Australia’s major supermarket chains are expressing strong opposition to new regulations aimed at curbing price gouging on groceries. The federal government has introduced changes to the Food and Grocery Code of Conduct, which will take effect on July 1, 2023. These rules will prohibit large retailers from charging excessive prices relative to their supply costs and a reasonable profit margin.
Jim Chalmers, Australia’s Treasurer, emphasized that the regulations are designed to provide families with fairer pricing on essential groceries. He stated, “One of the best ways to ease the cost of living for Australians is to help people get fairer prices at the checkout.”
Under the new rules, supermarkets could face penalties of up to $10 million for each breach, or three times the value of the benefit derived from the excessive pricing. Despite the intention behind these regulations, leading supermarket chains like Coles and Woolworths are pushing back, claiming that the measures will not effectively lower grocery prices.
Coles, which reported a profit of approximately $2.43 for every $100 spent, argued that the new regulations could inadvertently increase costs for consumers. A spokesperson for the company remarked, “At a time when the focus should be on easing cost-of-living pressures, these regulations risk doing the opposite.” The supermarket giant highlighted rising expenses, including energy, freight, and labor, as significant factors affecting their pricing strategies.
Woolworths echoed these concerns, suggesting that the regulations could have a detrimental effect on the grocery market. A spokesperson warned of a potential “butterfly effect” where consumers might miss out on valuable deals, arguing that the new law unfairly targets only Australian-owned companies. They cautioned that foreign-owned retailers would remain unaffected by these restrictions, potentially leading to an uneven competitive landscape.
Criticism of the price gouging ban also came from the Business Council of Australia, whose CEO, Bran Black, stated that regulation should be evidence-based. He asserted, “If Australia wants lower prices and better outcomes for consumers, we need to focus on reducing unnecessary regulation and addressing the underlying cost pressures across supply chains.”
An investigation by the Australian Competition and Consumer Commission (ACCC) revealed that Coles and Woolworths operate in a near-duopoly with little incentive to compete aggressively. Although they were identified as some of the most profitable supermarkets globally, the report did not explicitly accuse them of gouging customers. The ACCC found that grocery prices increased at more than double the rate of wages between late 2022 and early 2023, attributing some of these rises to additional profits for the major retailers.
As the new regulations approach, the government insists that they will enhance competition and accountability among supermarkets, holding them responsible for their pricing practices. The ACCC will be tasked with overseeing the enforcement of the new rules, aiming to ensure that consumers benefit from more equitable pricing in their grocery shopping.
With the changes set to take effect in less than a month, the debate over price gouging and supermarket profitability continues to unfold, highlighting the ongoing challenges faced by consumers in navigating the rising cost of living in Australia.
