The Federal Court's recent decision in proceedings brought by the Australian Competition and Consumer (ACCC) against Coles Supermarkets Australia Pty Ltd (Coles) places comparative pricing practices firmly in the regulatory spotlight, sending a clear message that businesses must be able to show their advertised “discounts” are genuine. With the ACCC continuing to scrutinise pricing practices, we outline the lessons that emerge from the decision and five practical steps businesses can take to reduce the risk of similar challenges.

Background

The case focused on Coles’ use of comparative pricing as part of its well-known ‘Down Down’ promotional tickets. The promotions in question involved ‘Was/Now’ pricing, (also known as ‘markdown’ or ‘strikethrough’ pricing) to highlight the savings available to consumers by contrasting a product’s previous selling price (the ‘Was’ price) with the new discounted ‘Down Down’ price (the ‘Now’ price). The ACCC alleged that:

• Coles had temporarily increased the prices of commonly sold products for a short period before reintroducing them under the ‘Down Down’ campaign at prices equal to or higher than their original prices.
   
• The ‘Was’ prices promoted by Coles did not represent genuine previous selling prices and, therefore, misled consumers in breach of the Australian Consumer Law (ACL). 

The Court’s approach to Coles pricing practices

In assessing the ACCC’s pricing practices, the Court considered a sample group of commonly sold household products as part of the case, including soft drink, deodorant, butter and toothpaste.  Ultimately, the Court found that Coles breached the ACL with its approach to ‘Was/Now’ pricing – with 13 out of the 14 ‘Down Down’ promotional tickets reviewed by the Court found to be problematic. In reaching this conclusion, the Court considered whether the ‘Now’ price reflected a genuine discount from the advertised ‘Was’ price and, further, the length of time required to establish a genuine ‘Was’ price so that it could legitimately be used as the reference point for the advertised discount (referred to as the ‘price establishment period’). 

The Court’s analysis was influenced by several factors including: 

• the frequency with which supermarket goods are purchased; 
   
• the relative stability of grocery pricing; 
   
• the regular exposure of consumers to those prices over time; 
   
• the fact that products were sold in meaningful volumes at the higher price; and,
   
• Coles’ own internal reliance on a 12-week benchmark.

The Court’s findings

Weighing up all of these factors in the context of supermarket retailing, the Court held that a minimum period of 12 weeks was sufficient to establish a genuine prior or ‘was’ price. It indicated that the ‘Down Down’ tickets for the sample products would not have been misleading had the products been sold at the ‘Was’ price for 12 weeks immediately preceding the promotion. Importantly, the Court was clear that a 12-week price establishment period is not a universal rule. The appropriate period will vary depending on factors including the price and nature of the product, market conditions, and consumer behaviour. Ultimately, the key question is whether the promotion creates an accurate impression of the discount being offered to consumers.

What should businesses take away from the decision?

The decision highlights a simple but important principle: if you’re advertising a discount, it needs to be genuine, and you need to be able to justify it in the eyes of the reasonable, ordinary consumer. Some key lessons for businesses using comparative ‘Was/Now’ pricing and promotional strategies include: 

• Genuine discounts require a reasonable ‘price establishment period’: Businesses should ensure that any ‘Was/Now’ promotion is based on a genuine prior selling price that has been maintained for a sufficient period to support the discounted price. What constitutes a reasonable price establishment period will depend on the nature of the product, consumer purchasing behaviour and the relevant market.
   
• Sale volumes matter: A discount is more likely to be considered genuine when products have been sold at the ‘Was’ price in meaningful quantities over a reasonable period. Limited sales at the higher price may call into question whether the advertised discount is genuine.
   
• Consumer perception is key: Courts will focus on the overall impression conveyed to an ordinary, reasonable consumer, rather than technical explanations or fine-print qualifications, meaning that the dominant message must be accurate.
   
• Internal pricing policies can be relevant: Well-designed internal guardrails (e.g. minimum price establishment periods) can support compliance, but these guardrails must reflect real market conditions and consumer behaviour.

Beyond Coles: five practical steps to reduce risk

1. Businesses should tailor price establishment periods to each product category rather than applying a single timeframe. Factors such as consumer behaviour, market dynamics, pricing frequency, purchase cycles, seasonality, and sales volumes at the higher price should determine the appropriate period.
    
2. The ‘Was’ price should reflect a genuine selling price supported by meaningful sales volumes. If products are not selling in sufficient quantities at that price, businesses should reconsider and potentially lower the ‘Was’ price before promoting discounts.
    
3. After a promotion ends, businesses should return products to the ‘Was’ price for a meaningful period to re-establish it. Products should generally be sold at the non-sale price most of the time, with frequent sale cycles avoided as they may undermine the legitimacy of the ‘Was’ price.
    
4. Promotions should be limited and tightly controlled. Prolonged or repeated discounts can cause the sale price to become the product’s established price, weakening the basis for any claimed discount and increasing the risk of consumer deception and regulatory scrutiny.
    
5. Prepare for increased regulatory scrutiny: The decision signals continued ACCC focus on pricing practices. Businesses should assume that unsupported discount claims could lead to enforcement action.