The nation’s competition watchdog has accused Woolworths and Coles of misleading shoppers by claiming they were dropping prices when they were actually increasing them, reigniting a political brawl over the power of the supermarket giants.

Australian Competition and Consumer Commission chairwoman Gina Cass-Gottlieb accused the two big retailers, which account for two-thirds of the grocery market, of targeting families with stretched budgets and seeking discounts.