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Supermarkets and retailers have warned a government ban on grocery price gouging could backfire, criticising the move as unprecedented and unfair for targeting only the biggest chains.
The Albanese government will announce on Sunday that it would ban price gouging in Coles and Woolworths, following a damning report from the competition watchdog earlier this year that revealed Australian supermarkets were among the most profitable in the world.
Coles and Woolworths make up about three-quarters of the supermarket sector.
The Australian Competition and Consumer Commission (ACCC) launched an inquiry into the big supermarkets in 2024 after they were accused of failing to pass on savings to consumers during a cost-of-living crisis, but did not prove the companies were price gouging.
Under the amended Food and Grocery Code, supermarkets must only charge a reasonable margin on products. The new rules come into force on July 1, 2026.
“We’re cracking down on supermarket price gouging to help Australians get a better deal at the checkout,” Treasurer Jim Chalmers and Assistant Minister for Productivity and Competition Andrew Leigh said in a joint statement.
“The ban will prohibit very large retailers from charging prices that are excessive when compared to the cost of the supply plus a reasonable margin.”
The ACCC will get a $30 million funding boost to police the new regulations. As has previously been reported, Coles and Woolworths will face maximum penalties of $10 million if found to have breached the code.
Australian Retail Association chief Chris Rodwell warned regulating profit margins risked making staples more expensive, and grocery prices were mostly driven by business costs, such as energy and freight.
“The ACCC Supermarkets Inquiry found no evidence of excessive pricing,” he said.
“Introducing a subjective new measure that regulators did not recommend will increase legal risk, compliance costs and uncertainty across the grocery sector.”
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Rodwell said regulation and tax relief were the best way to put downward pressure on prices, as “businesses large and small continue to face a cost-of-doing-business crisis”.
A Woolworths Group spokesperson said the law was “unprecedented by targeting only two Australian-owned companies”, and would create “an uneven playing field which will see much larger, foreign-owned retailers free to charge customers whatever they want”.
“We compete vigorously for every item in our customers’ baskets,” they said, claiming Woolworths’ average year-on-year prices had declined for seven consecutive quarters.
A Coles Group spokesperson said the changes risked weakening competition.
“Australia’s grocery sector is highly competitive, and carving out large multinationals and other major players from this legislation does not reflect how Australians shop,” they said.
“For every $100 customers spend at Coles, we make around $2.43 in profit – less than 3¢ in the dollar. We urge the government to tackle the real drivers of higher grocery prices for Australian families. Increasing regulation is likely to put upward, not downward, pressure on prices.”
Chalmers said the change would fill a gap in Australia’s competition and consumer protection framework and provide a safeguard for consumers, after the inquiry found Coles and Woolworths had limited incentive to compete.
The Albanese government made tackling price gouging an election promise, and launched a community consultation to canvas the changes in October.
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