How big supermarkets set their prices and whether their specials are actually delivering good deals to families will be high on the agenda as the consumer watchdog probes national grocery supply chains.

Under plans unveiled this week by Prime Minister Anthony Albanese, the Australian Competition and Consumer Commission (ACCC) will investigate grocery prices amid public anger about high inflation at major supermarkets.

Bankwest Curtin Economics Centre senior research fellow Daniel Kiely said the probe would “delve into the details” of how big retailers such as Coles and Woolworths set prices, and how they dealt with other businesses in their supply chains.

It would determine “whether or not prices being charged at the supermarkets are justifiable”, he said, and also if promotions and discounts offered to shoppers were actually good deals or just misleading marketing spin.

“The key thing here is the information provided to consumers and whether that is accurate,” Kiely said.

“When you go in and see a special on a shelf, is that really a special or just some marketing campaign? There have been arguments of late that prices on the specials might have been higher than they were six months ago.”

The supermarket probe has been a long time coming after a turbulent few years for Coles and Woolworths. The big retailers have been navigating public anger about soaring inflation, particularly for staples such as fruit, vegetables and red meat.

Albanese has criticised supermarket bosses in recent weeks, claiming repeatedly that the prices Australians are paying at the checkout are out of step with what farmers are being paid for their produce.

Those remarks culminated this week in a package of monitoring and transparency measures that included the ACCC’s inquiry, and funding for consumer group Choice to report on prices and issue consumer advice.

“When farmers are selling their product for less, supermarkets should charge Australians less,” Albanese said.

“That’s why the ACCC will use its significant powers to probe the difference between the price paid at the farmgate, and the prices people pay at the checkout.”

Discounts, competition and transparency 

The move has been welcomed by the farming industry, which said it had “long called for greater transparency” from the major supermarkets.

But it also warned that Albanese would need to make good on any recommendations.

“We need the ongoing commitment of government to act on any outcomes from this inquiry,” National Farmers Federation President David Jochinke said.

“We’ve seen past reports collect dust on shelves in Canberra. Reports and recommendations don’t make our food system fairer.”

Kiely said the ACCC would have the power to work out how supermarkets made decisions about prices and what they paid for produce, including where profit margins were added along supply chains.

It would probe “whether there’s a lack of competition or gouging happening at different stages of the supply chain”, he said, including whether it’s supermarkets or perhaps other wholesalers raising prices.

“It may not necessarily be the supermarkets themselves, but it could be wholesalers, for example, charging at different points in the supply chain,” Kiely said.

It remained to be seen whether the inquiry would deliver lower grocery prices for Australian families, Kiely said. But key issues like the information consumers had about their food bills would likely be addressed by the watchdog’s probe.

ACCC chair Gina Cass-Gottlieb said the regulator would use its “full range of legal powers to conduct a detailed examination”. It will be the watchdog’s first big inquiry into supermarkets since 2008.

“We know grocery prices have become a major concern for the millions of Australians experiencing cost-of-living pressures,” Cass-Gottlieb said.

“When it comes to fresh produce, we understand that many farmers are concerned about [the] weak correlation between the price they receive for their produce and the price consumers pay at the checkout.”

Transparency about pricing is a key area that other experts have pointed to in recent weeks, arguing that consumers are struggling with poor information and an inability to properly compare prices between chains.

“It can be a difficult avenue for consumers to navigate,” Kiely said.

On that front, the $1.1 million in taxpayer funding for Choice to deliver tailored advice for consumers about prices could prove to be the biggest immediate benefit for shoppers.

The funding will allow the consumer group to compare grocery prices at different chains, and highlight those that are charging most and least for comparable products.

Woolworths group chief executive Brad Banducci responded tentatively to news of the ACCC inquiry this week, suggesting that while food prices had risen in recent years, inflation would soon moderate.

“We know many Australian families are doing it tough and looking for relief at the checkout,” he said.

“Food inflation has continued to moderate in recent months and we expect this to continue throughout 2024.”