The ACCC vs Coles case, dubbed "the case of the century" for supermarkets, has everyone talking about fake discounts and consumer protection
. But the real story isn't about corporate manipulation.
The supermarket's argument is basically that most people are looking at what the price is now and whether it seems okay in the middle of a cost-of-living crisis, not running a mental spreadsheet of price changes over the past year
. What if they're right?

The ACCC says it found the same pattern over and over again: Coles kept an item at a regular price for a long stretch, increased that price for a relatively short period, and then dropped it to a "Down Down" price while marketing that as a discount
.
The example of Nature's Gift dog food, which had been priced at $4 for around 300 days until early 2023, then upped the price to $6 for just seven days before declaring a "Down Down" discount when it cut the price to $4.50
. The outrage writes itself.

Except we're missing something obvious.
Research in behavioral economics suggests that consumers tend to rely heavily on the first piece of information they encounter when evaluating subsequent options. This anchoring effect can be leveraged by businesses to steer consumers toward preferred choices
. But anchoring works both ways.
Consumers love bargains, and when something is presented as a good bargain, consumers are more willing to make the purchase. It is all relative to a reference point that helps consumers decide if something is "cheap" or "expensive"
.

The assumption underlying this entire case is that shoppers are passive victims of psychological manipulation.
Coles' legal team said Coles customers were aware of price movements before making purchases
. What if regular shoppers have developed their own sophisticated defenses against pricing psychology? What if the most frequent supermarket shoppers, those buying groceries weekly, have unconsciously learned to game the system better than the retailers trying to game them?

Think about it this way. The heaviest users of supermarkets are often families managing tight budgets who know product prices intimately. These aren't casual consumers wandering the aisles. They're people who notice when their regular yoghurt jumps from $5 to $6.50, remember exactly how long it stayed there, and make mental notes about when the "Down Down" tags appear.
While regulatory enforcement actions are often highly publicised, the research reveals that ACCC actions historically have minimal long-term effects on consumer trust or market outcomes. For instance, companies targeted by the ACCC typically recover their market capitalisation within 75 days on average
.

The sophisticated customer doesn't get fooled by the red hand pointing down. They use it as a signal that prices have been artificially elevated and are now returning to something closer to normal. The "Down Down" campaign, designed to create urgency and perceived value, becomes instead a warning system for experienced shoppers: "This price was jacked up recently. How recently? And how high?"

Behavioral economists point out that retailers intend for customers to ponder a purchase this way. The $900 watch is the anchor; therefore, the $750 watch seems like a bargain in comparison
. But regular supermarket shoppers don't experience one-off purchases like watches. They buy the same products repeatedly, building price memory that spans months and years. Their anchoring isn't to last week's inflated price. It's to their own historical database of what they've paid for this item over time.

ACCC chair Gina Cass-Gottlieb said alleged fake discounting by retailers had been "pretty blatant", particularly during sale periods such as Black Friday. But she acknowledged that businesses and consumers needed to have a "shared understanding", and that when it comes to the regulatory environment, "businesses are overwhelmed by complexity"
.

Here's the uncomfortable possibility: many consumers understand exactly what's happening and still find value in the transaction.
For a lot of shoppers, that branding has turned into a kind of promise that the price you're seeing is genuinely lower and staying that way
. But "lower than what" is the key question. Lower than the spike, yes. But experienced shoppers know the spike was artificial, so they're essentially getting a signal that prices are moving back toward the range they remember.

The most interesting evidence for this theory lies in what doesn't happen.
While tempting to declare that this will damage Coles reputation, Australians will continue to shop with Coles, more than likely trust the next 'Down Down' campaign and Coles will continue to have a strong market share
. If consumers were truly being fooled systematically, you'd expect them to learn from the court case and change behavior. But market research suggests most won't. Not because they're gullible, but because they were never fooled in the first place.

Pricing is far more than just covering costs or ensuring profitability- it is a psychological tool that shapes consumer perception and influences purchasing decisions. Every price tag we see has been carefully crafted to trigger specific emotions and behaviours, often without us even realizing it
. True. But the assumption that we don't realize it might be the fatal flaw in how we think about consumer psychology.

Regular grocery shoppers exist in a state of constant price surveillance. They know when milk goes up 20 cents, when bread shifts from $2.80 to $3.20, when their regular pasta sauce starts appearing in "specials" that aren't actually special.
Through experimental data and real case analysis, it is concluded that in a variety of retail environments, anchoring effect has an inevitable impact on both consumers and sellers. The experienced seller and buyer also influenced by potential anchor. This is reflected in pricing negotiation, where the price proposed by the consumer becomes the anchor that affects the seller's offer, aspiration level and bottom line
.

The most sophisticated consumers aren't trying to remember exact historical prices. They're developing heuristics that let them quickly assess whether a "discount" represents genuine value or price theatre. The red "Down Down" hand becomes a flag saying "investigate further" rather than "buy immediately." They've learned to read the retailer's signals against their own price memory.

As evidence heard in court showed, products can sell significantly more when they're promoted as being on sale. However, the law cares about substance, not just spin
. But what if the substance is that both sides know the game being played? The retailer gets to signal discounts and create promotional excitement. The consumer gets a heads-up that this product's price has been volatile recently and is currently in a lower phase of that cycle.

The ACCC case treats consumer psychology like it's stuck in 1970, when shoppers had no price comparison tools and limited price memory. Today's grocery shoppers live with dynamic pricing across every category.
Businesses may employ price discrimination strategies, offering different prices to different customer segments. Airlines often employ price discrimination strategies. They may offer different prices for the same flight depending on factors like booking time, demand, and customer loyalty
. We've all learned to navigate surge pricing on Uber, dynamic pricing on airlines, and fluctuating rates on everything from hotels to electricity.

The case assumes shoppers approach supermarket pricing with naive expectations of stability and straightforward discounts. But experienced consumers have developed more sophisticated models. They don't expect prices to stay static. They expect retailers to try psychological tricks. And they've learned to extract value from the system anyway.

Would my customers feel misled if they saw the full timeline?
Maybe the answer is no, because they already know the timeline better than anyone realizes. The "fake discounts" aren't fooling people. They're just part of a complex dance between retailers trying to optimize revenue and consumers trying to optimize value, where both sides understand the steps better than the regulators watching from the sidelines.

The real question isn't whether Coles misled anyone. It's whether we've been underestimating how well Australian shoppers understand the game they're playing every time they walk down the cereal aisle.

- JB

About the Author

Julian Blok Contrarians are not born. They are assembled — slowly, accidentally, and usually at someone else's expense. A stint in European banking teaches you that confidence and correctness are not the same thing. Extensive travel teaches you that the obvious answer is mostly just the local one. A decade supplying hospitality businesses teaches you that the industry's most repeated problems are not bad luck — they are bad defaults, faithfully maintained. Julian Blok consults on behavioural insight and systems-led change for hospitality and business operators. The Contrarian is what happens when someone who has spent too long watching the same mistakes recur decides, rather belatedly, to say something about it.