What is Price Gouging? Australian government brings new rules to reduce grocery bills, giant retailers to face penalty in case of breach; all you need to know

The Australian Government has brought in new rules to put restrictions on “excessive pricing of groceries”, leaving major supermarkets in the country furious that they are being targeted with more regulations. Once the ban kicks in, it will prohibit giant retailers from charging prices that are excessive when compared to the cost of the supply, along with a reasonable margin, the government said on Sunday.

The latest ban on price gouging, which is set to take effect from July 1, 2025, promised lower grocery bills, but giant retailers say they are the ones feeling the pinch, ABC Australia reported. "This is all about getting a fairer go for families in their weekly shop," Treasurer Jim Chalmers said, as quoted by ABC Australia.

Supermarkets to face fine in case of breach

After the new rules take effect starting in July, supermarkets could face fines of $10 million for breaches, three times the value of the benefit derived or 10 per cent of the company's turnover during the preceding 12 months, according to ABC Australia.

What is Price Gouging?

Price gouging takes place when companies raise prices to unfair levels, according to Harvard Business School.

What's the Difference Between Price Gouging and Inflation?

Price gouging is different from inflation in a way that the former is the result of a business decision, while the latter is directly impacted by the market. Inflation is a general increase in prices caused by economic factors like demand, costs, and money supply over time.

Inflation is a broader term, as it talks about an overall increase in prices throughout an economy over time, while price gouging is considered localized and opportunistic.