(Bloomberg) -- Australia’s supermarket giants could face millions of dollars in fines under a mandatory code of conduct recommended by an interim government review, the latest step to tackle a national cost-of-living crisis sparked by stubbornly high inflation.

An interim report by former Trade Minister Craig Emerson into the country’s Food and Grocery Code of Conduct, which was introduced in 2015 and is currently voluntary, was released Monday. Prime Minister Anthony Albanese ordered the review in January following concerns that major grocery chains were failing to pass falling prices on to customers.

Emerson has called for the code of conduct to be made mandatory, which would allow the Australian Competition and Consumer Commission to impose heavy penalties on supermarkets with annual revenues of over A$5 billion ($3.3 billion) who are in breach.  

“It would be able to seek penalties for major or systemic breaches of up to A$10 million, 10% of a supermarket’s annual turnover, or three times the benefit it gained from the breach, whichever is the greatest,” Emerson said in his opening statement to the review.

Emerson’s recommendations will now be opened for further consultation before his final report is delivered to the government before June 30.

Australia has one of the world’s most concentrated supermarket sectors, with retailers Woolworths Group Ltd. and Coles Group Ltd. controlling just over half of the market share, according to Bloomberg Intelligence. Grocery prices have come under scrutiny as the nation’s consumers face rising costs of living, amid the highest interest rates in 12 years.

Inflation is steadily moderating in the Australian economy — after rising as high as 8.4% at the peak in December 2022 — but is still above the Reserve Bank of Australia’s target band of 2% to 3%.

However, Emerson’s review has so far rejected calls for forced divestiture powers to improve competition in the supermarket sector, saying it could either increase concentration in the market or lead to the closing of stores unable to be bought out by smaller competitors.

“The threat of forced divestiture would need to be credible to have this effect, and the problems outlined above would ensure it lacked credibility,” the report said.

--With assistance from Angus Whitley.

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