Australians can save money by buying games abroad
The Australian Competition & Consumer Commission (ACCC) has been granted leave to be heard when Sony goes before Sydney's Federal Court in April.
Sony is seeking to use the Copyright Act to prevent consumers using a chip that allows them to use foreign-bought and pirated games.
The watchdog says Sony is protecting a system of global zones that operates against the interests of Australian consumers.
PlayStation technology is distributed according to three regional zones, covering North America, Japan (which covers all of Asia) and Europe.
Australia is included in the European region.
ACCC chairman Allan Fels said: "It is an attempt to lock out Australian mums, dads and children from enjoyment of legitimate products they have bought.
"Sony Computer Entertainment is moving, in this particular case, to prevent Australian consumers from reaping the benefits of globalisation."
Mr Fels said Australian consumers were paying up to double the price of PlayStation games sold in the US, and were often offered products much later.
Sony Computer Entertainment Australia Ltd managing director Michael Ephraim said he was "a bit shocked" by the statements.
He said Mr Fels was completely misinformed.
"The real issue is piracy," he said. "We have enough proof to show that piracy is rampant in Australia."
"The most pro-active way for us to stop piracy is stopping the modification of the systems to accept pirated games."
However, the ACCC said concerns about piracy should be addressed separately by stronger regulations.
"Consumers' interests are best served by ensuring access to the widest possible range of goods at the most competitive prices," Mr Fels said.
"Sony has overridden this basic consumer right by creating and maintaining artificial barriers to trade."