Coles Shares Fall After Court Loss
Coles Group (ASX:COL) dropped 3.3% to A$20.44 today, sliding close to its 52-week low after losing a major court case. The Federal Court ruled that Coles misled shoppers with its long-running “Down Down” promotions. Out of 14 sample products tested, the judge found 13 were marketed in a way that broke the law. The penalty has not been decided yet, but with a similar Woolworths case still waiting for a verdict, the big question for investors is simple: is this drop a buying chance or a warning sign?
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What the Court Actually Found
The case looked at how Coles promoted everyday grocery items between February 2022 and May 2023. The trick, as the ACCC saw it, worked like this: Coles would briefly raise the price of an item, then put it on a “Down Down” sticker at a level still equal to or higher than the original price. Take Arnott’s Shapes.
The price moved from A$5.00 up to A$6.50, then was “discounted” to A$5.50, still more than shoppers had paid before. The judge ruled this was misleading because the higher price had not held long enough to be a genuine “was” price. In our view, the bigger issue here is brand trust. “Down Down” has been Coles’ value promise to customers since 2010, and that promise just took a hit.
How Big Could the Fine Be?
This is the question every COL holder wants answered, and the honest reply is that no one knows yet. What we do know is that big consumer law fines have been rising. Qantas paid A$100 million in 2024 for misleading flight bookings. Optus paid A$100 million in 2025 for poor sales practices. Volkswagen still holds the record at A$125 million. Coles is a much larger business, and hundreds of products were involved, so the final figure could sit at the higher end. We see a fair range of A$100 million to A$400 million. That sounds huge, but Coles earned A$1.1 billion in net profit last year, so even the top end is a one-off hit rather than a body blow.
The Woolworths Verdict Is the Bigger Story
The ACCC ran an almost identical case against Woolworths (ASX:WOW) over its “Prices Dropped” program. The Federal Court has not ruled yet, but the decision should arrive within months. This matters more than the fine itself. If Woolworths also loses, both supermarkets get punished, and the playing field stays level. If Woolworths wins, Coles is suddenly at a real disadvantage. Since the two cases look very similar, we believe Woolworths is likely to lose too. If that proves right, today’s drop in COL looks more like short-term fear than a lasting problem for the business.
The Investor’s Takeaway for Coles
Coles is now sitting near its lowest price in a year, paying a fully franked dividend yield of around 3.5%. For investors who like steady income from defensive businesses, this sell-off looks overdone. Even a large fine would not threaten the dividend, since Coles still generates over A$1 billion in profit each year. The real worry for the longer term is whether tighter ACCC rules will permanently squeeze how supermarkets run their promotions. Two events will set the tone from here: Coles’ penalty hearing and the Woolworths verdict. Both should land within the next three to six months.
