Let's be real: if you've been to a supermarket in the past three years, you've felt it. A basket of groceries that cost $100 in 2021 now costs $115. Your weekly shop has become a minor act of financial triage. So when the government announced plans to ban supermarket price gouging, the public reaction was something like relief mixed with scepticism. Finally, something will be done. But will it?
From July 1, 2026, a new regulation within the Food and Grocery Code of Conduct will make it illegal for Coles and Woolworths (the only retailers large enough to trigger the rule) to charge prices that are excessive when compared to their supply costs plus a reasonable margin. Violations carry penalties of up to $10 million per breach, with maximum fines potentially reaching $3.6 billion for Woolworths or $2.9 billion for Coles based on annual turnover. The ACCC will enforce it.
The logic is straightforward: when inflation pushed input costs up, the major supermarkets didn't just pass those costs to consumers; they also widened their profit margins. Between March 2021 and September 2023, grocery prices rose 15.2 per cent. Coles and Woolworths, which control more than 65 per cent of Australia's supermarket market, maintained or increased their margins as costs rose, making them among the world's most profitable supermarkets by international comparison. The government looked at this, looked at angry voters, and decided to act.
But here's where it gets complicated. Coles has already made its position clear: the rule will push prices up, not down. The supermarket notes that the ACCC's own investigation into pricing practices found no conclusive evidence of illegal price gouging, even while acknowledging that margins expanded during the crisis. For every $100 a customer spends at Coles, it makes around $2.43 in profit, the company argues. Woolworths, meanwhile, called the law unprecedented and complained it creates an uneven playing field, since foreign-owned competitors like Aldi face no such restrictions.
Both companies warn that implementing compliance systems, pricing audits, and legal safeguards to justify every pricing decision to regulators will cost money. Those costs, they suggest, will get passed on to consumers. The Australian Retailers Association echoed that concern, warning the rules would increase legal risk, compliance costs and uncertainty across the grocery sector. On the face of it, this isn't entirely cynical. Supermarkets will need new systems to track supply chain costs and demonstrate that their markups remain within whatever threshold the ACCC defines as reasonable.
And that's the real problem. What is a reasonable margin? The law doesn't say. Neither does the ACCC, at least not yet. A margin of 5 per cent, 10 per cent, 15 per cent? The answer will determine whether the ban becomes a genuine price brake or merely a compliance exercise. Without clear definitions, retailers face genuine uncertainty, which means they're likely to play it safe by setting prices cautiously low. That might sound good, but it could also mean fewer products on shelves, less innovation, and reduced competition. When businesses don't know the rules precisely, they tend to restrict supply rather than risk penalties.
There's also a genuine question about whether price regulation alone solves the underlying problem. Market concentration is the real issue. When two companies control two-thirds of the market, even perfect pricing rules won't generate the competitive pressure that would naturally drive prices down. Aldi, the discount challenger, has gained ground since 2023, with customer purchase intent rising from 16 per cent to 21 per cent. But it's still fighting against entrenched advantage. The government could have tackled market structure, perhaps by making it easier for new competitors to enter, but instead it chose to regulate prices for the incumbents.
The counterargument is fair. Waiting for market forces to work takes years, and Australian households are struggling now. Woolworths and Coles are among the world's most profitable supermarkets; there's evidence they widened margins when they didn't need to. Preventing excessive pricing is a legitimate policy response, especially when the alternative is watching households spend a larger share of their income on groceries every quarter. The government's position is essentially that it's better to act imperfectly than to wait for the perfect market structure to magically emerge.
What happens from July depends almost entirely on how seriously the ACCC enforces the ban and how clearly it defines reasonable margins. If definitions remain vague, expect supermarkets to play it cautious and potentially restrict choice or investment. If the ACCC sets margins too tight, costs will rise. If it sets them right, the ban could genuinely help. The regulation itself is not flawed reasoning. But it's also not the kind of policy that will solve the cost of living crisis on its own. It might prevent things getting worse. That's something. Whether it's enough will become clear by late 2026.