Coles and Woolies are being banned from price-gouging. No one knows what exactly that means

Amid a cost-of-living crisis and a period of widespread dissatisfaction with Coles and Woolworths late last year, Treasurer Jim Chalmers declared the government would take a big stick to the big supermarkets.

“We’re cracking down on supermarket price gouging to help Australians get a better deal at the checkout,” he said.

On July 1, words will be turned into action. Australia will be the first country in the world to bring in a ban on supermarket price-gouging. But just don’t expect the national consumer watchdog to find many examples of it.

There are a few things we know about the ban, and much more we don’t. What is clear is the new prohibition is custom-made to target Coles and Woolies: they are the only supermarkets that qualify as “very large retailers”, with over $30 billion in revenue.

The other two main supermarkets don’t even come close: Aldi’s revenue in 2025 was $13.9 billion, and IGA operator Metcash’s food business brought in $10.5 billion in fiscal 2026.

Then there’s determining what price gouging, or “excessive pricing” as per the new rules, actually means. According to the Australian Competition and Consumer Commission, it applies when items are sold for an amount that “is significantly excessive when compared to the cost to the very large retailer of the supply, plus a reasonable margin”.

So what exactly is significantly excessive? The answer, frustratingly, appears to be: it depends.

“Significantly excessive” is not defined by the legislation or the ACCC; neither is a “reasonable” margin. These will be determined on a case-by-case basis by the regulator, which will look at all the “relevant circumstances”.

How does the new law work? The ACCC presents the following example: the closure of a competing grocery chain in a particular region might, for instance, tempt Coles or Woolworths to raise prices and double the margin on a cereal product, despite there being no changes to costs.

All signs seem to indicate the new law will uncover few instances of price-gouging. There are no directly comparable global precedents: in Europe, general competition law broadly bans companies from unfair prices, and regulators have found their target in pharmaceutical giants like Pfizer. In the US, about 40 states have anti-gouging laws that kick in temporarily after a state of emergency is declared.

Then there’s the heads-up Colesworth – the widely used nickname for the supermarket duopoly – will get on what the regulator is watching. The ACCC will choose a handful of grocery categories and publicly declare those as their “focus products” for the subsequent period in the name of transparency and targeting its resources.

Just because some groceries have been declared a priority won’t stop the ACCC from looking at how prices on other products fluctuate, but it certainly feels like the element of surprise could be taken away.

If few examples of “significantly excessive” pricing are found, the watchdog doesn’t reckon that’s a bad thing. “Deterrent effect is an enormously important element of these types of laws,” ACCC deputy chair Catriona Lowe said.

The new law certainly gives the ACCC a bigger stick to wield against Australia’s biggest supermarkets, which are on notice to be on their best behaviour. The Federal Court’s recent finding that Coles misled customers with its “Down Down” promotions has rippled across the retail sector.

For their part, Coles and Woolworths will be swift to point out that despite multiple inquiries – including the ACCC’s year-long inquiry, which did describe Coles and Woolworths as an oligopoly – there was ultimately no finding on price-gouging.

A Coles spokesperson argued that complying with the new laws comes at an extra cost for the business.

A Woolworths spokesman emphasised that global supermarket groups operating here don’t meet the sales threshold for the rules to apply, no other country has adopted the approach, and there is a lack of a clear definition for an “excessive price”.

“As always, we are committed to complying with the regulations that govern our sector,” the spokesman added.

The watchdog’s plan is to wait and see what products people complain about, and cross-check that information with what it finds in the supermarkets’ pricing data dump it will get to access soon.

“We certainly have got no preconceived idea of the particular behaviour that we expect to find,” Lowe said. “We really are very much keeping our minds open until we see what comes through, both in the data and also from the public reporting.”

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