The Australian Competition and Consumer Commission (ACCC) has found that Coles' decision to discount house brand milk does not breach competition law.

The ACCC decided that discounted prices for house brand milk benefitted consumers and did not constitute anti-competitive behaviour.

The decision was based on evidence that the purpose of Coles' price reductions was to increase competition with other supermarkets.

"The major impact of the reduction in milk prices since January seems to have been a reduction in the supermarkets' profit margins on house brand milk," said ACCC Chairman Graeme Samuel.

"Price cutting, or underselling competitors, does not necessarily constitute predatory pricing.

Businesses often legitimately reduce their prices, and this is good for consumers and for competition in markets."