FoodLegal

© Lawmedia Pty Ltd, February 2026

By Joe Lederman (FoodLegal Executive Chair) and John Thisgaard (FoodLegal Co-Principal)

Australia’s federal government has introduced a new law that imposes massive fines for ‘excessive pricing’ by Australia’s largest supermarket groups. The new law imposes radical restrictions on free market pricing. This article addresses several key aspects such as the controls and criteria applicable to price-increasing decision-making, and the likely broader impact.

The new ban on ‘excessive pricing’

On 11 December 2025 the Australian Federal Government passed legislation that prohibits what the law defines as ‘excessive pricing’ by ‘very large retailers’ in relation to food and grocery products. The new law takes effect on 1 July 2026 and will be enforced by the Australian Competition and Consumer Commission (ACCC).

The ban on excessive pricing is applicable where a price increase has the following features:

·        The price increase is considered ‘significantly excessive’ when compared with the ‘cost of the supply’ plus a ‘reasonable margin’;

·        Where the retailer is a ‘very large retailer’, namely a food and grocery retailer with total annual revenue for food and grocery sales that exceeds AUD$30 billion for the previous financial year; and

·        Records must be kept by each ‘very large retailer’ as the basis for all pricing information.

The penalties for each separate offence are huge and can be the greater of:

·        $10 million;

·        3 times the value of the benefit derived; or

·        10% of the company’s preceding annual turnover

– whichever is greater.

The legislation amends the Competition and Consumer (Industry Codes—Food and Grocery) Regulations 2024, otherwise known as the Food and Grocery Code of Conduct. This is the mandatory code under the Competition and Consumer Act that governs food and grocery retailers in all their interactions with suppliers. In our December 2024 edition, we have discussed the main features of this Code of Conduct.

We have also written previously on attempts by governments to expose price increases, such as the requirements for unit pricing in June 2024.

The legislation is targeted only at two companies at this stage

Whether fairly or not, under the criteria of the new laws, the law appears to be directed at two company groups – Australia’s largest supermarkets Woolworths and Coles. Each of them has an annual turnover that exceeds the threshold in this case of AUD$30b to meet the definition of a ‘very large retailer’.

Convenience stores that have high turnover from sale of petrol products will not be caught by the new laws because the revenue threshold only applies to the carrying on of a supermarket business (i.e. the retail and wholesale supply of food and grocery products), and does not include sales of petrol. Similarly, it excludes alcohol from the definition of food and grocery.

In introducing the legislation, the government has repeatedly used the phrase ‘price gouging’, which is an Australian colloquial expression to refer to unfair excessive opportunism in pricing decision-making by a retailer. The new law is radical. Although there are similar laws in the UK and France, authorities in those countries have not taken significant legal enforcement action and do not have the armoury of the substantial penalty fines that the Australian legislation imposes.

Unlike the laws of other countries, the Australian legislation is very targeted legislation against what appears to be two companies only and it is a direct intervention against the absolute level of prices rather than being tied in to existing laws relating to price fixing, anti-competitive conduct or misleading and deceptive conduct.

What is onerous is the substantial penalties and the imposition of pricing methodologies for the retailer making any decision to justify a price increase for any product. In effect, every price increase must be justified by documented evidence of prescribed pricing factors to prove innocence. In the absence of evidence to the contrary, any price increase is susceptible to these large fines and penalties.

What is the threshold for the activity of ‘excessive pricing’?

Under the new laws, the ‘very large retailer’ will be considered as having engaged in ‘excessive pricing’ where:

in all the circumstances, the pricing for the supply is significantly excessive when compared to the cost to the very large retailer of the supply, plus a reasonable margin.

Alcohol and food and beverages sold for in-store consumption are not covered by the ban on ‘excessive pricing’.

The laws do not provide a specific threshold or metric to determine when pricing is ‘significantly excessive’ or when a margin will be considered ‘reasonable’. However, very large retailers will be required to keep records of prescribed pricing information (see more below).

These pricing factors include:

·        The identifying attributes of the relevant item;

·        The retail price of the item;

·        The cost to the retailer, including costs for buying the item and operating costs;

·        Aggregate sales volumes and revenue for the item;

·        Any payments, discounts, rebates or other benefits provided by the supplier to the retailer for the relevant item in exchange for freight, advertising, data analytics or other services; and

·        Any other monetary benefits given by the supplier to the retailer.

The ban on ‘excessive pricing’ will limit the ability of major supermarkets to set their own prices freely

Although retailers are still permitted to make a profit, they will need to account for various factors such as supply chain costs to ensure that the profit remains at a ‘reasonable’ level. They will also need to be prepared to adjust prices downwards to avoid creating an ‘unreasonable margin’.

For example, if the cost of supplying a product decreases significantly (e.g. through a reduction in price of a key ingredient), the retailer will need to be prepared to reduce the price it charges for that product to ensure that its profit remains ‘reasonable’.

In the short term, the impact may not be drastic as it is likely that the affected supermarket groups will be cautious and would be wise to have digitised pricing mechanisms to track decision-making in relation to pricing.

However, the longer-term impact is that the supermarket groups will lose the ability to remain competitive as it will be difficult to offer specials without expensive bureaucratic record-keeping to justify prices going back up. The need to justify any price increase will make it more difficult to offer any temporary reduction in pricing, and may reduce creativity in supermarket retail offers such as special discounts or promotions. To minimise this impact, it would be vital for the supermarket to have strong documentary evidence to show that the pricing movements down and up are fair and reasonable. However, there is no guarantee that the ACCC will accept the interpretation of events being proffered by the supermarket. The new law will also make it difficult for unique pricing offers being made by local management, in particular supermarket locations. This is because the digitised system needs to substantiate the reasonableness of every pricing decision, even at the local level.

In the long term it may also put pressure on large retailers to divest and sell off parts of the major supermarket groups.

Pricing must not be misleading

This new ban on so-called ‘price-gouging’ will operate in addition to other existing laws that prohibit misleading practices and anti-competitive conduct. The ACCC has previously used these other laws to take action against large retailers.

For example, in September 2024, the ACCC initiated proceedings in the Australian Federal Court against supermarkets Woolworths and Coles in relation to pricing campaigns which the ACCC alleged were misleading.

Both supermarkets had increased the price of certain products for a period of time before placing the products on ‘sale’ at a sale price that was higher than the previous price before the price rise. The ACCC claimed that this conduct was misleading or deceptive in breach of the Australian Consumer Law. As at the date of this article (February 2026), this case has not been resolved.

Record-keeping bureaucratic obligations for ‘very large retailers’

A ‘very large retailer’ must keep any ‘pricing information’ that it creates or receives for a period of at least three years. Pricing information is defined to include the pricing factors set out earlier in this article including information about retail price and retailer costs, sales volumes and any payments or monetary benefits given by the supplier.

If the retailer creates or receives identical pricing information numerous times, it only needs to keep records of the first time it creates or receives that information.

A retailer must also notify the ACCC if it has an increase in revenue that meets the threshold for it to be a ‘very large retailer’, or if it has a decrease in revenue that means it no longer meets that definition.

What pricing power do suppliers have?

The new laws do not introduce any new restrictions on the pricing practices of suppliers. The prohibition on ‘excessive pricing’ only applies to ‘very large retailers’.

Food and beverage suppliers may continue to price their products and inputs using existing methods, and are not required to hold any additional documentation or records.

However, clearly retailers will need to keep evidence of factors such as discussions with suppliers in some sort of documentary record form (especially for private label products). Retailers may need to keep records of pricing communications with suppliers, which would amount to ‘pricing information’.

Under the existing Food and Grocery Code of Conduct, a retailer must hold documentation in relation to its grocery supply agreements and evidence it has acted in good faith when negotiating a price increase with each supplier.

The new law and its framework may cause a degree of reticence and lost creativity in shaping product customer deals that match the free market. For example, any reduction in pricing or discounts will likely result in the opportunity for a government investigator to query why and how the price subsequently rose. 

This is general information rather than legal advice and is current as of 9 Feb 2026. We recommend you seek legal advice for your specific circumstances before making any commercial decisions.