There’s no proof big supermarkets are price gouging, but Labor will ban it anyway

Supermarkets face a pricing crackdown if the Albanese government is re-elected as Labor moves to reassure voters it has heard their cost-of-living concerns by forming a new taskforce that would toughen laws on any price gouging in the sector dominated by Coles and Woolworths.

But the policy stops short of the Coalition’s plan to hand regulators the power to break up big supermarket chains to deal with extreme cases of market power abuse, and the Australian Competition and Consumer Commission has already sued Woolworths and Coles under existing laws for allegedly offering “illusory discounts”.

Prime Minister Anthony Albanese has ruled out any move to break up the supermarket giants.Credit: Trevor Collens

The watchdog published a damning report earlier this month that said the country’s major supermarket chains were among the most profitable in the world and were failing to pass on the full benefit of cost savings to consumers. But that report stopped short of accusing them of price gouging or recommending the companies be broken up.

Prime Minister Anthony Albanese will announce Labor’s policy on Sunday. “Labor will make price gouging by supermarkets illegal because Australian families deserve a fair price at the checkout and Australian farmers deserve a fair price for their goods,” he said in a statement.

Under the policy, a second term Albanese government would establish a taskforce of public service and other experts to provide advice on an “excessive pricing regime” for supermarkets, which would then be policed by the commission.

Woolworths and Coles have denied the commission’s pricing lawsuit against them, arguing that discounts they offered were genuine, that price increases were caused by suppliers needing to recoup higher costs, and that the ACCC’s pricing report used a misleading measure of their profitability.

The commission estimates Woolworths has 38 per cent of the supermarket sector, followed by Coles on 29 per cent and German discounter Aldi on 9 per cent. IGA stores supplied by Metcash have 7 per cent.

Treasurer Jim Chalmers said the government’s plans would deliver more competition, fairer prices and better deals for Australians. “Labor is making sure Australians aren’t being treated like mugs,” he said. “We’re delivering a better deal for families at the checkout and a better deal for farmers at the farm gate.”

The Coalition and Greens have called for Albanese to allow new laws that would permit the government to break up supermarket chains such as Woolworths and Coles as a last resort, but the government views that approach as unrealistic and counterproductive.

Some pro-market MPs within the Coalition have also privately expressed their concern that the divestiture policy is too interventionist. The announcement of Labor’s policy could revive divisions within the opposition over the policy it has adopted.

In its supermarkets report, the ACCC made 20 recommendations that Labor has promised, in principle, to implement, including measures to improve price transparency, a review of loyalty programs and requiring the supermarkets to notify customers of any changes in package sizes.

Labor has taken some action to curb market power, including raising penalties for anticompetitive behaviour and increasing the watchdog’s funding.

While Australia has laws to prevent companies from abusing their market power, the laws do not explicitly prohibit excessive pricing.

The new taskforce would engage in consultation, consider other countries’ laws and options suitable for Australia and then report back to the government within six months.

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