Coles and Woolworths hit back at government's price gouging ban

Australia's major supermarkets are furious they are being targeted with more regulations, with Coles crying poor about making about $2.50 for every $100 a customer spends.

The federal government has introduced rules to limit "excessive pricing of groceries", and Australia's major supermarkets are furious they are being targeted with more regulations.

Lower grocery bills are being promised within this new ban on price gouging, but giant retailers say they are the ones feeling the pinch.

The move against price-gouging, foreshadowed before a snap consultation period earlier in the year, takes effect on July 1.

It will prohibit very large retailers from charging prices that are excessive when compared to the cost of the supply, plus a reasonable margin, the government said on Sunday.

"This is all about getting a fairer go for families in their weekly shop," Treasurer Jim Chalmers said.

From July, supermarkets could face fines of $10 million per breach, three times the value of the benefit derived or 10 per cent of the company's turnover during the preceding 12 months.

In March, the Australian Competition and Consumer Commission found the near-duopoly enjoyed by Coles and Woolworths gave them little incentive to compete vigorously.

They were among the most profitable supermarkets in the world, an inquiry found.

But the report never directly accused the supermarkets of gouging customers, something both Coles and Woolworths have consistently denied.

It did not make a finding on, or seek to define whether supermarket prices were "excessive", since high margins are not prohibited under consumer laws.

Coles hit back, saying more regulations were not the answer to lowering grocery prices and would drive costs up for shoppers.

"At a time when the focus should be on easing cost-of-living pressures, these regulations risk doing the opposite," a Coles spokesperson said on Sunday.

"For every $100 customers spend at Coles, we make around $2.43 in profit — less than 3 cents in the dollar," they argued.

Valued at more than $29 billion, the supermarket giant said higher energy, freight, labour, insurance and production costs were the key pressures to getting goods on shelves and selling them.

Woolworths warned the ban would create a butterfly effect where shoppers would miss out on great deals, with the $36 billion public company saying it had delivered savings for consumers for seven quarters in a row.

"The law is unprecedented by targeting only two Australian-owned companies," a Woolworths spokesperson said, referring to it and its competitor Coles.

The retail giant said it would result in "an uneven playing field which will see much larger, foreign-owned retailers free to charge customers whatever they want, without any of the new proposed restrictions".

The Business Council of Australia also savaged the price gouging ban for being misplaced in its target.

"We all want lower prices for Australians, but regulation should be based on evidence," the council's CEO Bran Black said.

The consumer watchdog's report found grocery prices rose at more than double the rate of wages between late 2022 and early 2023, attributing at least some of those rises to additional profits for Coles, Woolworths and Aldi.

In a statement, the Australian Retailers Association's chief executive Chris Rodwell said they "strongly oppose" the ban.

"These measures seek to address a problem for which there is no evidence and risk having the opposite effect — pushing grocery prices higher for Australian families," Mr Rodwell said.

The treasurer said the changes give the competition watchdog the powers it needs to hold supermarkets to account by policing the new regime.

"One of the best ways to ease the cost of living for Australians is to help people get fairer prices at the checkout and that's what this is all about," he said in a joint statement.

AAP