Australia's new law on supermarket price gouging, also known as excessive pricing, takes effect on July 1 2026. The legislation prohibits any very large supermarket with revenue exceeding A$30 billion—currently only Coles and Woolworths—from charging a price for a grocery product that is significantly excessive compared to the cost of supply, plus a reasonable margin. This law is an addition to the existing mandatory Food and Grocery Code and will be enforced by the Australian Competition and Consumer Commission (ACCC), with significant financial penalties for any breach.
The law arrives amid heightened scrutiny of major supermarkets' pricing practices. Recently, Coles was found to have misled consumers under its "Down Down" promotion, where it advertised prices as reduced even though the prices were higher than originally advertised. Significant penalties are expected. A similar ACCC action against Woolworths is awaiting judgment.
Why Was the New Law Introduced?
The new law fulfills the Labor government's pre-election promise to ban supermarket price gouging as part of its commitment to address cost of living pressures. It was introduced following evidence of rising grocery prices. Last year, the ACCC's supermarkets inquiry found that Coles and Woolworths hold a significant market share—more than two-thirds of Australian grocery sales. They are also among the most profitable supermarket businesses globally and face little competition. Although the ACCC did not recommend an excessive pricing law, it anticipated that greater competition would reduce profit margins in the sector.
Other inquiries into supermarket pricing, including by the Australian Council of Trade Unions and the Senate Select Committee into supermarket prices, recommended an excessive pricing law. Separate parliamentary inquiries in Queensland and South Australia also pointed to the need for tighter regulation of the sector.
Australia's Law Goes Further Than Other Countries
Australia's law is unique. Countries that have introduced dedicated price gouging laws have done so primarily for limited times in emergencies, like the COVID-19 pandemic, when products such as face masks are scarce and the risk of price gouging is high. The European Union uses its competition law to prohibit large companies from abusing their dominance to harm competition, including by charging excessive prices. However, excessive pricing is not expressly part of Australia's competition law. Instead, Australia chose to include excessive pricing in the Grocery Code, confining it only to large supermarkets rather than other sectors of the economy.
Even so, Australia is expected to rely on competition cases from the EU and the UK in applying the new law. However, even in the EU and UK, cases are not extensive, and principles around what constitutes an excessive price are not fully settled.
How Will the Law Apply in Practice?
The new law does not define when prices are significantly excessive or provide examples, nor does it specify what a reasonable profit margin is. In the EU, the overarching test of whether a price is excessive is if it is significantly above what would be charged in a competitive market. However, the test will be difficult to apply because the nature of a supermarket business involves costs spread across a huge portfolio of products, making it hard to allocate costs and profits to a single product. Supermarkets also deal with hundreds of suppliers, with prices and costs changing frequently.
Therefore, courts and regulators look to other means for determining whether a price is excessive, such as the price charged by other companies for a similar product, or the price charged for the product in different places or at different times. The new law emphasizes whether a supermarket is making a "reasonable" profit margin, but determining this is notoriously difficult, and what is "reasonable" is open to debate and proof. All this means the new law will be difficult to apply, as noted in Treasury's consultation paper.
What Can Consumers Expect from the New Law?
In practice, the new law is likely to be used only infrequently, given the difficulties of proof. Large supermarkets will also have an incentive to defend any excessive pricing claim brought by the ACCC. The law is not a silver bullet for achieving fair grocery prices or for addressing cost of living pressures. Consumers need to manage their expectations of what it can realistically achieve on its own.
It was always intended that the excessive pricing law would be part of a broader armoury of consumer measures, including: the new merger law requiring major supermarkets to notify the ACCC of certain acquisitions; funding for the consumer group CHOICE to provide greater transparency on consumer prices; and funding for the ACCC to address misleading conduct by supermarkets, including increased funding in the recent May budget.
The new law does put Coles and Woolworths on notice that their pricing practices are being watched. Will these July 1 changes transform the market dominance of Woolworths and Coles? It's unlikely. But having new commercial incentives for large supermarkets to review their pricing practices can only be positive for consumers.
