ACCC finds Australia’s supermarkets are among the world’s most profitable – but doesn’t accuse them of price gouging

Australia’s supermarket sector has endured a long, uncomfortable moment in the spotlight. There have been six comprehensive inquiries into its conduct, pricing practices, and specifically claims of “price gouging”, over the past 18 months.

Today, the long-awaited final report^[1] from the Australian Competition and Consumer Commission (ACCC) Supermarkets Inquiry has been released, more than 400 pages long.

It finds Australia’s supermarkets are highly profitable by international standards, ranking among the highest in their peer group. But it did not find the supermarkets were price gouging. In fact, it didn’t even mention the phrase.

How we got here

In February 2024, the federal government formally directed^[2] the ACCC to investigate the competitiveness of retail prices in Australia’s supermarket sector. It was the first inquiry of its kind since 2008^[3].

The move followed widespread allegations^[4] the supermarkets had been price gouging – using the cover of high inflation to jack up prices even higher.

The interim report^[5] from the ACCC’s inquiry, released in September, found the supermarket industry was highly concentrated, and reported many suppliers had raised concerns about “being exploited”.

Read more: 'Concerning': ACCC interim report on supermarket inquiry tells of supplier woes and 'oligopolistic' market^[6]

Highly profitable supermarkets

The ACCC’s final report^[7] found Australian supermarkets appear highly profitable when compared with their international peers.

ALDI’s, Coles’ and Woolworths’ average earnings before interest and tax^[8] margins were noted to be “among the highest of supermarket businesses in relevant comparator countries”.

Average net profit after tax^[9] margins were similar to Walmart in the United States, Dutch-Belgian Ahold Delhaise, and Tesco in the United Kingdom, but below Canada’s Loblaw supermarkets.

The inquiry found ALDI acted as a “price constraint” on Coles and Woolworths. But as a low-cost operator, ALDI does not compete with them “head-to-head” on all product offerings.

It found while independent grocers provided a “valuable alternative”, consumers in regional areas were disadvantaged by higher freight costs and higher prices.

ALDI’s, Coles’ and Woolworths’ store networks have expanded since the last inquiry in 2008, leading to greater “geographic overlap” and increased competition between their stores.

Rising grocery prices

The report notes that between late 2022 and early 2023, grocery prices were rising at more than twice^[11] the rate of wages. Supply chains took a big hit in the pandemic and its wake.

Since March 2019, food and grocery prices have increased by about 24%, but this is still less than in many other OECD countries.

The report notes input costs for supermarkets have increased dramatically since the pandemic. However, it says the fact supermarkets have also increased certain margins during this time means:

at least some of the grocery price increases have resulted in additional profits for ALDI, Coles and Woolworths.

Supermarkets often did not engage with suppliers “meaningfully” in relation to trading terms. Rebates paid by suppliers were opaque, complex and not well understood.

The report found ALDI had been increasing its prices at a faster annual rate than Coles or Woolworths, particularly between 2022 and 2024.

Was there any evidence of price gouging?

Quite simply, no. And there appears to be no hard evidence of the practice from other inquiries either.

A range of other inquiries into supermarket pricing and conduct at state and federal level have published findings in the past year, many centring on this very question:

The ACTU report refers to price gouging 43 times, but no evidence is offered. Theories and possible economic impacts of price gouging and anti-competitive behaviour are presented.

The Senate Select Committee report mentions “price gouging” at least 50 times, saying on whether price gouging exists in the supermarket sector – “the answer seems to be resounding yes”.

However, a closer analysis again finds no actual evidence. Instead, the committee highlights that Australia’s “concentrated” supermarket sector, “potentially [creates] an environment for anti-competitive practices and price gouging”.

The interim and final reports^[13] from the independent review into the Food and Grocery Code of Conduct mention “price gouging” multiple times. However, they don’t offer any evidence, instead referring to claims in the ACTU Report.

Neither the ACCC inquiry’s interim report^[14] nor its final report^[15] mention “price gouging”.

ACCC recommendations

While the ACCC acknowledges there is no “silver bullet” to address competition issues in the supermarket sector, it offers 20 recommendations.

Making it easier for smaller supermarket competitors to enter and expand in the market was one area of focus. Recommendations include simplifying planning and zoning rules, and encouraging governments of all levels to support community-owned supermarkets in remote areas.

The ACCC also recommends supermarkets be required to publish notifications when “adverse” package size changes occur. This is commonly referred to as “shrinkflation^[16]”.

Other notable recommendations include:

• a requirement to provide an “independent” body weekly data about prices paid to fresh produce suppliers
• a review of loyalty program practices in three years’ time
• minimum information requirements for discount price promotions.

The report did not recommend divestiture or breaking up the big supermarkets.

Will Australians see lower grocery prices?

The widely popular narrative of “stamping out price gouging” by dragging supermarket chief executives into public hearings and threatening them with jail time^[17] might have inferred such inquiries would lead to lower food prices. In isolation, they have not.

The federal government says it agrees in principle with the recommendations. In its initial response, it has announced^[18] $2.9 million will be provided over three years for “targeted education programs” to help suppliers understand their rights.

References

1. ^{^} final report (www.accc.gov.au)
2. ^{^} formally directed (ministers.treasury.gov.au)
3. ^{^} 2008 (www.accc.gov.au)
4. ^{^} widespread allegations (theconversation.com)
5. ^{^} interim report (www.accc.gov.au)
6. ^{^} 'Concerning': ACCC interim report on supermarket inquiry tells of supplier woes and 'oligopolistic' market (theconversation.com)
7. ^{^} final report (www.accc.gov.au)
8. ^{^} earnings before interest and tax (corporatefinanceinstitute.com)
9. ^{^} net profit after tax (thebull.com.au)
10. ^{^} Darren England/AAP (photos.aap.com.au)
11. ^{^} more than twice (www.accc.gov.au)
12. ^{^} Hypervision Creative/Shutterstock (www.shutterstock.com)
13. ^{^} reports (treasury.gov.au)
14. ^{^} interim report (www.accc.gov.au)
15. ^{^} final report (www.accc.gov.au)
16. ^{^} shrinkflation (theconversation.com)
17. ^{^} threatening them with jail time (www.abc.net.au)
18. ^{^} announced (ministers.treasury.gov.au)