Regulator promises in-depth supermarket price probe

The ACCC will produce an interim report on supermarket pricing later this year before its final report in 2025.

The competition regulator said the first inquiry into the supermarket sector in 15 years will be able to delve deeper into pricing after the Albanese government announced an investigation into industry gouging.

The Australian Competition and Consumer Commission will produce an interim report later this year before a final report in 2025 which will include a number of recommendations.

The last price inquiry into the supermarkets during the Rudd government didn’t reveal price gouging. It however exposed barriers to competition, including exclusive agreements between Coles or Woolworths with shopping centre owners which prevented any other supermarkets from also renting space in those centres.

“The difference this time is that advances in data and computer technology mean it will be possible to have a much closer consideration of pricing through the supply chain,” ACCC deputy chair Mick Keogh said.

ACCC deputy chair Mick Keogh.

“In other words, what price is being paid at the farm gate, what price is being paid by the processor, what price is being paid by the wholesaler and what price is being charged by the retailer, and to look in great detail at where the margins are through the supply chain and answer the question as to whether margins are excessive.”

The probe will also look at how online shopping, loyalty programs and technology changes are impacting competition in the industry.

The 2008 inquiry led to enforceable undertakings on Coles and Woolworths to remove the restrictive tenancy provisions but Mr Keogh said it was too early to go into what changes could result from the new inquiry.

“The final report will have a definitive answer on whether price gouging is occurring and depending on what we find there may be recommendations to government about actions to be taken to address the problem,” he said.

Theoretically speaking, this could include price transparency measures, making the current voluntary food and grocery code of conduct mandatory and imposing penalties for breaches.

“In some jurisdictions overseas, governments require supermarkets to actually publicise the prices they pay for the goods they’ve purchased, which they then resell. So there’s a whole range of those sorts of measures used internationally to try and make sure supermarket prices are fair.”

The ACCC is also expected to inquire into the competitiveness of small and independent retailers, including those in regional and remote areas, pricing practices and any impediments to competitive pricing along the supply chain.

The share prices of Woolworths and Coles fell slightly following the announcement on Thursday, while the share price of Metcash, which operates the independent IGA supermarkets, finished 0.8 per cent higher.

“We know many Australian families are doing it tough and looking for relief at the checkout,” Woolworths chief executive Brad Banducci said, adding the retailer would assist with the inquiry.

Coles said price inflation at its supermarkets had declined to 3.1 per cent in the September quarter, down from 6.2 per cent in the March quarter.

Fresh food, including fresh produce, meat, deli items and seafood had been in deflation of 2.3 per cent during the July-September quarter.

“We have worked closely with the ACCC in previous inquiries, and we will do so again,” the company said.

“We welcome the ACCC’s examination of the factors that affect prices in the grocery supply chain and look forward to illustrating how we provide value to our customers and our positive relationships with our supplier partners.”

The government will also hand $1.1m in funding to consumer group CHOICE to provide quarterly “price transparency and comparison reports” on grocery goods at different retailers which will highlight those charging the most and the least.

The reports will empower Australian consumers to make informed choices about their purchases, the government said.

The National Farmers Federation welcomed the inquiry and said it had “been calling for this for a long time.”

German discount supermarket Aldi also welcomed the inquiry, saying it “always” aims to cut out unnecessary costs and pass savings directly to customers.

“Competition is incredibly important in keeping prices as low as possible for Australians, and our business is a testament to that,” the company said in a statement.