Supermarket giants Woolworths and Coles have been accused of using their "Prices Dropped" and "Down Down" promotions to mislead Australian shoppers.

The two companies now face separate legal action in Federal Court by the Australian Competition and Consumer Commission (ACCC).

The ACCC announced it was launching legal action on Monday morning, with chairperson Gina Cass-Gottlieb saying the organisation aims to seek "high penalties" in court.

Here's what we know about the allegations.

Supermarket prices increased 'by at least 15 per cent'

Both supermarkets allegedly offered certain products at their regular price "for at least 180 days", according to the ACCC.

The price of each product was then allegedly increased "by at least 15 per cent for a relatively short period of time".

"[Woolworths and Coles] subsequently placed it onto their 'Prices Dropped' or 'Down Down' program," the ACCC said in its statement.

"The ACCC alleged the display of the Prices Dropped and Down Down tickets was misleading, as the price of the products was in fact higher or the same as the regular price [offered previously]."

Woolworths' Prices Dropped campaign promised to help customers "spend less on their everyday essentials".

A release published by the supermarket in August offered price reductions of up to 23 per cent on more than 450 products in-store and online.

Coles' long-running Down Down marketing campaign was first launched in 2010, offering similar price discounts on common items.

Ms Cass-Gottlieb said the years of marketing campaigns meant Australians associated both promotions with cheaper prices.

Those cheaper prices, the ACCC alleges, "were, in fact, illusory".

"We also allege that in many cases both Woolworths and Coles had already planned to later place the products on a 'Prices Dropped' or 'Down Down' promotion before the price spike," Ms Cass-Gottlieb said.

Woolworths' Oreos family pack allegedly spiked in price

Woolworths has been accused of increasing the prices temporarily of at least 266 different products before they were put on the Prices Dropped campaign.

In the ACCC's legal statement, the Prices Dropped program aimed to lower the standard prices over a longer time period.

Products were typically on the program for at least 12 weeks, but according to the ACCC many of the affected products were on it for "six months or longer".

In 265 cases between September 2021 and May 2023, the price of a product was allegedly higher than its previous regular price before it was discounted.

"There was a price spike period of 45 days or less prior to the product being placed on the Prices Dropped promotion during which the price … was at least 15 per cent higher than its regular price," the ACCC said. 

Affected products included Tim Tams, batteries, pet food, butter, nicotine patches, muesli bars, cleaning supplies and menstrual products. 

A family pack of Oreos was allegedly sold at a "pre-existing Prices Dropped price of $3.50 from January 1, 2021 to November 27, 2022, "at least 696 days" according to the ACCC.

"On 28 November 2022, the price of the product was increased to $5.00 for a period of 22 days," the ACCC claimed.

"Woolworths had decided on or around 18 November 2022 to take the product off Prices Dropped, increase the price, and then put the product back on to Prices Dropped three weeks later."

Woolworths has said it will carefully review the claims and continue to engage with the ACCC on the issue. 

The supermarket said in a statement to the ASX it was still "committed to offering many ways for customers to save at the checkout". 

Coles allegedly increased price of Strepsils lozenges

Coles has been hit with similar accusations by the ACCC, with at least 245 different products affected.

In 249 cases, the Down Down price of an affected product was allegedly higher than the previous regular price.

In a further six cases, the discounted price was allegedly the same as the previous regular price.

The ACCC noted some products had allegedly been placed on the Down Down program on more than one occasion between February 2022 and May 2023.

Alleged affected products included band-aids, soft drinks, toothpaste, pet food, two-minute noodles, cereals, menstrual products, yoghurt and baby formula. 

A 16-pack of Strepsils Throat Lozenges Honey & Lemon was sold at a regular price of $5.50 on a pre-existing Down Down promotion for "a period of at least 649 days" to October 11, 2022.

"On 9 November 2022, the product was then placed back on a Down Down promotion with the tickets showing a Down Down price of $6.00 and a 'was' price of $7.00.

"The Down Down price was 9 per cent higher than the product's previous regular price of $5.50."

As with Woolworths, the ACCC alleged Coles had planned the temporary price strike "following a request from the supplier for a price increase" on or around October 7, 2022.

Coles has said the allegations relate to "a period of significant cost inflation" when it was receiving a "large number of cost increases" from suppliers. 

"In addition, Coles' own costs were rising, which led to an increase in the retail price of many products," it said in a statement. 

"Coles sought to strike an appropriate balance between managing the impact of the cost prices increases on retail prices and offering value to customers through the recommencement of promotional activity as soon as possible after the establishment of the new promotional price."

It said it intends to defend the legal proceedings. 

Supermarket giants now facing penalties, 'community service' and potential class actions

The ACCC has said it will seek "declarations, penalties, costs and other orders".

It will also seek "community service orders" meaning both supermarkets will be made to fund a registered charity "to deliver meals to Australians in need".

It said customers might have made decisions "based on false or misleading information".

"The relevant conduct took place over an extended period of time, and involved the largest player in a critical market for Australians," the organisation said in its filings.

"The false or misleading representations concerned the price of household staples at a time of increasing cost of living pressures.

"[They] were made in the context of a program which [Coles and Woolworths] specifically promoted as being designed to help consumers make long-term savings on the cost of their groceries."

The alleged conduct has been labelled as equally serious by Ms Cass-Gottlieb.

She said there was also the potential for class actions as a result of the investigation.