Grocery prices have been climbing fast, and with inflation outpacing wage growth, it’s no wonder people are accusing Australian supermarkets of price gouging. When some everyday household items suddenly seem to cost double what they used to, it feels predatory and unfair. But is is actually illegal?

Under Australian law, businesses generally have freedom to set their own prices. This is part of how a market economy works. There’s no legal cap on how much a business can charge for groceries. That said, there are certain laws which might apply to prevent price gouging.

What is price gouging, and is it illegal in Australia?

Price gouging is when a business significantly increases prices to exploit a lack of competition or a crisis situation – like jacking up the cost of hand sanitiser during a pandemic. In Australia, there’s no general law against price gouging. However, in very specific circumstances it might be characterised as ‘unconscionable conduct’ or ‘misuse of market power’.

Unconscionable conduct is banned under the Australian Consumer Law. If a supermarket took unfair advantage of consumers in a way that was harsh or oppressive, that could potentially cross the line. However, determining whether conduct is ‘unconscionable’ is complex and depends on a number of factors, but it’s a pretty high threshold that usually applies to predatory selling practices (like door-to-door selling) that might target vulnerable people.

Misuse of market power is prohibited by the Competition and Consumer Act 2010 (Cth). If a company with substantial market power (like Coles or Woolworths) uses their substantial market power to implement a pricing strategy which does (or intends to) substantially lessen competition in that market, that’s illegal.

So, while setting high prices isn’t itself illegal, if it’s done as part of a pattern of conduct which is unconscionable or misuses substantial market power, it might be unlawful.

Are the major supermarkets colluding to set higher prices?

Price-fixing happens when competitors (like Coles and Woolworths) agree to set prices or coordinate pricing strategies. This completely undermines competition and is a classic form of illegal ‘cartel conduct’. The law is very clear here: the Competition and Consumer Act 2010 (Cth) bans contracts, arrangements or understandings between competitors that fix or control prices.

So, for example, if Woolworths and Coles were caught agreeing behind closed doors to set the price of carrots at $2/kg at both retailers, that would be a serious breach of the law. But unless there’s evidence of that kind of collusion, ‘parallel pricing’ (where two companies just happen to price things similarly) isn’t automatically illegal.

The Australian Competition and Consumer Commission (ACCC) recently conducted a major inquiry into supermarkets in Australia. The final report (released in February 2025) noted that the ACCC didn’t find evidence of price-fixing between Coles and Woolworths. But it did flag something that looks suspiciously similar: ‘alternating high-low pricing cycles’. Think: when bananas are on special at Woolworths, they’re full price at Coles – and then it switches. Legally, that’s not price-fixing unless there’s a secret agreement behind it. But it does reduce real price competition.

What if supermarkets aren’t honest about why they’re hiking prices?

If a supermarket raises prices and lies about why prices have gone up, that could amount to ‘misleading or deceptive conduct’, which is prohibited by the Australian Consumer Law. The law prohibiting misleading and deceptive conduct doesn’t stop businesses from increasing prices, but it does stop them from lying about why.

For example, if a supermarket says a product is more expensive because the price they are being charged by suppliers has risen – when in reality the supplier price stayed the same and the supermarket simply increased its profit margin – that misrepresentation would be unlawful.

Conclusion

So, are supermarkets breaking the law? Not necessarily. The law doesn’t stop Coles or Woolworths from charging more – even if those price hikes feel unfair or excessive. But if they collude, mislead consumers, or abuse their market power, they risk crossing into illegal territory.

The ACCC’s recent inquiry shows that while supermarkets may not be breaking the rules outright, they’re operating in a system with weak competition, complex pricing tactics, and a lot of consumer confusion. That’s not currently illegal – but it is a problem that the law could play a role in fixing.

Note that the content of this blog does not apply in all jurisdictions, does not constitute legal advice, and should not be relied upon. You should seek legal advice in relation to any particular matters you may have. All opinions expressed are our own, not necessarily those of any organisations with which we are connected.