Supermarket Giants Probed Amid Allegations of Unfair Practices

A shopper seen at Khan's SUPA IGA in Cobar, Australia, on April 17, 2020. Jenny Evans/Getty Images

The Australian government has directed its consumer watchdog to investigate pricing and competition within the supermarket sector—the first in 16 years—following allegations of price gouging by major chains.

The Australian Competition and Consumer Commission (ACCC) will conduct a 12-month inquiry into how supermarkets charge for their products and whether they engaged in unfair pricing practices.

This marks the first inquiry into the supermarket sector since 2008 when the ACCC investigated allegations about restrictive tenancy provisions in contracts signed by Coles and Woolworths with shopping centres that prevented them from leasing space to competing supermarkets.

The government said the move was part of a broad plan to boost competition in the sector and reduce living cost pressures for Australians.

Treasurer Jim Chalmers said the government wanted a “fair go” for Australian households and farmers.

“Australians are under cost-of-living pressure, and we know that a lot of that pressure is piled on at the cash register,” he said in a statement on Jan. 25.

“This is about making our supermarkets as competitive as they can be so Australians get the best prices possible.”

Similarly, Prime Minister Anthony Albanese said consumers should not pay one dollar more than the real price of the things they needed.

“When farmers are selling their product for less, supermarkets should charge Australians less,” he said.

“That’s why the ACCC will use its significant powers to probe the difference between the price paid at the farm gate, and the prices people pay at the check-out.”

The government’s announcement comes after Coles and Woolworths, which accounted for around 60 percent of the market share, reported a considerable increase in net profit for the 2022-2023 financial year.

What Will the ACCC Investigate?

Among the matters to be considered by the ACCC were the structure of the industry at the supply, wholesale and retail levels, the competitiveness of small and independent retailers, and the pricing practices of supermarkets.

The consumer watchdog will also investigate factors influencing prices in the supply chain and recent trends in the sector, including online shopping, changes in technology, and loyalty programs.

ACCC Deputy Chair Mick Keogh believed a competitive supermarket sector would bring about greater prices, quality and choice for consumers.

“Our inquiry will examine the nature of the current competitive environment between supermarkets, as well as the barriers to greater competition and new entry in the sector,” he said.

“We believe we are well placed to conduct this broad-ranging inquiry and will bring to bear our expertise in competition, consumer law, agriculture and the supermarket sector in particular.”

The ACCC is expected to submit an interim report in 2024 and a final report in 2025.

Residents shop at a supermarket in Canberra, Australia, on August 12, 2021. Rohan Thomson/AFP via Getty Images

Meanwhile, Woolworths said it was aware of the ACCC’s inquiry and would assist the watchdog in its investigation.

“"We know many Australian families are doing it tough and looking for relief at the checkout,” the supermarket giant said in a statement.

“Food inflation has continued to moderate in recent months and we expect this to continue throughout 2024.”

Both Coles and Woolworths have dismissed allegations of price gouging, saying they had reduced prices for hundreds of products for consumers while being subject to increasing price pressures.

Apart from the ACCC’s inquiry, the government said it would provide $1.1 million (US$720,000) in funding to the consumer group CHOICE to provide price transparency and comparison reports on a quarterly basis for three years.

From the June quarter of 2024, CHOICE will make changes to the way it presents information about the prices of grocery goods at different retailers, allowing consumers to have better comparisons when shopping.