The judge overseeing the shocking federal court case has made a surprising intervention as the consumer watchdog makes its closing arguments.
The ACCC has outlined why it believes Coles broke the law by misleading shoppers with fake discounts on hundreds of products.
During the week-long trial, the consumer watchdog group alleged that the supermarket giant temporarily jacked up prices before lowering them to higher than original prices under a “down-down” promotion.
But this morning, Judge Michael O’Brien briefly interrupted ACCC lawyer Garry Rich’s speech.
Mr Rich had accused Coles of a deliberate and sophisticated “tactic” to defraud shoppers with “Down Down” promotional tickets.
He said shoppers are often “in a hurry” and find groceries “a hassle”, so when they see a red ticket offering a promotion, they think they’re being offered a good deal.
“They read that the price was ‘down down’,” he told the court.
“They think it’s a genuine discount.
Garry Rich, general counsel at the ACCC, argues that when customers see a ‘down down’ promotion, they don’t know that the price was ‘actually lower four weeks ago’. (ABC News: Andrew Ware)
“Coles customers truly come from all walks of life, from highly paid professionals to the unemployed, from teenagers to elderly pensioners and everyone in between.
“Many of them are well-educated and commercially savvy, but many are not.”
He argued that many shoppers don’t consider the history of an item’s price and whether factors such as inflation are driving up prices over time.
“Many people will not know that prices were actually down four weeks ago,” he said in his final filing.
“Many of them believe what Coles says.”
The ACCC claims shoppers are not considering whether factors such as inflation are driving up prices over time. (ABC News: Billy Cooper)
But Judge O’Brien stopped Mr. Rich and questioned whether the case would fail.
“But may I pull up?” he interrupted.
“There is very little about the description you have given of shoppers walking down the aisles that I disagree with.
“But it’s interesting to see that the first two phrases shoppers mentioned in response were:
“They look at the ‘Down Down’ tickets and think it’s a good deal and they think there’s a real discount.”
Graph showing price increases and promotions for Arnotts Shapes. (ABC News )
Mr Justice O’Brien then appeared to criticize the consumer watchdog group for relying on key points it had not properly established during the litigation.
“Neither representation is pleaded by the committee,” he said.
“If these are the two primary expressions conveyed by the ticket…
“Doesn’t the commission’s case have to fail?”
“No, sir,” Mr. Rich replied.
“I’m just warming up.”
Rich said the average shopper would have been attracted to what they considered to be a genuine discount from the price at which the item was regularly sold, rather than a discount that occurred after a short period of price increases.
“That’s why the authenticity of the discount is paramount,” he says.
Mr Rich disagreed with the judge’s argument that these points were unproven and irrelevant to the ACCC’s case.
Coles claims discounts were ‘genuine’
In his closing statement this afternoon, Coles’ legal adviser John Sheehan spent much of his time discussing the three prices the ACCC relied on to make its case.
The first price is the product’s starting price, or previous regular price.
For example, the Nature’s Gift dog food can featured in this case was $300 with a 4-day “Down Down” promotion.
The second price was when the supermarket raised the price to $6 for just 7 days.
The lawsuit focuses on the pricing of Nature’s Gift’s adult breed dog food. (ABC News: Patrick Stone)
The third price was 50 cents more than a week ago as Coles put its dog food back on its “Down Down” promotion at $4.50 for 12 months.
Mr Sheehan claims the ACCC has failed to prove that Price 2 is not the “real” price, so the case “must fail”.
He told the court that there was all the evidence to suggest that Price 2 was genuine as it was set at the supplier and suggested retail price and a significant quantity was purchased.
Coles’ general counsel John Sheehan (left) argues that the prices before the “Down Down” promotion were genuine and therefore the discount was legal. (ABC News: Andrew Ware)
He argued that this was correct because shoppers also read the “down down” price tag and price 2 was a legitimate price.
“It should fail because the primary message that the consumer would receive from the ticket is not the (misleading) representation that the consumer claims, and it should fail because the message that the consumer would receive from the ticket is the truth,” he said.
“Race to the bottom”
Internal compliance documents for Coles’ “Down Down” program showed significant changes to the discount program’s policy guardrails before the alleged misleading conduct, a court heard last week.
Mr Rich argued that the previous policy prohibited all but one of the promotions and that the price changes were related to commercial considerations of cornering Woolworths on pricing.
A former biscuit manager also admitted that the supermarket giant had breached internal guidelines by featuring Arnott’s shape in its “Down Down” promotion earlier than it had permission to do so.
Today, the court heard how there was a “race to the bottom” between Coles and Woolworths over the shortest possible period for setting higher prices before discounts were applied.
Rich encouraged the judges to consider not only whether Kohl’s misled consumers about the timing of discounts, contrary to its own guidelines, but also whether it should be held to a higher standard.
“What did they think was appropriate in a situation where they weren’t fighting Woolworths tooth and nail?” Mr Rich was referred to the judge.
“Now is not the right time to look at what their standards are evolving to. Let’s look at what their standards were at a time when nothing like that was happening in the market.”
Mr Coles rejected accusations that the discounts were fake or “illusory”. (ABC News: Billy Cooper)
Mr Justice O’Brien also suggested that Coles’ discounted price “could probably be a good deal” given other factors.
“With all the evidence of cost increases, negotiations, funding, etc., it is difficult for the committee to conclude that it is not a good deal,” he said.
Mr Rich acknowledged he had to convince the court that the “Down Down” promotion in Coles stores was why consumers believed they were receiving a “genuine discount.”
The ‘Down Down’ promotional program has been in place since 2010, offering discounts on classic shopping items for over 12 weeks.
Kohl’s heavily promotes the program, with its signature giant red needle pointing downwards, which often leads to a significant increase in sales.
Promotions are typically jointly funded by Kohl’s and the product’s suppliers.
The trial resumes on Thursday.