The supermarket colossus, Coles, is embroiled in a storm of controversy over allegations of price manipulation tied to its widespread “down down” campaign. Despite the serious accusations, the retailer maintains that it “genuinely cares” about its customers.
As the case unfolds, Coles is staunchly defending itself against claims made by the Australian Competition and Consumer Commission (ACCC). The consumer watchdog accuses Coles of intentionally misleading shoppers since the campaign’s inception in 2010.
In a striking revelation, the Federal Court in Melbourne heard that Coles has admitted to exerting undue pressure on suppliers. The retailer reportedly threatened to remove products from its shelves if suppliers did not comply with its pricing strategies.
The ACCC’s allegations suggest that Coles engaged in a systematic practice of inflating prices on everyday goods, only to later offer them at so-called discounted rates that were, in reality, equal to or above the original prices.
These “down down” discounts, applied to a wide range of products from snacks to pet food, allegedly deceived consumers into believing they were getting bargains. For instance, the court was informed that a particular Nature’s Gift pet food item was sold at $4 for nearly a year, then temporarily raised to $6, only to be advertised as a “down down” special at $4.50.
One Nature’s Gift item sold for 10 months at $4, then was bumped up to $6 for a week before reduced to the “down down” price of $4.50, the court was previously told.
Senior category manager for pets, Paul Carroll, admitted the “down down” campaign helped drive sales.
The company effectively used the tactic during the pandemic to increase pet product sales, as the number of Australians adopting animals skyrocketed during lockdown.
“I can’t speak on the perception of customers – every customer is different. But in my experience, I’ve seen a sales increase by offering promotions, yes – specifically to the pet category,” Carroll said.
“I wouldn’t perceive it as volume of sales, but I would say that it gave a good perception of value to the customer.”
While Carroll repeatedly insisted that the “down down” intention was to make products “accessible”, he conceded that the primary motive was to drive sales.
Coles received rebates from suppliers when their products were discounted and promoted.
During negotiations with Real Pet Food Company, the supplier of Nature’s Gift pet products, Carroll threatened to pull the range from shelves over pricing and a dispute over rebates, the court was told.
Emails read out to the court revealed Carroll also offered Real Pet Food a “steer” to reach an agreement that the supermarket giant could accept, before placing existing product shipments on hold.
“You told him in the email that you were happy to give him a steer as to where you would require investment,” ACCC barrister Garry Rich SC said.
“By that, you meant you were happy to tell him what additional promotional funding or other benefits he could provide Coles to enable you to accept the CPI (cost price increase) request in full.
“You were telling him that you would be able to provide him with suggestions as to the amount of promotional funding or other benefits Real Pet Food could provide to Coles.”
While Carroll admitted writing the emails, he said his intention was to reduce costs for the benefit of customers.
“You keep talking about benefits to a customer, and we keep having this debate. But the reason you want benefits for customers as you describe it is so they’ll buy your product,” Rich said.
Carroll argued he “genuinely cared about the customers” before ultimately agreeing that it was about driving sales for the supermarket giant.
The competition watchdog is seeking significant penalties for alleged breaches relating to Woolworths’ “prices dropped” and Coles’ “down down” promotions across 15 months.
The case continues before Justice Michael O’Bryan.
