What to make of the Australian Government's new laws outlawing excessive pricing by supermarkets?

This week, the Australian Treasurer enacted new regulations to outlaw excessive pricing by Australian supermarkets. These regulations will come into force on 1 July 2026. The Treasurer announced the regulations are designed to protect consumers from supermarkets taking advantage of ineffective competition to inflate prices and profits.

The regulations provide for penalties of up to A$10m, 10% of turnover or three times the gain made for charging excessive grocery prices and will be enforced by the ACCC. These measures were issued after a short consultation late this year.

This reform proceeds on the back of the ACCC's 2025 Supermarkets Inquiry Final Report, which did not find that supermarket prices were excessive and cautioned that any attempt to assess whether supermarket prices might be excessive will be "challenging".

Overview

The regulations amend the Competition and Consumer (Industry Codes – Food and Grocery) Regulations 2024 to:

• require corporations to notify the ACCC if they become a "very large retailer" (with annual group sales revenue exceeding A$30 billion);

• prohibit very large retailers from supplying or offering to supply grocery products to consumers at an "excessive" price; and

• require very large retailers to keep certain information and documents related to these pricing requirements for at least three years.

Under the regulations, a very large retailer will engage in "excessive pricing" if, in all the circumstances, it charges or offers to charge prices for any grocery product that are "significantly excessive" compared to their cost plus a "reasonable margin".

The explanatory materials allow for consideration of state-wide pricing policies, recognising that costs may be higher in some locations than others, and so it would not be considered excessive to focus only on profits earned where supply costs are lower.

The supermarkets' long standing use of regular "high-low" pricing cycles may also be considered to determine whether pricing across the full cycle was excessive.

The compliance task for affected supermarket chains looks challenging. The amendments do not prescribe how one should determine the cost of supply or what is a reasonable margin. Rather, under the explanatory materials, the reasonableness of a margin will be left to consideration in the circumstances of each case, including broad factors such as market dynamics, capital employed, commercial risks, and margins on comparable kinds of grocery products.

ACCC Grocery Inquiry findings

Earlier this year, the ACCC report found that:

• grocery prices in Australia have been increasing rapidly over the last five financial years;

• most of those price increases were attributable to increases in the cost of doing business across the economy, including particularly production costs for suppliers, which have increased supermarkets’ input costs;

• ALDI, Coles and Woolworths had increased their product and EBIT margins and profits; and

• in large part, the price increases at ALDI, Coles, Metcash banner stores and Woolworths resulted from higher costs.

Significantly however, the report, which looked closely at the underlying facts, stopped short of accusing the major supermarkets of charging "excessive" pricing. The ACCC did not find or try to determine whether the prices or profit margins of these supermarkets were excessive.

The ACCC noted the complexity of analysing supermarket pricing and profits – supermarkets sell a vast range of products, most consumers typically purchase a basket of goods that are likely to have a range of product margins and each consumer is likely to purchase a different basket of goods.

Comparison with UK and EU approaches to excessive pricing

The Government intends to draw on the concept of unfair and excessive pricing, which is a recognised form of "abuse of dominance", prohibited under UK and EU Competition Law.

Since 2000, the European Commission has decided a handful of excessive pricing cases, and only once conclusively found that a company charged excessive prices.

However, findings of excessive prices have been made in a few decisions in the UK. For example, earlier this year, on appeal, a pharmaceutical company was found to have charged excessive prices over an eight year period for an off-patent drug, liothyronine, through a total of 63 progressive price increases. In that decision, prices were found to have been increased by more than 1,100% over the period in question and well above the prices charged for the same drug in various other European countries.

Unlike the UK and EU laws, the new Australian regulations circumvent any need to investigate whether very large grocery retailers are dominant in relation to the pricing of the goods or services which they supply. In effect, the regulations assume the supermarkets are dominant in relation to "any kind of grocery product". However, the degree of competition faced by the very large retailers will be key in any application of these regulations and forms part of the assessment of whether their prices are "excessive".

Guidance

The decisions in the UK and the EU, considering excessive pricing by dominant firms, have posed a two-part test:

1. whether the price for a product is higher than what would be expected in "comparable, competitive conditions"; and

2. whether the pricing is “unfair" because the difference from the competitive price is not justified by reason of cost, quality or other objective factors.

A price may also be considered "abusive" when it bears no reasonable relationship to the product's economic value or cost.

The UK analysis of excessive pricing recognises that pricing requires assessment over the longer term to test whether the margins and returns remain "persistently above the true economic costs for supply, including capital employed, intangible assets, and the risks faced by the firm". This requires expert economic assessment and selection of the appropriate comparator market.

The guidance available from the UK decisions is limited, noting the UK Competition Appeal Tribunal accepted that:

"there is considerable flexibility in how the overall assessment is conducted and the court or regulator assessing the price needs to think carefully about the appropriate way to answer the overall question of whether the price is unfair."

The new regulations will increase the costs and risks of compliance for major supermarkets.

The UK and EU laws are not sector specific. It remains to be seen whether in time the Government may also seek to impose similar regulations on other sectors of the economy such as pharmaceutical companies, banks or energy retailers.