On 1 July 2026, two of the country's three biggest supermarket chains will become subject, for the first time, to an explicit ban on excessive pricing under a mandatory industry code. The threshold is A$30 billion a year in grocery revenue. Today, only Coles and Woolworths clear it. Aldi, the third major chain, sits below the line, and the rest of the industry is not in scope at all.

The trigger: an oligopoly with record margins

The law did not arrive in a vacuum. In March 2025, the ACCC released its final report from the Supermarkets Inquiry, its year-long examination of how Coles, Woolworths, Aldi and Metcash interact with suppliers and shoppers [1]. The headline finding was blunt. The grocery sector, the ACCC said, is an oligopoly (a market dominated by a small number of large firms) where the three largest chains "appear to be among the most profitable supermarket businesses globally" [1].

That framing signalled the regulator was no longer prepared to treat unusually high grocery profits as a market quirk. They were evidence of a structural problem. The excessive-pricing prohibition that switches on this winter is the policy answer.

What "excessive" actually means

The legal test is narrow on paper. A price becomes excessive when it sits well above the cost of supply plus a reasonable margin. "Cost of supply" is not the sticker on the supplier's invoice. It includes the retailer's own costs of getting the product to the shelf: transport, storage, labour, and an allocation of overhead. "Reasonable margin" is the harder concept. It does not mean a fixed percentage. It means the margin a competitive market would bear if the firm in question did not have the market power (the ability to set prices above competitive levels) to push it higher.

That framing matters. The ACCC is not setting a price ceiling. It is asking whether the price reflects a market where the seller could have charged less and still made a fair return. The difference is between regulation and price control.

Who is caught, and what they face

The new prohibition applies only to supermarkets that earn more than A$30 billion a year in grocery revenue. Today, that is two companies: Coles and Woolworths. Aldi and Metcash, the next two largest, sit below the threshold. IGA, Costco and the independents are not in scope at all.

The penalty regime is designed to make the cost of being caught outweigh the benefit. A court can impose the greatest of three figures: a flat A$10 million, three times the benefit derived from the conduct, or 10 per cent of annual turnover. For a business the size of Coles or Woolworths, the 10 per cent figure is the one that bites. It puts the law in the same penalty league as the most serious cartel cases.

How the ACCC will police it

The watchdog has been telegraphing its approach. On 19 February 2026, the ACCC chair delivered the regulator's 2026-27 priorities speech to a business audience in Sydney [2]. The message was that enforcement of the new prohibition is a centrepiece of the year ahead. The Commission has flagged that it will use its information-gathering powers to scrutinise pricing patterns, particularly during supply shocks and the kind of seasonal price spikes that have shaped public sentiment about supermarkets.

That does not mean a new specialist unit. It means pricing data, supplier complaints, and consumer tip-offs will be assessed against the "cost of supply plus reasonable margin" benchmark. Where a case looks strong, the ACCC can bring proceedings in the Federal Court. Penalties are civil, not criminal, but they are payable to the Commonwealth and are intended to strip out the financial gain from the conduct.

The pushback, and the skeptics

The big two have not accepted the framing quietly. Both Coles and Woolworths have argued publicly that their margins are comparable to global peers, that higher prices largely reflect input costs, and that a vague "reasonable margin" test will chill legitimate investment in supply chains and store renewal [3]. Retail industry bodies have echoed those concerns and warned that a sprawling interpretation of "excessive" could capture normal commercial responses to cost increases.

A second line of criticism comes from economists in the Productivity Commission tradition [4]. They argue that price-gouging rules, even well-designed ones, are difficult to enforce. Calculating a "reasonable margin" requires the regulator to second-guess cost allocations across thousands of product lines. The risk, these critics say, is that the law ends up rarely used, or used only in obvious cases that the market would have punished anyway. The skeptic's case is that the political value of the prohibition will be greater than its practical effect on grocery bills.

What's still unknown

Three things will become clearer in the months after 1 July. First, whether the ACCC publishes a guideline on how it calculates "reasonable margin," or leaves it to be tested in court case by case. A guideline would give the industry a target. Case-by-case testing will keep everyone guessing. Second, whether the first round of enforcement targets specific events, such as the price spikes that follow natural disasters, or ongoing high prices in everyday categories like dairy, bread, and pet food. Third, and most importantly for shoppers, whether the law changes anything at the checkout. The history of consumer-protection rules in concentrated markets is mixed. Sometimes a credible threat of action is enough to bring prices into line. Sometimes it is not.

For now, the prohibition is more a warning shot than a price cut. Whether it lands on either one will be the story of 2026-27.