By Adrian Black

Supermarket giant Woolworths will defend its discounting regime in court against consumer watchdog claims it used fake discounts to mislead customers despite higher prices.

Woolworths will present its case to the Federal Court after Coles made its defence in February, with the court withholding judgment until both grocery juggernauts have offered their arguments.

The Australian Competition and Consumer Commission launched the joint action in 2024, alleging the pair broke consumer law by hiking prices on everyday items for brief periods before reducing them as part of their separate “Prices Dropped” and “Down Down” promotions.

The discounted prices were often the same or higher than the original shelf prices and therefore deliberately misled consumers, the ACCC claims.

The watchdog alleges the conduct involved 266 products for Woolworths at different times across 20 months between late 2021 and mid-2023, impacting tens of millions of sales by itself and Coles.

The product list was pared down to 12 agreed items to be scrutinised in court, including a Tim Tams Family pack, Carman’s classic fruit and nut muesli bars and Sakata rice crackers.

“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where,” ACCC chair Gina Cass-Gottlieb said.

The watchdog is not alleging Coles and Woolworths have colluded or engaged in anti-competitive behaviour.

In a statement to AAP, Woolworths said it fundamentally disagreed with the claims and at no stage misled or deceived its customers.

“Following COVID, there was a period of extraordinary inflation, and we were acutely aware that customers expected Woolworths to provide value wherever possible,” the spokesman said.

“Inflation also put pressure on our suppliers’ costs, and we worked with them to reduce the inflationary impact on customers through our Prices Dropped program.”

The supermarket giant said it respected the ACCC’s role and took the allegations seriously.

The case resumes as a new wave of inflation is set to hit Australian consumers due to soaring oil prices sparked by the US-led war on Iran.

Australia’s supermarket sector has come under heavy scrutiny after cost pressures borne by the COVID-19 pandemic, prompting multiple inquiries.

One such probe found Australian supermarkets to be some of the world’s most profitable, with margins expanding in the years after the pandemic.

It found no evidence of price gouging, but the watchdog has flagged potential future legal action through new excessive pricing laws set to come into effect in 2026.

Coles and Woolworths account for roughly two-thirds of the Australian supermarket industry.