When most Australians picture a ‘free market’, they imagine a bustling ecosystem where countless sellers compete for buyers, driving prices down and quality up. But in reality, true competition is rare. Instead, many of the markets that shape our daily lives are defined by imperfect competition—where a handful of firms hold sway, barriers to entry are high, and prices often reflect market power more than supply and demand.
What Is Imperfect Competition?
Imperfect competition refers to market structures that fall between the extremes of perfect competition and pure monopoly. In these markets, individual firms have some ability to influence prices, often due to product differentiation, limited competitors, or regulatory barriers. In 2025, this is the norm across much of the Australian economy, from banking and energy to supermarkets and tech.
- Oligopoly: A few large firms dominate (e.g., Coles and Woolworths in groceries).
- Monopolistic Competition: Many firms sell similar but differentiated products (e.g., cafés, clothing brands).
- Monopoly: A single supplier dominates, often with regulatory approval (e.g., NBN Co. for fixed-line broadband).
Australian Examples: Supermarkets, Banks, and Beyond
Australia’s most visible example of imperfect competition is its supermarket sector. Coles and Woolworths control over 65% of the grocery market, with Aldi and IGA making up much of the remainder. This duopoly has long been criticised for limiting choice and driving up prices, particularly in regional areas.
The banking sector tells a similar story. The ‘Big Four’—Commonwealth Bank, Westpac, NAB, and ANZ—collectively hold more than 75% of the mortgage market. Smaller banks and neobanks have emerged, but regulatory compliance costs and consumer inertia mean the incumbents retain enormous pricing power.
Even the energy market, though technically open to competition, is dominated by a few major players. And in digital services, global giants like Google and Meta hold near-monopoly positions in search and social media, shaping not just prices but the very nature of information flow.
2025 Policy Moves: Competition, Regulation, and Consumer Impact
Recent years have seen a renewed policy focus on boosting competition. The Australian Competition and Consumer Commission (ACCC) has ramped up action against anti-competitive mergers and price-fixing cartels. In 2025, new rules target digital platforms, aiming to level the playing field for local startups and crack down on predatory pricing.
- The 2025 Competition Policy Review recommends lower barriers for fintech and energy startups, plus greater transparency in supermarket pricing.
- Mandatory open banking and energy data-sharing aim to help consumers switch providers more easily and encourage new entrants.
- The Digital Platforms Act, introduced in 2024, gives the ACCC more power to investigate and fine tech giants for anti-competitive behaviour.
For consumers, imperfect competition means higher prices and fewer choices than in a truly competitive market. But it can also mean greater stability and investment—for example, the NBN’s monopoly ensures universal broadband coverage, albeit at a price premium. The challenge for policymakers is finding the right balance: fostering innovation and choice without sacrificing reliability or scale.
Imperfect Competition and the Future: Trends to Watch
Looking ahead, several forces may reshape the landscape:
- Digital Disruption: Startups in payments, energy, and retail are challenging incumbents with new business models and tech-driven efficiencies.
- Globalisation: International players like Amazon and Alibaba continue to chip away at local market share, but face regulatory hurdles.
- Consumer Activism: Australians are increasingly voting with their wallets, supporting ethical brands and demanding more transparency from big business.
- Regulatory Evolution: Ongoing reviews and reforms—especially in digital and financial services—will determine how much room new entrants have to compete.
Imperfect competition is here to stay, but the shape it takes in Australia will depend on how regulators, businesses, and consumers respond to these shifting dynamics.
