Major supermarkets should be subject to a mandatory code of conduct with teeth, including penalties of up to $10 million, an interim review has recommended.
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Craig Emerson's report into the Food and Grocery Code of Conduct claimed a "heavy imbalance in market power between suppliers and supermarkets" necessitated the change.
National Farmers Federation president David Jochinke welcomed the findings, saying that the status quo "clearly hasn't worked for many producers."
"Farmers have continued to suffer a massive power imbalance, so we support measures to improve transparency and accountability," he said.
"Farmers need this stronger protection in negotiations where there is a large number of small producers dealing with a small number of large retailers.
The report also suggested the measures be extended into other markets, particularly the "greenlife" sector, which is dominated by Bunnings with a reported 70 per cent market share.
The Albanese government commissioned the review in January, facing pressure to deliver cost-of-living relief, and appointed the former Labor minister to lead it.
Dr Emerson argued the existing code was ineffective because it is voluntary and contains no penalties for breaches.
Instead he urged supermarkets with annual revenues exceeding $5 billion - which includes Coles, Woolworths, ALDI and wholesaler Metcash - be forced to sign up to a new and improved code.
These supermarkets hold a market share of more than 70 per cent in Australia.
The NFF also supported an interim review proposal to better protect farmers from commercial retribution.
"It makes sense to monitor commercial decisions by retailer buying teams following a disagreement, and that will help give producers confidence to speak up," Mr Jochinke said.
Consultation is now open on the review. The government will not respond to recommendations until Dr Emerson submits a final report at the end of June.\
The existing code was established in 2015, following complaints about the conduct of supermarkets towards their suppliers.
It encourages supermarkets to act in good faith when dealing with suppliers, and sets out rules around general conduct, involving areas such as payment arrangements, price increases and fresh produce standards.
The review also recommended maximum penalties of up to $10 million be applied for serious breaches of the code, while less serious breaches could be charged at $187,800.
This would require Federal Parliament to amend current legislation.
The ACCC should be empowered to pursue such breaches, and should do so through the courts, the review found.
Supermarkets face heightened scrutiny from Parliament
In a joint statement released on Monday, Treasurer Jim Chalmers and the Assistant Minister for Competition Andrew Leigh said the review was focused on making sure Australians got the best deal.
"We want a fair go for families and a fair go for farmers," the ministers said.
"This work is all about making our supermarkets as competitive as they can be so Australians get the best prices possible."
The Treasurer is also expected to make a significant announcement about the federal government's plans for merger reform when he delivers a major competition lecture in Sydney on Wednesday.
Supermarkets face heightened scrutiny from parliamentarians amid calls for relief from rising cost of living.
The ACCC is conducting a separate inquiry into supermarket pricing, due to report back in February 2025, while the Senate has also established a Select Committee on Supermarket Prices, which will hand down its report in May.
Nationals leader David Littleproud said while the larger fines with enforcement and a mandatory Code were offered by to Labor in a bi-partisan deal by The Nationals in December 2022, "the broader suggestions won't address all the issues consumers and farmers are facing."
