The Government is hoping to abolish the power imbalance between the supermarket duopoly and suppliers.
Its new Grocery Code of Conduct has launched, slapping big supermarket chains with million-dollar fines for not treating small suppliers fairly.
It is a part of the Government's wider work to reform the grocery sector following a damming report by the Commerce Commission.
Newshub revealed last week the cut supermarkets make on suppliers' products has more than doubled since the 1990s, according to suppliers.
"[Big supermarket chains] have been taking advantage of their dominance and imposing unreasonable terms and conditions. We are calling time on their poor behaviour," Minister of Commerce and Consumer Affairs Duncan Webb said.
"It's entirely reasonable and hardly too much to ask. Local suppliers have been stretched for a long time, and that’s stifled innovation and the development of our food supply chain."
The new code requires large corporates to do things like pay on time, have plain-English supply contracts and deal with small companies in good faith. The code will initially apply to the two big supermarket chains, Woolworths New Zealand (including the Countdown Brand) and Foodstuffs North Island and South Island (including Pak ‘n Save, New World and Four Square).
Breaches of the Code will result in penalties with fines up to $3 million or 3 percent of turnover. Individuals will face fines of up to $200,000.
The code comes into force on September 28 and will be monitored and enforced by new Grocery Commissioner Pierre van Heerden, whose position was established in July.
Also coming into effect on Thursday were new regulations the Government said will help Kiwis find it easier to compare product prices in supermarkets.
The regulations will require grocery retailers to consistently and clearly display pricing by weight, volume or number.
It includes displaying unit pricing for grocery products, such as the price of a product per kilogram or litre.
The rules aim to support inter-brand competition and encourage grocery retailers to compete on best value for money, benefitting customers in the long term.
There will be a transitional period of one year for physical stores and two years for online stores before compliance is mandatory for physical stores and two years for online stores, providing retailers time to put the required systems in place.
In a major report last year, the Commerce Commission found competition in the grocery sector is "not working well for New Zealand consumers" with smaller retailers unable to compete effectively against the two main players, Foodstuffs and Woolworths.
Following the report's recommendations, the Government has taken action including establishing a Grocery Commissioner, requiring major grocery retailers to open wholesale offerings and has banned restrictive land agreements.
