Australians should be protected from big supermarkets hiking grocery bills with a prohibition on price gouging and a crackdown on unit pricing, a parliamentary inquiry has found.

Delivering its final report on Tuesday, the Greens-led Senate probe into supermarkets found shoppers were being let down by laws that allowed big chains such as Coles and Woolworths to chase profits at the expense of families struggling with costs.

Essentials have become unaffordable for many, the inquiry found, while poor competition has robbed shoppers of alternatives to the big two.

“Maintaining margins and increasing margin growth is occurring at the expense of suppliers, consumers and best business practices … without proper justification,” the inquiry said.

Senators called for reforms that would outlaw price gouging, while also establishing a commission to review how businesses set prices. They also recommended a crackdown on existing unit-pricing rules that would create standards for how they should be displayed on labels.

Meg Elkins, a senior lecturer at RMIT University, said the report backed reforms that would boost transparency for grocery shoppers.

That included moving towards stronger, mandatory rules under the Food and Grocery Code of Conduct and improved unit pricing regulations.

“It really is about putting more power back with the [Australian Competition and Consumer Commission] to be able to regulate – that will be the key element here,” Elkins said.

Greens senator Nick McKim, who chaired the inquiry, said supermarket “profiteering” had already “done so much to harm” to Australian families.

“[Outlawing price gouging] would mean that corporations couldn’t just arbitrarily increase prices without facing consequences from the courts,” McKim said on Tuesday.

“This would be a significant new power to stop unreasonable pricing that has been rampant for years because of a lack of competition.”

Transparency, enforcement key

The inquiry has also backed divestiture laws that would theoretically let the government break up the supermarkets if they abused their power.

The reform isn’t backed by Labor, though, meaning it is unlikely to happen.

Labor senators did, however, leave the door open to a crackdown on gouging and unit pricing, but said it could be considered only after the  ACCC hands down its supermarket review.

More broadly, the inquiry heard about searing consumer anger at the big supermarkets over sharp rises in grocery prices since Covid.

A series of separate public reviews have reached similar conclusions – that poor competition has delivered higher-than-necessary food prices and boosted the profits of Coles and Woolworths.

The Senate probe wants consumers to be protected by pushing the legal onus onto supermarkets to ensure any price hikes are justified.

More consistent and better enforced unit-pricing rules would also allow shoppers to make more informed decisions in store, the inquiry found.

That included changes to “prevent promotional material indicating a discount when one is not available” and display changes in price or size.

This goes to key concerns raised by experts that consumers are in the dark about changes on supermarket shelves and can be caught out by incremental differences that, over time, add up to huge increases.

Elkins said better information would empower consumers and limit the ability of supermarkets to pass through larger grocery price hikes.

“What supermarkets are saying and what they’re doing are two different things and that’s where consumers become confused,” she said.