Coles and Woolworths supermarket chains accused of bullying tactics as they hog 80 per cent of market.

Australia's two major supermarket chains are coming under increasing fire over their market dominance and allegations of "unconscionable" bullying of suppliers.

Already the subject of an inquiry by corporate watchdog the Australian Competition and Consumer Commission, Coles and Woolworths are now being targeted by a federal bill introduced by north Queensland independent MP Bob Katter.Katter's bill would force the chains to reduce their market share - at present a combined 70-80 per cent - to just 20 per cent each within six years, overseen by a new food retailing commissioner.

The bill would join two others requiring imported food to carry warnings that it could have been produced in conditions possibly threatening to human health, and allowing dairy farmers to collectively bargain with the chains.

"The Americans are screaming blue murder because Walmart and their [major] competitor have now reached about 23 per cent market share," Katter said.


"Here we have two supermarkets with a market share of over 80 per cent, so if they decide to cut down the amount of money they are going to pay farmers and jack up the price to the consumers, they can, because there is no competition."

The bill will join the clutter amassed in the final months of the present Government, with neither Labor nor the Coalition previously showing any enthusiasm for curbing Coles and Woolworths.

But Katter does have the support of independent Tasmanian MP Andrew Wilkie and South Australian Senator Nick Xenophon, both of whom represent states whose farm sectors have long railed against the power of the chains.

Coles managing director Ian McLeod told a Sydney function that Katter's "extremist" bill would damage competition, lead to higher prices and force the chain to shut down stores with the loss of more than 1000 jobs in Queensland alone.

Woolworths supermarkets managing director Tjeerd Jegen told the same function Katter's bill had been framed with the September 14 election in mind and that the Government needed to focus on a strong retail sector and the jobs it provided.

But anger at the power of the two chains has been steadily rising for a decade, flaring among suppliers with the introduction of A$1-a-litre milk and the growth of home brand products.

There is also broader concern that the chains are forcing smaller rivals and independents out of business, especially in suburban shopping centres and rural towns.

Critics say a 60 per cent surge in imports in the past seven years has contributed to the collapse of food processors and to rising pressure on farm finances.

A Commonwealth Bank analysis last year for News Ltd found that A$40 of every A$100 spent by Australian households now goes to Coles and Woolworths, with the chains expanding market share through acquisitions. They have been moving into new areas from electronics and hardware to office supplies and liquor, now accounting for 60 per cent of alcohol retail, 50 per cent of petrol sales and 40 per cent of all retail business.

Master Grocers Australia, representing independent stores, also claims the chains are knocking out rivals by building "oversized, unprofitable stores" in growth areas and rural centres to decimate rivals.

Last year a Senate inquiry into the impact of supermarket pricing on dairy farmers found cause for concern, recommending an independent review of competition and consumer law, with regular monitoring.

The ACCC inquiry is looking at more serious allegations of improper and unlawful practices in dealing with suppliers, including forcing suppliers to pay extra to keep their products on the shelves. The chains deny the allegations and have said they will co-operate fully.

They are also working with the Australian Food and Grocery Council and the National Farmers Federation on a new industry code of practice.