In brief:
- The supermarket giants are before Federal Court over accusations of price gouging.
- The ACCC claims Woolworths misled customers with fake savings by misrepresenting discounts on its "Prices Dropped" campaign.
Australia's biggest supermarket chain cut a promotional rest period that discouraged price manipulation from six months to as little as three weeks, the Federal Court has been told.
The consumer watchdog has taken dual action against Woolworths and Coles over allegations of "illusory" discounts offered by the supermarket giants.
The Australian Competition and Consumer Commission alleges the supermarket giants temporarily hiked item prices before reducing them to above the original shelf price to disguise price hikes as discounts.
Woolworths had previously required items removed from its "Prices Down" marketing campaign to remain off the program for half a year, discouraging the "gaming" or manipulation of supermarket prices.
This period was later slashed to between three and six weeks, the court heard.
Woolworths chief commercial officer Paul Harker had input on the decision to reduce the price guardrails, but rejected suggestions it distorted pricing.
"Clearly, we don't want a scenario that someone, knowing that they were going to drop the price in the future, invent some ridiculous price that they're going to make a comparison from," Harker told the court in Sydney on Wednesday.
"I want that price to be real, and I want it to be genuine, and I want it to be the one that would hold up in the absence of a deal."
The guardrails, which helped discourage gaming of prices by suppliers, were adjusted as costs surged due to impacts from the COVID-19 pandemic, Harker said.
"These rules were in a low inflation environment, and were designed to make a long term commitment to the program by making it difficult to take the product off the program," he said.
"As inflation continued to grow and grow and grow, we revised these policies."
Gaming refers to using market mechanisms, pricing or supply levels to artificially inflate prices or gain an unfair advantage over competitors.
Retailers are required by the regulator not to mislead customers in their pricing and must hold prices for a reasonable period of time and sell reasonable quantities at said price.
The case will likely hinge on the duration of the temporary price hike and what is considered a "reasonable" period.
ACCC lawyers on Monday accused Woolworths of employing "subtle magic" in its pricing campaign to disguise price hikes with outsized, short-term increases before reducing them to above the original shelf price.
The commission alleges the conduct involved 266 products at Woolworths and 245 goods at Coles at different times between late 2021 and mid-2023, impacting tens of millions of sales and delivering significant revenue for the grocery giants.
The basket was whittled 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.
Coles and Woolworths account for about two-thirds of the national grocery market, followed by Aldi with its 10 per cent market share.
The case had already impacted the way supermarkets worked, according to consumer finance expert at price comparison app Zyft, Joel Gibson.
"They're being much more cautious now with their discounting practices, even probably for the last couple of years after they first got a got a letter from the ACCC about these matters," Mr Gibson told AAP.
While so-called "yo-yo" discounting was likely here to stay, customer trust was gradually being eroded.
"A lot of people have already lost faith with those discount stickers in the supermarkets, in Black Friday sales," Mr Gibson said.
"So what we need to do is just to shop on the basis of price."
The case continues on Thursday.
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