Both of the major supermarket chains have increased profits over the past five years, and the ACCC said Coles and Woolworths have an "apparent ability to increase margins for packaged grocery products by more than is necessary to accommodate a wholesale price increase".
The report also reaffirmed Coles and Woolworths are using promotions and loyalty programs "that make it harder for consumers to judge whether they are getting a good deal".
It made 20 recommendations, including minimum information requirements for discount price promotions, new obligations for supermarkets to issue notifications if package sizes change and publish pricing information, as well as periodic disclosure statements for members using loyalty programs.
It also found the major supermarkets have "monopsony power" with some supplies - basically that Coles or Woolworths are the sole buyer for certain suppliers which gives them the power to buy products for lower prices.
Importantly though, the report made no mention of divestiture, which would require Coles and Woolworths to sell off stores to reduce their market share.
Opposition Leader Peter Dutton has made noises about giving the ACCC "last resort" powers that would allow it to break up the major supermarkets found to be abusing market dominance.
How do the supermarkets plead?
Coles have come out firing, claiming the ACCC overstated its profit margins by excluding the increases in input costs like energy, rent and wages.
Coles say its net profit after tax has remained consistent over the past five years and that this should be the principal measure used to determine whether it is price gouging.
Woolworths CEO Amanda Bardwell says it is working with the ACCC but that there is "considerable competition" in the grocery price sector.
Do Coles and Woolworths actually compete with one another?
Coles and Woolworths have what the ACCC called an "entrenched position in an oligopolistic market".
Collectively the pair make up 67% of national grocery sales, making the market much more concentrated than many other developed countries.
In the UK for example, the three largest supermarkets (Tesco, Sainsburys and Asda) make up 58.8% of the market, with several other major players like Morrisons and Waitrose.
The scale Coles and Woolworths operate at makes it extremely hard for competitors to compete, and the ACCC says its led to a situation where there isn't much incentive for the pair to "compete vigourously" on price.
The Savings.com.au Grocery Price Index has been tracking prices over the past year and the results show a remarkable symmetry between the prices at Coles and at Woolworths.
Take instant coffee and unsalted butter for example - since November 2023 Coles and Woolworths have been perfectly in unison increasing the prices of both.
Unsalted Butter (250g, Australian)
Coles Annual change Woolies Annual change Average Annual change February '25 $4.80 11.6% $4.80 11.6% $4.80 11.6% January '25 $4.80 11.6% $4.80 11.6% $4.80 11.6% December '24 $4.80 11.6% $4.80 11.6% $4.80 11.6% November '24 $4.80 11.6% $4.80 11.6% $4.80 11.6% October '24 $4.80 $4.80 $4.80 September '24 $4.30 $4.30 $4.30 August '24 $4.30 $4.30 $4.30 July '24 $4.30 $4.30 $4.30 June '24 $4.30 $4.30 $4.30 May '24 $4.30 $4.30 $4.30 April '24 $4.30 $4.30 $4.30 March '24 $4.30 $4.30 $4.30 February '24 $4.30 $4.30 $4.30 January '24 $4.30 $4.30 $4.30 December '23 $4.30 $4.30 $4.30 November '23 $4.30 $4.30 $4.30 Instant coffee (200g)
Coles Annual change Woolies Annual change Average Annual change February '25 $5.50 48.6% $5.50 48.6% $5.50 48.6% January '25 $5.50 48.6% $5.50 48.6% $5.50 48.6% December '24 $5.50 48.6% $5.50 48.6% $5.50 48.6% November '24 $4.50 21.6% $4.50 21.6% $4.50 21.6% October '24 $3.70 $3.70 $3.70 September '24 $3.70 $3.70 $3.70 August '24 $3.70 $3.70 $3.70 July '24 $3.70 $3.70 $3.70 June '24 $3.70 $3.70 $3.70 May '24 $3.70 $3.70 $3.70 April '24 $3.70 $3.70 $3.70 March '24 $3.70 $3.70 $3.70 February '24 $3.70 $3.70 $3.70 January '24 $3.70 $3.70 $3.70 December '23 $3.70 $3.70 $3.70 November '23 $3.70 $3.70 $3.70 Look through the complete index and you'll find these examples are far from anamalous.
Will the report make a difference?
The ACCC can only make recommendations - the government would subsequently need to implement them into law.
Treasurer Jim Chalmers called the report "an important piece of work" and said the Government are already working on measures to address some of the issues that were raised.
"Cracking down on the supermarkets is part of [cost of living relief]," he told Sky News.
"We've made the food and grocery code mandatory... we're working with the states on planning and zoning to make it easier for new competitors to enter the market, we're funding choice... we're reforming the unit pricing code."
Nationals Senator Bridget Mckenzie said it was a "flaccid response".
"I didn't hear any tough measures that are actually going to put together a very strong incentive for our supermarkets to behave better," Ms Mckenzie said.
What would divestiture look like?
The most concrete proposal for introducing divestiture powers for corporations that abuse market power was tabled by the Greens in 2024.
The Bill provides that if a corporation that has a "substantial market share" misuses market power (engages in conduct designed or likely to "substantially lessen competition"), Courts have the ability to mandate the company to reduce its market share.
It isn't just the supermarkets that might be in the crosshairs - concerns have been raised for example about the dominance of the big four in the banking sector.
The Coalition has also pledged to introduce "last resort" divestiture powers if elected, but Labor has criticised these proposals, claiming it could make competition worse not better.
Picture by Scott Warman on Unsplash
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