From 1 July, Coles and Woolworths face fines of up to $10 million for item prices which are significantly excessive against the cost of supply. An RMIT expert explains why this will be difficult to enforce in practice, and even harder to win back the trust of customers.
Associate Professor Meg Elkins, School of Economics, Finance and Marketing:
“The law’s real test won’t be in court, it’ll be in the public’s gut. Shoppers don’t compare prices to a retailer’s costs, they compare them to what they remember paying last time.
“The law’s test is cost-based, asking whether the price is excessive relative to the cost of supply. But the public’s test is memory-based, asking whether this price is higher than expected.
“A retailer can clear the legal bar easily, for entirely legitimate reasons like a bad harvest or rising freight costs, and it will still feel like gouging at the checkout.
“The law doesn’t define what ‘excessive’ means, or what counts as a reasonable margin. That’s not a drafting oversight – it reflects how genuinely hard this is to pin down. Supermarkets sell thousands of products with shared costs, so isolating one item’s true margin is close to impossible.
“These laws are landing at the worst possible moment for supermarket trust. Coles has already been penalised over its ‘Down Down’ promotion, and Woolworths is waiting on a similar judgment. Consumers are primed to be sceptical of every price tag, regardless of what the ACCC can actually prove.
“The biggest impact on supermarkets may be psychological; making them feel watched, rather actually catching them out legally.”
Dr Meg Elkins is a cultural and behavioural economist whose research focuses on those on the economic fringes and community wellbeing.
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