The Australian Competition & Consumer Commission launched legal action in the federal court against Woolworths Group Limited and Coles Supermarkets Australia Pty Ltd on Monday.
The consumer watchdog claims both retailers bumped prices of products by 15 per cent for brief periods before placing them in Woolworths' Prices Dropped promotion and Coles' Down Down promotion at prices lower than during the price spike but higher than, or the same as, the regular price.
ACCC chair Gina Cass-Gottlieb said the duopoly breached consumer law by making "misleading claims about discounts, when the discounts were, in fact, illusory".
"It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims," Ms Cass-Gottlieb said.
"We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy and where."
The allegations relate to 266 products for Woolworths sold at different times across 20 months and 245 products for Coles sold at different times across 15 months.Â
The representations were made on pricing tickets displayed to consumers in-store on supermarket shelves and online, usually with a 'was' price displayed showing what the price was during the short-term price spike and the date of that price.
In a statement, the ACCC said the revenue from the allegedly misleading discounts was "significant".
The watchdog is seeking penalties, costs and community service orders for supermarkets to fund registered charities to deliver meals to vulnerable Australians.
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