The supermarket giant agreed to include Nestle's Cerelac baby rice in the promotion before ever selling it at the marketed "was" price, a landmark consumer rights trial in the Federal Court hearing was told on Thursday.
In a joint consumer watchdog action, the Australian Competition and Consumer Commission alleges Woolworths and Coles misled consumers by briefly raising prices before reducing them to above the original shelf price in marketing campaigns to disguise hikes as discounts.
Nestle made a proposal to Woolworths it would increase the cost of the Cerelac product - which would be passed on to the consumer - and then offer funding for it to be put on the "Prices Dropped" scheme, Woolworths baby needs category manager Stuart Robinson told the hearing.
Mr Robinson said he did not know if Woolworths would have sold the baby food for an extended period at the higher price of $6.50, without the proposed funding model.
"The proposal that had been put forward to me was a 'Prices Dropped' proposal, so that was what I was considering," he said.
Mr Robinson admitted the agreed "was" price of $6.50 - to be advertised in store - was higher than Woolworths had ever charged for the product at the time.
Just over a month before, the same product had cost just $5 and had done so for most of a year, according to court documents.
It sold for $6 under the "Prices Dropped" promotion.
"What mattered was it had already been agreed this was going to go on 'Prices Dropped' and this was what was going to be the 'was' price that was used," ACCC silk Michael Hodge suggested
"That's incorrect," Mr Robinson replied.
Echoing responses by more senior company executives earlier in the trial, Mr Robinson explained at the time Woolworths was going through a period of "significant inflationary pressures".
The guidance around pricing supplied by the ACCC requires prices to exist for a reasonable time and drive a reasonable number of sales to be considered legitimate.
The case will likely hinge on the how long the temporarily higher prices were held and whether this could be considered an established price.
ACCC lawyers on Monday accused Woolworths of employing "subtle magic" in its pricing campaign to disguise price hikes with short-term increases before reducing them to above the original shelf prices.
Coles made its case to the court in February, but final judgment will be withheld until Woolworths has presented its evidence.
Australia's supermarket sector - one of the most profitable in the world - has faced heavy scrutiny and inquiries amid rising cost pressures and supply chain disruptions since 2020.
In February, Woolworths posted a half-yearly net profit of $859 million, up 16 per cent.
Shares in the company surged 13 per cent following the release of the results - its biggest single-day gain on record.
The hearing will resume with further testimony from Woolworths executives on Friday.
