Key Takeaways
- Australia’s new price gouging law increases scrutiny on pricing decisions and margins.
- Its impact extends beyond major supermarkets to retailers, suppliers, and manufacturers.
- Businesses must strengthen pricing governance, documentation, and transparency.
- Balancing profitability with customer trust and regulatory expectations will become more complex.
Australia’s Price Gouging Law Creates a New Pricing Challenge
Australia’s price gouging law is reshaping how retailers approach pricing decisions, forcing businesses to balance profitability with transparency and fairness. Imagine increasing prices to recover higher supplier costs, only to have customers question whether the increase is fair. Delay a price increase instead, and margins begin to shrink. This dilemma is becoming more common for retailers across Australia.
From 1 July 2026, the law prohibits supermarkets with annual revenue exceeding $30 billion, currently Coles and Woolworths, from charging grocery prices considered significantly excessive compared with supply costs and a reasonable margin. The ACCC will enforce the law under the mandatory Food and Grocery Code.
Although the legislation directly applies only to Australia’s largest supermarket chains, it signals a broader shift in pricing expectations. Customers, regulators, suppliers, and business partners are placing greater emphasis on transparency, fairness, and accountability. Pricing is no longer just a commercial decision; it directly affects profitability, reputation, and customer trust.
Read This CEO Pricing Strategy To Improve Margin & EBIT
Why the Price Gouging Law Creates New Pricing Challenges
Protecting margins becomes more difficult under the price gouging law
Many retailers already operate on tight margins. Rising wages, freight, utilities, supplier costs, and operating expenses continue to increase pressure on profitability. At the same time, consumers remain highly price sensitive due to ongoing cost-of-living pressures.
The law adds another layer of complexity. Businesses must demonstrate that prices are commercially justified while protecting margins. A price increase that appears reasonable internally may attract external scrutiny, making it harder to balance profitability with customer confidence.
Pricing becomes harder to justify under the price gouging law
Pricing is rarely as simple as adding a margin to costs.
Retailers manage thousands of products sourced from numerous suppliers. Distribution, labour, promotions, seasonal demand, rebates, shrinkage, and inventory all influence profitability. Manufacturers face similar complexity through fluctuating raw material costs, production expenses, logistics, and customer-specific agreements.
The law refers to supply costs and a reasonable margin but does not define either. Costs are often shared across products and activities, and market conditions change constantly. As a result, determining whether a price is fair or excessive often relies on commercial judgement rather than a clear formula.
How the Price Gouging Law May Affect Different Parts of the Supply Chain
Supermarkets
Large supermarkets will face the greatest scrutiny. Pricing decisions, promotions, and margins may be examined more closely by regulators, customers, and the media. Stronger documentation and clearer justification of pricing decisions may become necessary under the price gouging law.
Retailers
Although most retailers are not directly covered, many will feel indirect effects. Customers increasingly expect transparency regardless of business size. Retailers that cannot clearly explain price changes may face reputational pressure, especially when competitors communicate value more effectively in a market influenced by the price gouging law.
Suppliers and Manufacturers
Suppliers and manufacturers may also be affected. As supermarkets strengthen pricing oversight, they are likely to demand greater transparency around costs, wholesale pricing, rebates, and price increases.
Negotiations may become more detailed, requiring businesses to justify not only cost increases but also pricing decisions. This extends pressure across the entire supply chain as the price gouging law influences commercial behaviour.
Why Pricing Is Becoming More Complex Under the Price Gouging Law
Pricing is no longer just about recovering costs. It reflects customer value, competitive positioning, demand, and long-term profitability.
Today’s pricing decisions must account for inflation, promotions, competitor actions, multiple sales channels, changing customer expectations, and regulatory scrutiny driven in part by the price gouging law. These factors often conflict, making pricing decisions more difficult.
Without structured pricing processes, businesses may struggle to make confident decisions while maintaining margins.
The Biggest Pricing Risks Businesses Face Under the Price Gouging Law
Commercial risks
Businesses may delay necessary price increases due to fear of backlash or scrutiny, or discount too aggressively to stay competitive. Both can erode margins and weaken profitability in an environment shaped by the price gouging law.
Customer risks
Customers increasingly value transparency. Confusing promotions, inconsistent pricing, or poorly explained increases can reduce trust, even when prices are competitive, particularly as awareness of the price gouging law grows.
Regulatory risks
Although the price gouging law targets major supermarkets, pricing practices across industries are under greater scrutiny. Expectations around documentation, governance, and accountability are rising.
See how pricing breaks in practiceWhat Retailers, Supermarkets, Suppliers, and Manufacturers Should Do
The price gouging law is unlikely to transform the market immediately, but it highlights the need for disciplined pricing.
Businesses should ensure pricing decisions are supported by clear commercial reasoning rather than habit or short-term reactions. They should review pricing approval processes, margin visibility, documentation, and promotional strategies for consistency.
Suppliers and manufacturers should strengthen cost visibility and clearly communicate value during negotiations.
Businesses best positioned for this environment will understand not only what they charge, but why.
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The Price Gouging Law Is Changing the Game for Businesses
Australia’s new supermarket price gouging law reflects a broader shift in pricing expectations. Pricing is becoming more transparent, more scrutinised, and more strategically important. While the legislation directly affects only Coles and Woolworths, its influence will extend across the retail supply chain.
Business leaders should assess whether pricing strategy and governance are strong enough to protect margins while maintaining customer confidence.
Pricing teams should improve profitability analysis, strengthen governance, and ensure pricing decisions are well documented and commercially defensible as expectations continue to evolve.
If you would like further insights, tailored advice, or support in strengthening your pricing strategy, governance, or commercial decision-making, we invite you to reach out to our team. We can help you navigate these changes with confidence and ensure your pricing approach remains both competitive and defensible.
Read This CEO Pricing Strategy To Improve Margin & EBIT
Are you a business in need of help aligning your pricing strategy, people, and operations to deliver an immediate impact on profit?
If so, please call (+61) 2 9000 1115.
You can also email us at team@taylorwells.com.au if you have any further questions.
