Supermarkets warned on pricing as government threatens tougher action

Matthew Elmas
Jan 16, 2024, updated Jan 17, 2024

Australia’s major supermarkets face the threat of mandatory codes as the consumer watchdog signals a get-tough approach to their pricing.

It comes amid fears the big chains are shafting suppliers – and consumers – as a public inquiry examining a possible mandatory industry code gets under way.

On Tuesday, the ACCC threatened legal action against one of the major chains, as it investigates dodgy price claims around how supermarkets set prices.

Supermarket giants Coles and Woolworths have copped the brunt of public anger recently over several years of high food inflation, with Prime Minister Anthony Albanese looking to make political hay out of the situation by announcing a fresh review into the grocery code of conduct.

The review, led by former Labor minister Craig Emerson, will report to the government this year.

Albanese said a key issue was whether the existing voluntary code should be mandatory and added to his commentary on Tuesday, suggesting the government was open to empowering the ACCC with stronger powers to crackdown on grocery price gouging.

“Our priority is providing assistance for people and making sure as well that people can get their goods for the cheapest possible price,” Albanese said.

“That’s why myself and the Treasurer met with Dr Craig Emerson yesterday. That’s why the ACCC are also examining those issues.”

Albanese was referring to a report in the AFR, which quoted Australian Competition and Consumer Commission chief Gina Cass-Gottlieb on Tuesday saying the regulator was investigating dodgy price claims made by the supermarkets.

Cass-Gottlieb said that while the ACCC did not have price monitoring powers over groceries, it could look at cases of deceptive and misleading conduct.

Specifically referring to the practice of “was” and “now” prices for discounts, Cass-Gottlieb even took the extraordinary step of foreshadowing a possible legal case in the next 12 months.

But Australians also need better transparency about how supermarkets set prices, according to a leading expert, who says a review into the sector must stretch from the farm gate to the checkout.

University of Technology Sydney associate professor Sanjoy Paul said the crackdown must also extend to smashing the “black box” of food prices to quell anger about soaring grocery bills.

He called for reforms that would require supermarkets to explain price changes to customers, including whether they reflect higher costs faced by suppliers or merely a promotional strategy.

“We don’t have information on what happens in the black box [of food prices],” Paul, a supply chain expert, said.

“Prices go up, but what are the reasons? Show us the proof, all the calculations and disclose everything to us so we can be more confident and understand we’re not paying too much.”

What would a mandatory code look like?

Paul said a mandatory food and grocery code would be a step in the right direction because it would make it easier to enforce penalties when supermarkets do wrong by their suppliers.

But it’s unclear how merely making the code mandatory would change pricing practices that affect consumers.

All the major supermarkets, including Coles, Woolworths and Aldi, are already signatories to the voluntary code. That means coverage of the regulations would not drastically increase under a mandatory system.

Nevertheless, key provisions in the existing code that commit signatories to treating suppliers fairly and in good faith, would become easier to enforce if the code was compulsory and overseen actively by the ACCC, Paul said.

That could have positive implications for consumers because it would be harder for supermarkets to use their market power unfairly against suppliers to push up prices.

But introducing a mandatory system could still fail to go far enough because action to safeguard consumers and improve transparency about the way food prices are set is also needed, Paul explained.

“[The code] should be mandatory and not only include farmers and processors, but retail,” Paul said.

“It should be end to end.”

Topics: Consumer, Cost of Living, Grocery costs, Price Gouging, Supermarkets, Transparency