‘Shop rip-offs are rife’
Report says big players up profits by ‘dodgy’ pricing
Major Aussie businesses are turning to “dodgy” pricing to rip off customers, with billions in corporate profits driving high inflation, a report says.
It comes amid a federal inquiry into price gouging sparked by concerns that major supermarket chains were overcharging customers.
Former ACCC chair Allan Fels said rising prices were not only driven by inflation but by greed, corporate gouging and “profit pushing”.
The cost of unfair prices to the Australian public had tallied up to a shocking $100bn per year, he told the National Press Club on Wednesday.
“Australians are paying prices that are too high, too often,” Professor Fels said.
“A significant part of the cost-of-living crisis has been caused by companies in uncompetitive markets taking advantage of their market power and relying on gaps in government policy to squeeze consumers and often suppliers to breaking point. Reform to curb this is urgent.”
Grocery prices across Australia have increased by 20 per cent since 2020, far higher than the 8 per cent increase recorded over the past decade.
In a new report commissioned by the Australian Council of Trade Unions, Prof Fels identified several pricing practices businesses use to grab extra from customers.
These include “loyalty tax pricing”, which occurs when initial prices are low and then increase over a longer period.
Drip pricing, which happens when companies only reveal part of the price of a product, has also rapidly spread.
Businesses are also taking advantage of algorithms to set higher prices, Prof Fels said.
“This can sometimes operate like a cartel, especially if the algorithms are programmed to co-operate with the prices of competitors,” he said.
In his report, Prof Fels targeted airline giant Qantas as a major culprit of price gouging, explaining that airfare rises over the three months to December 2022 were sizeable enough to contribute to overall inflation on travel.
He said a lack of effective market competition had enabled the national airline to jack up its prices.
“A quarter of the inflation that month was mainly due to Qantas aggressively raising airfares, although Virgin may have contributed,” he said.
Prof Fels also recommended a major review into the national energy sector, noting that electricity prices had “dramatically increased”.
Overall, Prof Fels said his inquiry had been flooded with concerns and submissions over supermarket prices.
It comes after the Albanese Government announced in January that it would commission the Australian Competition and Consumer Commission to conduct a 12month inquiry into pricing and competition in the supermarket sector. Public hearings are expected to run over the coming weeks.