Woolworths has denied corporate watchdog claims it tricked Australians with fake discounts, saying the regulator has misrepresented what drives prices at the shelf.
In the Federal Court on Tuesday, the supermarket giant denied temporarily hiking prices on hundreds of items before reducing them by a lesser degree to hide increases from consumers.
Price increases sometimes fell below suppliers' recommendations and occurred against a backdrop of rising inflation after the COVID-19 pandemic, Woolworths' legal team argued.
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"Woolworths was facing significant cost price increases from a large number of suppliers across their full range of products," Robert Yezerski SC said.
"To suggest … Woolworths is engaged in an activity that is involved for them manufacturing prices to then show a drop, we say, just totally misrepresents the true nature of the commercial negotiation."
Woolworths' defence argued the inflationary impacts – which hit grocery items harder than other products and services in the period in question between late-2021 and mid-2023 – were relatively uniform across competitors Coles and Aldi.
The key to determining the case would be the duration prices were temporarily elevated, Justice Michael O'Bryan said.
"One tends to think … if the price establishment period was three months, we wouldn't be here," O'Bryan said.
"If it was always one week, the case might not be fought.
"We're somewhere in the middle, and that's what makes this case rather difficult."
But the ACCC's 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 silk Michael Hodge earlier told the court.
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.
Woolworths dropped the marketing campaign after the ACCC brought legal action against it.
Coles made its defence in February but the court's final judgment will be withheld until both supermarket juggernauts have presented their cases.
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 Tam biscuits, Carman's classic fruit and nut muesli bars and Sakata rice crackers.
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The watchdog is not suggesting Coles and Woolworths colluded or engaged in anti-competitive behaviour as part of the alleged misleading conduct.
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," 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 probe found Australian supermarkets to be some of the world's most profitable, with margins expanding in the years after the pandemic.
The case resumes on Wednesday, for the second of a scheduled eight-session hearing.
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