Coles is facing a legal showdown with the Australian Competition and Consumer Commission (ACCC) as the consumer watchdog tests claims the supermarket giant misled shoppers with so-called “illusory” discounts on hundreds of everyday products.

The 10-day Federal Court hearing, which begins this week and will be streamed online, centres on Coles’ long-running ‘Down Down’ promotion.

The ACCC alleges the retailer breached Australian Consumer Law by temporarily increasing the shelf price of products before reintroducing them at a “discounted” price that was equal to or higher than their earlier regular price.

At issue are 245 household staples sold between February 2022 and May 2023, ranging from paper towels and yoghurt to Arnott’s Shapes and baby formula. To streamline proceedings, the court will examine 12 representative products.

In one example cited by the ACCC, a box of Strepsils was sold at $5.50 for more than 600 days before rising to $7 for 28 days. It was then promoted under ‘Down Down’ at $6 – advertised as reduced from $7, but still higher than the long-standing regular price.

ACCC chair Gina Cass-Gottlieb has described the discounts as “fake” or “illusory”, arguing they undermined consumers’ ability to make informed decisions during a period of heightened cost-of-living pressure.

The watchdog alleges 255 breaches, exposing Coles to potential penalties of up to $50 million per breach. Legal experts suggest total fines could reach into the hundreds of millions if the court rules against the retailer.

Coles is defending the case, arguing price increases were driven by inflation, supplier cost pressures and surging global commodity and freight costs. The supermarket maintains the ‘Down Down’ prices represented genuine discounts from the prevailing shelf price at the time.

The outcome is expected to have major implications for pricing practices across Australia’s retail sector. A parallel ACCC case against Woolworths is set to follow in coming months.