ACCC Fines Coles $12 Million for Milk Supply Deal Breaches

The Australian Competition and Consumer Commission announced on 22 May 2026 that it has fined supermarket giant Coles $12 million for engaging in anti-competitive exclusive supply agreements with dairy processors. The regulator also flagged it is formally investigating the pricing practices of processor Brownes Dairy. The penalty stems from Coles’ conduct between 2021 and 2023, which the Federal Court found substantially lessened competition in markets for the acquisition of raw milk in Victoria. This action signals a renewed regulatory focus on the concentrated Australian grocery sector.

Context — [why this matters now]

The ACCC’s action against Coles occurs amidst intense public and political scrutiny of Australia’s supermarket duopoly, comprised of Coles and Woolworths. A Senate inquiry into supermarket prices wrapped up public hearings in April 2026, applying pressure on regulators to demonstrate enforcement. The last major ACCC penalty against a major retailer was the $10 million fine imposed on Woolworths in 2021 for unconscionable conduct towards suppliers.

Australia’s current economic backdrop features inflation persisting above the Reserve Bank of Australia’s target band. Food price inflation, while moderating, remains a sensitive political issue. The Coles penalty is a direct response to this environment, demonstrating regulatory intent to curb practices that may contribute to higher consumer prices or unfair supplier terms.

The specific catalyst for this penalty was a Federal Court proceeding initiated by the ACCC in late 2024. The court found that Coles’ exclusive supply deals with two large dairy processors prevented smaller retailers from sourcing branded milk. This foreclosure effect harmed competitive dynamics at the processor and retail levels, triggering the multi-million dollar fine.

Data — [what the numbers show]

The Federal Court ordered Coles to pay a total penalty of $12.0 million AUD for breaches of the Competition and Consumer Act 2010. This penalty is situated within the maximum allowable for such contraventions. The conduct spanned a 26-month period from January 2021 to March 2023, impacting the raw milk acquisition market in Victoria, Australia’s largest dairy-producing state.

Metric	Before Conduct	After Conduct
Competitive pressure on processors	High	Reduced
Market access for smaller retailers	Unrestricted	Foreclosed

Coles’ statutory net profit after tax for the 2025 financial year was $1.10 billion. The $12 million fine represents approximately 1.1% of that annual profit. For comparison, Woolworths’ 2021 $10 million supplier-conduct fine represented about 0.7% of its net profit at the time. The ACCC also flagged that Brownes Dairy, owned by Chinese company Shanghai Ground Food Tech, is under investigation for alleged anti-competitive wholesale pricing. The dairy industry contributes over $4 billion annually to the Australian economy.

Analysis — [what it means for markets / sectors / tickers]

The immediate market impact is a direct financial penalty for Coles, ticker COL.AX. While the fine is minor relative to its annual earnings, the greater risk is the precedent for stricter regulatory oversight. This could constrain Coles’ and Woolworths’ (WOW.AX) ability to use their scale for exclusive supply terms, potentially increasing their cost of goods sold and pressuring gross margins. Woolworths shares may face secondary pressure due to regulatory contagion fears.

Conversely, the ruling is a positive for smaller grocery chains like Metcash (MTS.AX), which supplies IGA stores, as it may improve their access to branded dairy products. Dairy processors like Bega Cheese (BGA.AX) and Saputo DSP.AX could also benefit from reduced buyer power from the major supermarkets, potentially leading to better wholesale pricing terms. A potential counter-argument is that punitive regulatory measures could stifle investment and innovation within the grocery supply chain, ultimately raising costs for consumers.

Investment flow is likely to rotate cautiously within the consumer staples sector. Funds may reduce exposure to the major supermarkets in the short term, seeking shelter in less politically sensitive sub-sectors like beverages or wholesaling. Trading volumes for COL.AX and WOW.AX are expected to be elevated as the market digests the regulatory implications.

Outlook — [what to watch next]

The next key catalyst is the final report from the Senate Select Committee on Supermarket Prices, due by 7 July 2026. This report could recommend legislative changes, such as divestiture powers for the ACCC, which would represent a systemic risk to the sector structure. Investors should monitor any government response to the committee’s findings in the third quarter.

The ongoing ACCC investigation into Brownes Dairy’s pricing practices will be a critical indicator of whether this enforcement action is isolated or part of a broader crackdown on the dairy supply chain. A decision or further action is likely before the end of 2026. The outcome will signal if regulators are targeting retailer and processor conduct simultaneously.

Key levels to watch for Coles’ share price include the 200-day moving average as a sentiment gauge. A sustained break below this technical level could indicate a fundamental reassessment of regulatory risk. For the sector, the S&P/ASX 200 Consumer Staples index will be a barometer of overall investor confidence.

Frequently Asked Questions

What does the Coles fine mean for milk prices?

The $12 million fine itself will not directly lower supermarket milk prices. The ACCC’s objective is to foster greater long-term competition, which theoretically leads to better prices. By preventing exclusive deals, the ruling aims to give smaller retailers better access to supply, increasing competition. However, the immediate effect on shelf prices for consumers is likely to be negligible, as pricing is influenced by many factors including farmgate milk prices, transport costs, and overall inflation.

How does this compare to international supermarket regulation?

Australia’s grocery market concentration is high by global standards, with Coles and Woolworths holding an estimated 65% market share. This action aligns with a global trend of increasing antitrust scrutiny for Big Tech and Big Retail. The UK’s Competition and Markets Authority recently investigated the grocery sector for price gouging, while the European Commission has longstanding strict rules against buyer power abuses. The fine, however, is modest compared to billion-dollar penalties sometimes levied by US or EU regulators.

Are other Australian supermarkets under investigation?

While the current penalty targets Coles, the ACCC’s broader inquiry examines the entire sector. Woolworths is also subject to the Senate probe and remains under constant regulatory supervision. The investigation into Brownes Dairy shows the scrutiny extends to suppliers. The ACCC has not indicated imminent action against Woolworths, but the sector-wide nature of the Senate inquiry suggests all major players face elevated regulatory risk.