The Abbott government has warned the supermarket giants it will intervene if they don't abide by a new code of conduct to protect their smaller suppliers.
The new code agreed to by Coles, Woolworths and the Australian Food and Grocery Council (AFGC) will restrict the major supermarkets from using their market power against their suppliers.
But its voluntary nature has raised questions about how effective it will be in stopping food producers being squeezed by the retailers.
Small Business Minister Bruce Billson said the "historic" agreement would be subject to a regulatory impact statement, to ensure the code had "tools and teeth" to manage how supermarkets treat their suppliers.
It would be "pretty vivid and clear" if the retailers weren't abiding by their own rules, he said.
"And if that's the case, we've made it clear that the government will act," he told reporters in Canberra.
"We will ensure that there are proper working and commercial relationships that are fair and mutually respectful."
Non-compliance would see government intervention to develop an "effective" code, he said.
The code, announced on Monday, sets out restrictions to "retrospective and unilateral variations" to grocery supply agreements.
"It is hoped other retailers and industry groups agree to the code," a statement from the AFGC said.
Mr Billson's coalition colleague Andrew Broad was sceptical about the voluntary code, saying "it's probably been brought there kicking and screaming".
"Let's see how it works out," the Nationals MP and former head of the Victorian Farmers Federation told reporters in Canberra.
"At the end of the day Australians deserve good healthy food, they deserve to be able to go to the supermarket and buy food that they can afford, but they don't have a god-given right to cheap food at the expense of the Australian producers."
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