New laws banning supermarket price gouging are now active. While they won’t instantly reduce your grocery bill, they will give regulators the power to stop big supermarkets ripping you off.
What are the new laws?
The new price gouging laws amend the Food and Grocery Code and are enforced by the Australian Competition and Consumer Commission (ACCC). This legislation makes it illegal for supermarkets to excessively mark up prices of goods beyond the supply cost.
Essentially, the ban protects consumers from supersized grocery prices. However, it only applies to standard supermarket food and groceries. It excludes alcohol sold in supermarkets or food and drinks made for immediate consumption, like coffees made by supermarket baristas.
How will these laws be enforced?
In the past, regulators, like the ACCC, struggled to prove if a price was ‘excessive’. The new laws shift that responsibility to the supermarkets.
Supermarkets are now legally required to retain pricing information for at least three years. This includes information on:
- Wholesale margins
- Manufacturing costs
- Transport costs
- Supplier negotiations
If the ACCC suspects a price is unfair, they have the immediate power to audit these three-year paper trails.
How the ACCC will evaluate prices
Grocery prices naturally fluctuate over time. This means when investigating excessive pricing, the ACCC will take into account:
- Promotional cycles: Monitoring prices over time to make sure supermarkets aren’t temporarily raising prices before dropping them again and claiming a ‘price cut’..
- Geographic conditions: It costs more to transport groceries to remote parts of Australia. The law allows for higher costs in specific regions so long as the overall profit margin remains fair.
- Market dynamics: The level of actual competition in a specific area and broader commercial conditions.
Who do these laws apply to?
The law only applies to “very large retailers” making over $30 billion in annual revenue.
Currently, Coles and Woolworths are the only supermarkets these new laws apply to, meaning Aldi, IGA, Costco and even Amazon are currently off the hook. However, the moment a competitor hits the $30 billion mark, they must comply with the new rules.
What happens if these laws are broken?
If a court finds a supermarket guilty of price gouging, the fines are big. Chains will be fined the greater of:
- Flat rate: $10 million per offence
- Benefit-based: 3 times the amount derived from the price gouging
- Turnover-based: 10% of the company’s annual turnover for the preceding year
Canstar spokesperson Eden Radford says that while the new laws are a win for consumers, they won’t stop prices rising in future.
“It’s worth remembering that this new law doesn’t prevent supermarkets from passing on increased prices brought on by higher operational costs – that’s things like transport, wages, and energy,” she said.
“Unfortunately, all three of those are on the rise, as the petrol excise is reduced, the minimum wage has been increased, and the cost of energy continues to be volatile.
“Regardless of any new laws, the best way for shoppers to get ahead with the weekly grocery shop is to take matters into their own hands. Comparing prices across supermarkets, switching to home-brand, and paying attention to unit pricing can deliver a much bigger impact to your bottom line than this legislation will.”
How can I save on my shop?
Don’t wait for these laws to lower your grocery bill. You can take control of your budget right now with these strategies:
- Swap fresh for frozen: Canstar research shows swapping half your weekly fresh produce to frozen can save you $13 a week. That’s $676 a year.
- Use canned proteins: Substitute meat with chickpeas, beans, and other legumes to stretch your meals and your budget .
- Shop home brands: A family of four could save nearly $2,500 a year by switching half of their groceries to home-brand alternatives.
- Check restocking times: Ask when your local supermarket restocks shelves and shop around that time to get the deals on markdowns and products close to expiry.
- Split your shop: Check what’s on special at the major supermarkets and shop at both to take advantage of lower prices.
