Greedflation

When the Australian Competition and Consumer Commission released its final report on the supermarkets inquiry on 21 March 2025, the two companies whose conduct it had investigated for more than a year both saw their share prices rise. Investors were relieved. The ACCC had found problems but had not recommended the structural remedies that would have directly constrained profits.

Correction, 29 September 2026. The ACCC’s media release announcing its final report is dated 21 March 2025, not 20 March as the paragraph above said ¹⁶; the earlier date matched the 20 March 2025 date of the US News report this article cited ².

The ACCC’s findings were, nevertheless, damning. Grocery prices had risen 24 per cent over five years. Woolworths and Coles together controlled 67 per cent of supermarket grocery sales. Their EBIT margins were among the highest of supermarket businesses in relevant comparator countries. The sector was not working well, leading to poorer outcomes for consumers and suppliers. At least some of the grocery price increases had resulted in additional profits.

The ACCC did not conclude that price gouging had occurred. It was, legally, unable to: the complexity of thousands of products and varying margin profiles made a definitive conclusion impossible within the statutory framework. But the regulator’s description of what had happened was clear: an oligopolistic market, limited competition, margin expansion during a cost-of-living crisis, and a sector not working well for consumers.

01The market structure: why competition doesn’t work here

Australia’s grocery market is one of the most concentrated in the developed world. Woolworths holds 38 per cent of supermarket grocery sales. Coles holds 29 per cent. Together they account for two-thirds of the market. ALDI, after more than 20 years of operation in Australia, holds approximately 9 per cent.

The ACCC described the structural consequence of this concentration precisely: an oligopolistic market structure in which Coles and Woolworths have limited incentive to compete vigorously with each other on price. The two companies provide broadly similar supermarket offerings and appear to price at similar levels, reinforcing each other’s pricing rather than undercutting it.

ALDI provides a partial competitive constraint, but does not compete head-to-head with Coles and Woolworths across their full product range. Consumers who want the full range of branded products, fresh produce, and specialty items must choose between Coles and Woolworths. For those consumers, the 67 per cent duopoly is effectively 100 per cent.

The ACCC found that substantial pro-competitive departures from the status quo are unlikely in the foreseeable future. Entry barriers are high: it took ALDI more than 20 years to achieve 9 per cent. The ACCC said it was unlikely that a new major supermarket chain would enter the market.

02What happened to margins during the inflation peak

The ACCC’s analysis of what happened to supermarket margins during the 2022–23 inflation peak is the core finding of the inquiry. Between late 2022 and early 2023, the period when annual inflation peaked at 7.8 per cent in the December quarter 2022, the highest since 1990 ²⁵ and, on this article’s reading, the worst inflation in a generation, and the RBA was raising rates most aggressively, grocery prices were rising at more than twice the rate of wages.

The ACCC found that Coles and Woolworths had the apparent ability to increase retail margins for packaged grocery products by more than is necessary to accommodate a wholesale price increase. This is the margin expansion finding: when their input costs rose, the supermarkets raised retail prices by more than their costs required. The additional price increase became profit.

Woolworths and Coles expanded their profit margins during the worst inflation in a generation. The ACCC found it. It could not call it price gouging. The companies’ shares rose on the day the report was released. The RBA was simultaneously raising rates to suppress the inflation those margins were contributing to. The borrowers paid for it. The shareholders celebrated.

The Australia Institute described this dynamic as corporations abusing market power to raise prices in ways that drove the inflation the RBA was then raising rates to address. The logic: supply-side inflation provides cover for margin expansion; oligopolistic companies use the inflationary environment to raise prices beyond cost increases; the RBA raises rates to suppress the resulting inflation; borrowers bear the cost.

Update, 29 September 2026. The Reserve Bank has since published its own study of margins. Its May 2026 Bulletin found that margin squeezes in retail and home building pushed inflation down in early 2025 and that their unwinding accentuated ‘the pick-up in aggregate inflation in the latter part of 2025’, the pick-up that preceded the 2026 rate rises; overall it judged margins had ‘only a modest impact’, and cautioned that ‘simple narratives in which margins are said to have "driven" inflation can be misleading’ ¹⁷. An August 2026 RBA staff article (a staff view, not the Board’s) whose data end in early 2026, before the war, finds that the contribution of import prices and business owner returns ‘moderated significantly’ from 2023 to early 2026, and that business owner returns in some quarters ‘dragged on aggregate consumer price growth a little’ ¹⁸. The same article finds that immediately after the pandemic, import prices and business owner returns ‘accounted for a larger share’ of consumption price growth, with price pressures later shifting towards labour costs and dwelling rents ¹⁸. The Bank’s May 2023 analysis found ‘little evidence’ of a broad-based increase in non-mining profit margins as an independent cause of inflation, but also that among the 200 largest firms ‘some highly profitable firms’ had gradually increased their margins, a trend the Bank traced back to 2016 ²⁴. On 11 August 2026 Governor Bullock said some firms had passed cost pressures through to prices and that with excess demand her concern is that passing costs on will be easier ¹⁹, and on 29 September the Bank said liaison indicates that firms ‘are experiencing cost pressures and are either increasing the prices of their goods and services or looking to do so’ ²⁰.

Update, 7 October 2026. The 7.8 per cent peak is now sourced to the Australian Bureau of Statistics: annual CPI inflation reached 7.8 per cent in the December quarter 2022, the highest since 1990, and fell to 7.0 per cent the next quarter ²⁵. The paragraph opening this section now says so; “the worst inflation in a generation”, in the headline summary and above, is this article’s description of that 1990-to-2022 high.

03The misleading pricing legal action

The most concrete evidence of supermarket conduct during the inflation peak came not from the inquiry but from the ACCC’s separate legal action, announced in September 2024.

The ACCC alleged that Woolworths and Coles had misled consumers through promotional pricing practices. Specifically: products were placed on ‘was/now’ promotional tickets that implied a discount from a previous higher price, but in many cases, the ‘was’ price had been artificially elevated shortly before the promotion, or the ‘special’ price was actually higher than the product had recently sold for.

The period covered by the legal action: Woolworths: 266 products over 20 months; Coles: 245 products over 15 months. These 15 to 20 months were precisely the period when Australian inflation peaked at 7.8 per cent ²⁵ and the Reserve Bank raised rates most aggressively.

The Reserve Bank’s 2023 analysis found little evidence of a broad-based rise in non-mining margins, though some of the largest firms had widened theirs ²⁴; its May 2026 study, of 2025, judged margins had only a modest impact ¹⁷. Both are set out in the 29 September 2026 update above.

Update, 7 October 2026. The 7.8 per cent inflation peak in the paragraph on the period covered by the legal action is now cited to the Australian Bureau of Statistics ²⁵.

04What the inquiry found and what it didn’t

The ACCC’s final report did not find price gouging. It could not: the legal standard for price gouging requires evidence of prices above a level that could be sustained in a competitive market, applied across a complex product portfolio. The ACCC found it was unable to conclusively say whether Woolworths and Coles were actively price gouging.

What it did find: margins expanded during the inflation period. The sector was not working well for consumers or suppliers. Woolworths and Coles are among the most profitable supermarket businesses among their global peers. ALDI provides only a partial competitive constraint. Entry of a new major competitor is unlikely. Suppliers lack bargaining power and fear retribution for raising concerns.

Twenty recommendations were made. The most significant: mandatory price transparency, stronger protections for suppliers, planning and zoning reform to make it easier to establish new supermarkets. No divestiture. No structural remedy.

Update, 29 September 2026. Since this article was written, excessive grocery pricing by ‘very large retailers’ (more than $30 billion in revenue: currently Coles and Woolworths) has been prohibited from 1 July 2026 under the Food and Grocery Code regulations. The ACCC enforces it; the test is whether prices are ‘significantly excessive’ against the cost of supply plus a reasonable margin, and the maximum penalty is the greater of $10 million, three times the benefit or 10 per cent of turnover ²¹. In THE RORT’s reading it is a price-side tool held by Parliament and the regulator, not the RBA. THE RORT has not checked whether the ACCC has used it. Two earlier measures belong here too: the Food and Grocery Code became mandatory on 1 April 2025 for the largest supermarkets and wholesalers, mainly governing their dealings with suppliers ²², and since 1 January 2026 acquisitions above the thresholds must be notified to the ACCC and wait for its approval, a reform the Treasurer tied to grocery prices ²³. The ACCC did not recommend divestiture ¹⁶. An earlier line here, in the key facts and in the chart said the ACCC recommended no price controls; THE RORT could not re-check that against a source this round and has withdrawn it, keeping only what the ACCC is on record for: no divestiture ¹⁶.

If it’s a rort, we cover it.