Key Points
- Supermarkets are under scrutiny for price gouging, as farmers struggle to keep up with production costs.
- The National Farmers Federation of the Horticultural Council hopes that a review will lead to protections for both consumers and growers.
- Experts agree the industry watchdog needs greater power to investigate and incentivise competition.
Major supermarkets have been warned all options are on the table as a federal inquiry into rising grocery prices gathers pace.
Former Labor minister Craig Emerson has been announced as the head of a review into the food and grocery code of conduct.
The review of the code comes as major supermarkets, which are bound to the conduct agreement, stand accused of price gouging customers.
Prime Minister Anthony Albanese said allegations that supermarket giants - like Coles and Woolworths - aren't passing on savings to customers is "completely unacceptable".
“When supermarkets are getting goods cheaper, the prices should go down. When that doesn’t happen, then there’s something wrong in the system and that’s an abuse of market power,” he told Nine’s Today.
, announced in October, is expected to examine whether the supermarket industry code - which regulates the conduct of retailers and wholesalers towards suppliers - is helping improve standards of business behaviour in the sector.
Coles has defended its prices, saying they're set by the market and also depend on seasonal conditions as well as supply and demand.
Woolworths said it was always working to strike the right balance to ensure access to high quality produce and giving suppliers a fair market price.
So what prompted the inquiry? And could a review bring down costs at the checkout?
Why is there a review into supermarket price-gouging?
There are growing concerns about the gap between what farmers earn and supermarket prices as grocery giants posted billion-dollar profits in 2023.
Morale among fruit and vegetable growers is low, with 30 per cent reportedly considering leaving the industry as the price of production continues to climb.
On Friday, Queensland Premier Steven Miles wrote a letter to the chief executives of Coles, Woolworths, IGA and Aldi demanding a meeting to address the decreasing gap in prices.
National Farmers Federation of the Horticultural Council spokesperson Dr Jeremy Griffith said the review must not be simply consumer-centric, but should instead examine the whole supply chain.
"We want to make sure that everybody is looking at both sides of the equation, the price of what the consumer's getting and the price that the growers are receiving," told SBS News.
Griffith relayed an instance where a farmer had not seen a price increase in 10 to 15 years while costs of production continued to soar.
He said this highlighted the system was broken and that the government needed to step in with legislation to protect both the consumer and the growers from price gouging.
"The starting point would be to allow the regulator to have real-time access to [supermarket] buy and sell data because that's the smoking gun, to see what they're actually buying for and over a long period of time," Griffith said.
"We want to access the historical data and we want to see what they're selling so you can see what the actual margins are."
Griffith said the government needs to introduce legislation that gives the Australian Competition and Consumer Commission more resources for investigation and increase penalties to make the legislation effective.
What could a review of supermarkets lead to?
Chief Economist at the left-leaning think tank the Australia Institute Greg Jericho said the review is important as Coles and Woolworths have become "price setters" instead of "price takers".
"Woolies and Coles have such market power… They can, in a sense, determine the price. They're not really responding as much to demand and certainly not to other competition," he said.
"When you have really strong competition, you have to look at ways to offer the lowest prices.
"Competition is the key to keeping prices down because when you have another competitor and it's not just two … you actually all have to really fight to get people's dollar, you will look to cut costs and lower prices to entice people to come."
Jericho agreed the ACCC watchdog needs to be given greater powers to investigate non-competitive behaviour, which would in turn increase competition among retailers and give them an incentive to drop prices.
He also suggested the government use the inquiry as a moment of reflection on how else to improve competition, perhaps by introducing antitrust laws similar to the United States which limit the power of a particular firm.
The economist said retailers are using an increase in supply chain costs due to the invasion of Ukraine and the pandemic as an excuse to drive up prices.
"I think this inquiry will be good for putting a bit of a heat on the companies to at least justify what they've been doing because I think really they kind of get away with it," he said.
The supermarket giants are expected to face a grilling when Coles and Woolworths front a parliamentary inquiry into price gouging, record profits and cost-of-living pressures in the coming months.
- With additional reporting by the Australian Associated Press.
