Price gouging investigations are adding up

Article published 17 January 2024

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Allegations of supermarket price gouging have led to two investigations and a third might be on the way

You might have seen some talk over the past few days about the Treasurer Jim Chalmers considering an inquiry into supermarket price gouging. You’d be forgiven for thinking this had already happened, as the Australian Government last week announced the appointment of Dr Craig Emerson to lead a review into the supermarkets’ Code of Conduct. Meanwhile, a third investigation, this time by the Senate, is also investigating the behaviour of the major supermarket chains to find out how they’ve been using (and misusing) their market power.

So what’s the difference between these three investigations, and what is likely to come of them?

Review of the Food and Grocery Code of Conduct

Let’s start with the Code of Conduct. The Food and Grocery Code of Conduct is a voluntary code that governs the ways that supermarkets deal with their suppliers. Once a retailer or wholesaler signs up, they’re bound by the code and can be penalised by the Australian Competition and Consumer Commission (ACCC) if they breach it. Coles, Woolworths, Aldi and Metcash (which owns IGA) are all signatories to the code.

The review of the code, led by Dr Emerson, is designed to make sure that the code does what it’s supposed to do, which is to protect suppliers from unfair supply agreements and to ensure that both suppliers and supermarkets act in good faith.

Because the review is examining the code of conduct itself, rather than the actual practices of the supermarkets, it’s unlikely that it will have any immediate effect, beyond putting some public pressure on the big chains.

Senate Select Committee on Supermarket Prices

The Senate Select Committee on Supermarket Prices was announced at the end of last year and is currently looking into price gouging by Coles and Woolies. You might have even heard it referred to in the news as the inquiry into price gouging. The committee is made up of Senators from different parties, with no party having a majority.

The aim of the Senate’s inquiry is to give a platform for stakeholders to raise issues and perspectives relating to price gouging and market power of the major supermarkets. It will then release a final report (scheduled for May 7) with recommendations based on the input from stakeholders and the committee’s deliberations. While the Government is not required to enact these recommendations, or even respond to them, the inquiry will turn up the heat on Coles and Woolies and may provide enough evidence and pressure to convince the Treasurer to trigger the ACCC price inquiry.

ACCC Price Inquiry

A potential ACCC supermarket price inquiry would have significant powers that neither the Senate, nor Dr Emerson have access to. Unlike either of the other investigations, an ACCC inquiry would be able to force supermarkets to provide confidential information about how much they pay their suppliers. This would allow the ACCC to see exactly how much Coles and Woolies are raising their prices and would put to bed the supermarkets’ claim that price rises are just an unfortunate result of rising costs in their supply chain.

The ACCC would also be able to compare the supermarkets’ supply agreements to determine whether they are colluding with each other to set prices for either their suppliers or their customers. If they are found to be engaging in anti-competitive behaviour, then the ACCC can issue fines or even take legal action.

While the ACCC inquiry has the most power of the three, there’s no guarantee that it will happen. There have been calls for one for at least the past couple of months, but the Treasurer is still trying to convince Coles and Woolies to “do the right thing” on their own. As the responses from our recent survey into cost of living pressures show, the supermarket duopoly will keep gouging prices unless they are made to stop.

Have your say

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