Lawyers for both supermarkets appeared in the Federal Court on Wednesday after the Australian Competition and Consumer Commission launched separate legal proceedings in September.
The watchdog claims the companies violated consumer law by misleading shoppers on hundreds of popular supermarket items with their "Down Down" and "Prices Dropped" campaigns.
The ACCC claims Coles' "Down Down" campaign breached consumer law with many products. (Joel Carrett/AAP PHOTOS)
It's alleged both supermarkets used similar ploys to increase prices of hundreds of products before dropping them as part of their respective campaigns.
The products - including dairy, pet food and personal care - sold for less than the inflated prices, but still more than the regular price that applied before the price spike.
Cameron Moore SC, representing Woolworths, told the court the company had not initiated the temporary spikes in prices.
Both supermarkets claim they were following the requests of suppliers, who pushed for the increase due to their rising costs.
"The suggestion is that Woolworths initiated temporary price spikes and that's not correct factually," Mr Moore said.
Woolworths did not initiate temporary price hikes but acted on supplier requests, their lawyer said. (Con Chronis/AAP PHOTOS)
"We say factually, the ACCC's case is misconceived."
John Sheahan KC, representing Coles, said the case was not as simple as alleged by the ACCC and any outcome could have significant implications for the whole industry.
Coles and Woolworths have until November 29 to file a written response to the ACCC's allegations.
The parties will then return to the Federal Court in December for another case management hearing.
Justice Michael O'Bryan did not set down an exact date for the hearing.
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