Two former competition watchdog chiefs warn that Coles' loss in a landmark federal court case could lead to the end of 'fake discounts' in Australia, with the supermarket giant at risk of record fines exceeding $200m.
Coles ’ landmark federal court loss could signal the end of “ fake discounts ” in Australia , according to two former competition watchdog chiefs, with the supermarket giant at risk of record fines exceeding $200m.
, accusing the supermarket giants of duping shoppers between 2021 and 2023 with “was/is” promotional pricing. All Australian retailers have been left on notice to keep their “discounts” genuine, according to Rod Sims, the former head of the consumer watchdog. Read more “This is going to have wider implications for all companies … They really need to be sure that what they’re offering consumers is true.
” Jeannie Paterson, professor of law at the University of Melbourne, said the decision would remind businesses misleading advertising could break the law. She said a jewellery store that raised its prices weeks out from Valentine’s Day, then dropped them again in time for the holiday, could breach the law if it advertised that as a “discount”.
“People don’t shop for diamonds very often, so a discount off a short-term price rise is likely to be misleading,” Paterson said. Consumers were entitled to rely on the expectations created by advertising, she said.
“This is not about ‘buyer beware’ in Australia any more. ” With consumer prices on the rise as inflation surges, the decision would make businesses wary of masking price increases with false advertising, Paterson said. Prof Allan Fels, another former chair of the ACCC, said he believed Woolworths would be watching the case closely. The decision could also push supermarkets to tighten their discount rules, Fels said.
The judge found Coles’ own rules required a product’s former or “was” price to be in place for at least 12 weeks before imposing a “Down Down” discount but in 2022 cut this to just four weeks. Fels said other supermarket companies would probably fall in line with the timeframe to avoid a court case of their own. Other industries would be careful to avoid claiming a discount soon after a price hike, he said.
“They can’t claim it’s a discount if the previous high price didn’t last long enough for it to be a genuine higher price,” he said. Coles faces significant fines and lost $630m in market value in the wake of the ruling, as traders sold off its shares on Thursday. Woolworths lost $512m, with investors betting Australia’s largest supermarket chain would face the same fate as its rival.
The ACCC chair, Gina Cass-Gottlieb, said on Thursday the watchdog would seek a substantial penalty as it consults with Coles ahead of a separate court hearing.
“It is very important that a penalty is not just able to be dismissed as a cost of doing business, and that it comes at a level that is a significant deterrent for such conduct,” she said. Each individual misleading promotion could attract a maximum penalty of $50m but the record penalty for a breach of Australia’s consumer law was $125m,Fels said he expected Coles would have to pay hundreds of millions of dollars in fines, which would set a new record.
“Millions of consumers are affected the behaviour was planned, systematic, and sustained over a long period. It was deliberate policy, driven by the highest levels of the business. ” Coles could also have to pay an additional sum if it loses a class action lawsuit over the “Down Down” pricing, led by GMP Law and tied to the federal court’s findings.
GMP’s special counsel, Greg Mackey, said he expected Coles would have to refund the millions of Australians who bought at a misleading “Down Down” price. Mackey said it could take another year for the class action to be heard, with it to be delayed further if Coles appealed against the findings. The company on Thursday said it was reviewing the judgment.
“My guess is there’s 90% chance of an appeal because there’s too much at stake at all levels for Coles,” Mackey said.
Coles Federal Court Fake Discounts Record Fines Misleading Advertising Consumer Watchdog University Of Melbourne ACCC Woolworths Discount Rules Price Increases Inflation Surges Consumer Prices Expectations Created By Advertising Buyer Beware Australia Federal Court Case Fake Discounts Record Fines Misleading Advertising Consumer Watchdog University Of Melbourne ACCC Woolworths Discount Rules Price Increases Inflation Surges Consumer Prices Expectations Created By Advertising Buyer Beware
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