By Kat Wong and Sam McKeith in Canberra

Shoppers have been urged not to place “simple trust” in the major supermarkets as the benefits of competition depend on making price comparisons.

The Australian Competition and Consumer Commission (ACCC) is taking Coles and Woolworths to court, accusing the supermarket behemoths of breaking consumer law by duping customers with misleading discount pricing claims on hundreds of products.

Watchdog chair Gina Cass-Gottlieb dispelled rumours the grocery giants were in cahoots on these allegedly fake markdown schemes but noted they monitor each other’s prices and suggested customers do the same.

“They price check each other and they price check other competitors to set their prices… but there is no suggestion that they colluded,” she told ABC radio on Tuesday.

“Consumers always should work on the basis of information and checking rather than… simple trust.

“In order to get the benefit of competition, we need to check and compare to the local supermarkets.”

The ACCC, for example, only launched its court case after scrutinising the work of social media sleuths.

TikTok, Reddit and X all contained hundreds of reports about misleading discounts from consumers who were monitoring prices.

“People sensed that these were not genuine discounts,” Ms Cass-Gottlieb said,

“Consumers who are engaged give us the ability to best protect consumers and competition.”

Consumer group Choice said increased public scrutiny of the supermarkets’ historical pricing was needed in the wake of the lawsuit.

“We’re calling for greater transparency of historical supermarket pricing data,” Choice campaign director Rosie Thomas said.

“Easier access to data on supermarket price changes over time would have made it much harder for the supermarkets to get away with this kind of behaviour for so long.”

She said Coles’ and Woolworths’ pricing practice “urgently needs to be addressed – particularly during a cost-of-living crisis when people are doing it tough”.

In its efforts to address ballooning costs across a variety of sectors, the consumer watchdog is prioritising merger reform, rather than divestiture powers.

“It’s about maintaining the competition that we have now in key sectors, and allowing it to grow,” Ms Cass-Gottlieb said.

Prime Minister Anthony Albanese said the allegations, if proven true, would be “completely unacceptable”.

The ACCC, which launched its legal action in the Federal Court, said it would seek a significant penalty for the alleged breaches, which relate to the Woolworths’ “Prices Dropped” and Coles’ “Down Down” promotions across 15 months.

Coles said it would defend the court proceedings, while Woolworths said its “Our Prices Dropped” program was introduced to give shoppers “great everyday value” on products.

Both supermarket giants were hit hard after the ACCC announcement, with Woolworths and Coles shares falling more than three per cent in trade for a combined loss of $2.29 billion.