The competition regulator has announced it will investigate clothing importers who are making deals with international online stores to inflate prices for Australian shoppers.

There are reports that some fashion importers and retailers are asking international websites to increase prices for Australian shoppers or restrict sales of particular brands.

The Australian Competition and Consumer Commission (ACCC) says suppliers who reach such agreements could be breaching competition legislation.

If found to have breached the law, suppliers could face hefty fines that run into the millions of dollars, ACCC chairman Rod Sims says.

"If people are found guilty of a breach of the competition provisions of the act, it very much depends on the size of the company and the level of detriment, but penalties can be in the millions of dollars," Mr Sims said.

Consumer advocacy group Choice has been calling for the investigation, and spokeswoman Ingrid Just says watchdogs must keep an eye on this emerging area of competition.

"We have the law that is there ... in order to protect consumers, and in order to ensure that there is competition whether it be online or through the physical stores, and so we're pleased that the ACCC is treating this as a priority," Ms Just said.

Retailers say international websites have an unfair advantage as they pay less for overheads such as rent, and goods purchased overseas worth less than $1,000 are exempt from the 10 per cent Goods and Services Tax (GST).

Some retailers have called for the GST threshold to be lowered, and the Federal Government has announced it will set up a taskforce, the Retail Council of Australia, to look at the situation.

But Ms Just believes the GST argument is a "red herring".

"We know from feedback from shoppers that they are hopping online to save far more than 10 per cent," she said.

"They're saving 20, 30, 40 per cent when they're shopping online, so I think that the 10 per cent GST issue is not really a robust argument to apply here."

In a speech in Sydney yesterday, Mr Sims said the regulator was turning its attention to competition between online and with traditional bricks-and-mortar businesses.

Earlier this year, the ACCC launched legal proceedings against Flight Centre, accusing it of trying to arrange price-fixing deals with some airlines to stop them offering international airfares lower than its own fares.

And in December last year, the Federal Court fined Ticketek $2.5 million for blocking last-minute ticket supplier Lasttix from offering special deals online.

"If you're in the retail business - or indeed in any other business that's significantly affected by online competition - then I would urge those companies to embrace that competition, because clearly consumers increasingly are going to want to buy online," Mr Sims said.

"And if you're in the business of selling to those consumers you need to embrace the technology and find ways of selling that way as well."