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The strategies used by Woolworths and Coles to set the price of groceries will be scrutinised as part of a Senate inquiry.Credit:James Alcock/Getty

The Greens have secured Labor’s support to establish the Senate probe in next week’s final sitting period of the year,and will push for the companies’ chief executives to give evidence in public hearings about their pricing practices. The first hearings are expected to be held early next year.

Allan Fels,who led the Australian Competition and Consumer Commission from 1995 to 2003,said the inquiry should consider options for beefing up government mechanisms to investigate price gouging and new powers to break up companies that abuse their market power.

“Although the number one concern of the public is cost of living and the impact of prices on incomes,there’s no actual body in the government where consumers can take their concerns about pricing. They can only go to the ACCC if there’s a technical breach of the law,” Fels said.

He said divestiture powers were a feature of competition law in other advanced economies like the United States,where they have been used to break up chemical and oil industries,but were absent from Australia’s regulatory system.

“If there were a power to get court-ordered divestiture for breaching the competition law that would hugely improve compliance,especially with regard to abuse of market power,” Fels said.

Woolworths and Coles together account for more than 60 per cent of the nation’s grocery market. The last time the ACCC conducted an investigation into the retail prices of standard groceries was in 2008.

Greens economic justice spokesman Nick McKim said the party would seek to use the inquiry to examine the impact of market concentration on food prices,with a focus on the companies’ profits amid rising costs of essential items,and the validity of discounts offered by the supermarket chains.

“For too long the big supermarkets have had too much market power. This allows them to dictate prices and terms that are hitting people hard,” McKim said. “We want the CEOs to justify their decisions in a public hearing.”

Assistant Minister for Competition Andrew Leigh confirmed Labor would support the inquiry and said the government was already using a Treasury taskforce to identify potential reforms to competition policy to ease cost of living pressures.

“We recognise that Australians have questions about what’s driving the prices they’re paying at the cash register and these are issues where we welcome informed discussion and debate. That’s why we’re supporting this Senate inquiry,” he said.

Food and grocery inflation is at 4.8 per cent – lower than overall inflation,which is 5.4 per cent,according to the latest Australian Bureau of Statistics quarterly data.

However,the price of some grocery staples such as bread and milk is still well above inflation,while the cost of other goods such as vegetables is falling. Bread prices are up 12.6 per cent in the year to September,fish prices have risen 8.7 per cent,while dairy has increased 10.2 per cent. Vegetable prices are down 10.2 per cent and lamb is down 5.7 per cent.

A Woolworths spokesperson said the company was working with suppliers to “sensitively manage economy-wide inflationary pressures”.

“We know Australians are feeling the strain of cost of living and we are working to deliver relief in their weekly grocery shop,” the spokesperson said.

The company said it offered 6,000 specials every week and had dropped the price of all its standard lamb cuts by 20 per cent,and 400 other products for summer.

A Coles spokesperson said the company’s in-house measure of inflation was coming down and it was “always exploring ways to reduce prices on the products we sell”.

“Coles is also not immune to the increased cost of doing business – construction costs,energy prices,the cost of logistics and packaging have all risen. Our suppliers are also challenged with many of the same increases and,rightly so,we have experienced a greater volume of supplier price increase requests which we have to balance,” the spokesperson said.

Representatives from both companies have provided evidence at other parliament inquiries this year,including a Senate inquiry into the cost of living and a lower house inquiry into economic dynamism,competition and business formation.

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