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Price gouging should be illegal, according to a supermarkets inquiry

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A Senate inquiry into how supermarkets set their prices has recommended making price gouging illegal to stop unfair cost increases.
A Senate inquiry into supermarkets has recommended making price gouging illegal.

After six months, a Senate inquiry into Australia’s supermarkets has handed down its final report, suggesting price gouging should be made illegal.

The inquiry investigated claims major supermarkets have been overcharging customers during the cost of living crisis.

It recommended making price gouging, the practice of setting unnecessarily high prices for certain goods, illegal.

Australia’s two major supermarkets, Coles and Woolworths, have rejected claims they’re unfairly increasing the prices of their products.

Inquiry

Coles and Woolies control about two-thirds of Australia’s supermarket sector.

The Greens set up an inquiry with the support of the Government in December, following concerns over the supermarket giants’ profits while cost of living pressures were increasing.

The inquiry examined supermarkets’ price-setting practices. It interrogated whether the ‘duopoly’ of Coles and Woolworths unfairly used their dominance to increase prices.

The six-month inquiry hosted hearings in multiple locations across Australia, including Orange, Hobart, and Melbourne.

It heard from some farmers and growers who aired concerns about supermarkets’ price-setting practices.

Growers gave testimony about fearing “commercial retribution” should they object to the way Coles and Woolworths conduct business when buying large quantities of fresh produce, like fruits and vegetables.

The National Farmers Federation said the farmers’ testimony was “troubling”.

Final report

The final report suggested price gouging should be made illegal, meaning companies could face penalties for breaches.

In Australia, businesses can set prices that allow them to make a profit on goods and services, meaning it isn’t illegal for businesses to charge a price that customers think is too high.

However, businesses aren’t allowed to mislead or lie about the reasons for their prices or price increases.

The final report also suggested the Government establish a Commission on Prices and Competition, a new agency responsible for overseeing price-setting practices.

The Commission would monitor prices from farms to supermarket shelves.

The report also recommended creating divestiture powers, to be used against supermarkets found behaving anti-competitively — meaning supermarkets could be forced to sell some of their stores if they’re caught engaging in unfair practices like price-gouging.

Greens

Greens Senator Nick McKim has introduced a bill in Parliament that would give courts power to force companies to divest if found to be misusing their market powers.

McKim, who headed the inquiry, also said making price gouging illegal “would mean that corporations couldn’t just arbitrarily increase prices without facing consequences from the courts.”

The Senator claimed the committee’s recommendations would help “bring food prices down”and “break up Australia’s supermarket duopoly”.

Next steps

The Government will now consider the findings before deciding if it will adopt any of the recommendations. It’s due to respond within three months.

Prime Minister Anthony Albanese has previously ruled out introducing divestiture powers. He described them as “Soviet Union” style reforms, where the Government has too much control over the economy.

Opposition

Coalition senators Maria Kovacic and Ross Caldell described the inquiry as a “missed opportunity” to address some inequalities faced by suppliers and shoppers.

The Senators support efforts to increase cost transparency. However, they suggested extra powers be given to the consumer watchdog, the ACCC, instead of establishing a new agency.

The Coalition did not support calls to introduce divestiture powers.

Supermarkets

Coles and Woolworths have both repeatedly rejected allegations of price gouging.

A spokesperson for Woolworths told TDA the company will “review the report”, while maintaining “grocery inflation is coming down”.

In a statement to TDA, Coles said it would not support recommendations that “are likely to impact the operation of open and free competitive markets in the provision of food and grocery in Australia”.

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