Woolworths has countered allegations from the competition regulator, stating it did not deceive shoppers with artificial discounts in its “Prices Dropped” advertising initiative.

During a session in the Federal Court on Tuesday, the retail chain disputed claims that it temporarily inflated prices on numerous products only to lower them slightly, thus obscuring actual price hikes from customers.

“The commission’s interpretation of what constitutes a reasonable timeframe is incorrect and misguided,” Woolworths’ legal representative asserted during the proceedings in Sydney.

Woolworths attributed the rise in prices to escalating inflation driven by the COVID-19 pandemic, which increased supplier costs between mid-2021 and the end of 2023.

“There is substantial proof that the former ‘was’ price was legitimate,” defended Robert Yezerski SC.

“Numerous units were sold at that price over several weeks, and it generally mirrored an increase in cost price,” he added.

But the Australian Competition and Consumer Commission’s (ACCC) legal team alleged Woolworths used misleading tactics in its discount campaign.

“The subtle magic of the ‘prices dropped’ message that draws the consumer in is to say that the new stable price is lower than the old stable price,” ACCC lawyer Michael Hodge earlier told the court.

“The power of the ‘prices dropped’ marketing message is that it conveys to a consumer that Woolworths has done something remarkable or unusual.”

Coles and Woolworths facing joint action

The ACCC launched the joint action in 2024 against Woolworths and Coles, alleging the supermarket giants broke consumer law using fake discounts to mislead customers.

The reduced prices were often the same or higher than the original shelf prices and therefore deliberately misled consumers, the competition watchdog claims.

Coles made its defence in February, but the court’s final judgment will be withheld until both supermarket juggernauts have presented their cases.

Woolworths dropped the marketing campaign after the ACCC brought legal action against it.

But during the hearing, Justice Michael O’Bryan was at odds with the watchdog’s lawyer over the extent to which discount tickets impacted consumers.

“They’re not going to spend any time analysing in any intellectualised or analytical way, what these tickets mean,” the judge said, stressing the case hinged on whether or not consumers were getting a real discount.

“One thing we can be certain of is that they would form the belief, and in my view, be entitled to form the belief, that what’s said to be a saving is a genuine saving.”

The commission alleges the conduct involved 266 products sold by 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 family pack of Tim Tams biscuits, Carman’s classic fruit and nut muesli bars and Sakata rice crackers.

The watchdog is not suggesting Coles and Woolworths colluded or engaged in anti-competitive behaviour as part of the alleged misleading conduct.

Woolworths ‘funadmentally disagrees’ with claims

In a statement to Australian Associated Press, 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,” a 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.”

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

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

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