The Australian Competition and Consumer Commission has launched a high-stakes legal battle against Woolworths (ASX:WOW) in the Federal Court, alleging the supermarket giant engaged in "subtle magic" to mislead shoppers through its "Prices Dropped" campaign.
The regulator claims Woolworths executives deliberately relaxed internal guardrails to inflate prices before applying deceptive discounts, effectively masking the impact of surging costs at the expense of consumer transparency.
The ACCC’s case, led by Michael Hodge KC, focuses on 266 products sold between 2021 and 2023.
Using a family pack of Oreos as a primary example, Hodge illustrated how the supermarket allegedly raised the price from $4 to $5 for a brief period before "dropping" it to $4.50.
While the red-and-white tickets heralded a bargain, the product remained 50 cents more expensive than its long-term stable price.
The commission argues that the window required for a "stable" price was slashed from months to mere weeks, allowing for manufactured discounts that capitalised on inflationary pressures.
Internal communications from former Chief Commercial Officer Paul Harker suggested a strategic move to "leverage increased flexibility" in pricing rules to maintain programme size amidst FY22 cost pressures.
While Justice Michael O’Bryan expressed some initial scepticism regarding whether average shoppers perform such deep price analysis, the ACCC maintains the practice fundamentally distorted "value perception".
Woolworths denies the allegations, with barrister Robert Yezerski SC set to argue that price adjustments were legitimate responses to post-pandemic inflation.
At the time of reporting, Woolworths’ share price was $37.75.