Australian court finds grocery giant Coles misled shoppers over discounts

By Byron Kaye

SYDNEY, May 14 (Reuters) – An Australian court on Thursday found that Coles, the country’s No. 2 supermarket chain, had misled shoppers by hiking prices on hundreds of goods and then advertising discounts even though the discounted prices were higher than the earlier sale prices.

The Australian Competition and Consumer Commission said it would seek a substantial penalty in the case.

“It is very important that a penalty is not just able to be dismissed as a cost of doing business and that it becomes at a level that is a significant deterrent for such conduct,” Gina Cass-Gottlieb, chair of the commission, told a news conference.

The regulator filed suits against Coles and Woolworths in 2024 after persistent inflation and price hikes spurred a backlash against the country’s grocery duopoly from consumers struggling with a cost-of-living crisis. Together the two firms sell nearly two-thirds of Australia’s groceries.

Class-action lawsuits were also filed in tandem with the regulator’s action, and Federal Court judge Michael O’Bryan’s ruling applies to both.

Shares in Coles fell 2.7% after the decision.

“The court ruling is the clear trigger for today’s weakness, but the market is looking beyond the legal headline,” said Vantage Markets analyst Hebe Chen.

“Investors are pricing in … the risk that Coles’ discounting playbook becomes less flexible.”

A Coles spokesperson said the company was reviewing the judgment, adding that “minimum price establishment periods” could prevent “unnecessary litigation in future”.

Hearings for Woolworths have concluded but a judgment is still pending. Woolworths shares lost 1.9%.

In his ruling, O’Bryan said Coles was justified in putting up prices through 2022 and 2023 but misled shoppers by advertising discounts typically within four weeks.

For the discounts to appear credible to shoppers, supermarkets should have sold the goods at their higher prices for at least 12 weeks, O’Bryan said.

“Because the relevant products were not sold at the ‘was’ price stated on the ticket for a reasonable period and, as a consequence, the discount represented on the ticket was not genuine,” he added.

($1 = 1.3795 Australian dollars)

(Reporting by Byron Kaye; Additional reporting by Rajasik Mukherjee and Shivangi Lahiri; Editing by Muralikumar Anantharaman and Edwina Gibbs)