The Federal Court’s recent decision against Coles over its “Down Down” pricing campaign is a timely reminder for franchise systems that misleading and deceptive conduct is not always loud, deliberate or obvious. Sometimes, it is simply a matter of the overall impression conveyed to consumers — and that can leave businesses with their prices “down down” and their legal exposure “up up”.
In proceedings brought by the ACCC, Justice O’Bryan found that 13 of 14 promotional “Down Down” tickets were misleading because the represented “was” prices had not genuinely been established for a reasonable period prior to the advertised discount. In effect, products had been increased in price for relatively short periods before being “discounted”, creating what the ACCC described as “illusory” savings.
Importantly, the Court accepted that many of the underlying price increases were commercially justifiable due to inflationary pressures and supplier increases. However, that did not save the campaign. The issue was not whether Coles had a reason to increase prices — it was whether the overall representation conveyed to consumers was misleading.
That distinction matters enormously in franchising.
Misleading Conduct Is Broader Than Many Franchisors Think
Section 18 of the Australian Consumer Law prohibits conduct that is misleading or deceptive, or likely to mislead or deceive. Critically, intention is irrelevant. A franchisor may genuinely believe it is acting appropriately and still contravene the law if the overall impression created is misleading.
Franchise systems are particularly exposed because marketing is typically centralised. Pricing campaigns, promotional strategies, social media content and advertising collateral are often developed by the franchisor and rolled out network-wide. In many systems, those campaigns are funded — directly or indirectly — through mandatory marketing levies paid by franchisees.
That means if a centrally managed promotion becomes problematic, the issue can quickly spread “aisle by aisle” across the network.
Discount Campaigns and Franchise Advertising
The Coles case should particularly resonate with franchise systems that rely heavily on promotional advertising.
Discount-based campaigns are common across:
- quick service restaurants;
- gym franchises;
- beauty and barber brands;
- retail systems; and
- service-based franchises.
“$10 Tuesdays”, “50% off sign-up fees”, “free upgrades”, “limited time offers” and “exclusive member pricing” are all examples of promotions capable of attracting scrutiny if not carefully managed.
The legal risk does not arise merely because a discount exists. The issue is whether the representation creates a misleading impression about value, urgency, exclusivity or savings.
For example:
- a pizza franchise advertising a “special” price which is effectively the ordinary trading price;
- a gym franchise promoting a “limited time” joining fee waiver that is perpetually extended;
- a barber franchise advertising “premium products included” when additional charges commonly apply; or
- a retail franchise promoting “network-wide sale prices” which are not consistently honoured across locations,
may all potentially create misleading impressions.
Much like Coles, the danger is not necessarily the underlying commercial justification — it is the representation conveyed to the ordinary consumer.
The Franchise Context Creates Additional Risk
Franchise systems face an additional layer of complexity because advertising often involves multiple stakeholders.
Franchisors commonly:
- control brand standards;
- dictate advertising requirements;
- administer marketing funds;
- approve promotional campaigns; and
- require franchisees to participate in network promotions.
At the same time, franchisees are the customer-facing operators implementing those campaigns on the ground.
This creates an interesting legal dynamic. If a campaign attracts regulatory scrutiny, responsibility may not neatly sit with one party alone. Depending on the circumstances, both franchisor and franchisee exposure may arise.
The 2024 amendments to the Franchising Code of Conduct only sharpen this focus. Regulators are increasingly scrutinising whether franchise systems are operating transparently and in good faith, particularly where centralised decision-making materially impacts franchisee profitability or customer perception.
It Is Not Just About Advertising
Importantly, misleading conduct extends well beyond customer pricing.
In franchising, some of the most common risk areas include:
- overstated earnings projections;
- unrealistic “return on investment” messaging;
- misleading territorial exclusivity representations;
- understated fit-out or establishment costs;
- “fully managed” business representations;
- supplier rebate or pricing arrangements; and
- marketing around likely customer demand.
Misleading conduct can also arise through silence or omission. A franchisor may not expressly lie, but may still mislead by failing to disclose material facts that alter the overall impression.
Internal Policies Matter
One particularly important aspect of the Coles decision was the Court’s consideration of Coles’ own internal “guardrails”, which contemplated a 12-week establishment period for genuine pricing.
In other words, the company’s own internal standards became evidence against it.
Franchisors should take note. Operations manuals, disclosure documents, marketing policies and sales scripts are not merely internal documents — they can become central evidence in future disputes.
If a franchise system internally acknowledges a particular compliance standard but operational conduct falls short, that may significantly strengthen a regulator’s or claimant’s case.
Final Thoughts
For franchise brands, the Coles decision is a reminder that clever marketing can quickly become costly marketing.
The more sophisticated and centrally managed a franchise network becomes, the more important it is to ensure promotions genuinely reflect the impression being conveyed to consumers.
Because in franchising — much like supermarkets — businesses cannot have their “Down Down” campaigns while quietly pushing legal risk “up up” through the network.