The commission has released a preliminary decision authorising the proposal. It is not known what penalties companies would face if they did not comply with rules if the proposal goes ahead.
The commission has called for submissions on the proposal and will make a final ruling after they close on March 25.
Chairman Dr Mark Berry said restrictions on marketing and advertising activities typically limited the amount of information available to consumers, reducing competitive pressure and making consumers worse off.
"In this instance, however, authorising the INC's Code of Practice is likely to have significant public health benefits.
"In particular, it is widely agreed that there are a variety of health benefits from breastfeeding, which could be adversely affected by the unrestricted marketing and advertising of infant formula."
INC chief executive Jan Carey said the commission's approval would ensure members, who cover the Karicare, Nurture and S-26 brands in New Zealand, complied with the code.
Ms Carey said the council supported breastfeeding as optimal for babies and infant formula as the next best substitute.
The Women's Health Action's maternal and child health promoter Isis McKay said unrestricted marketing had been shown to negatively impact women's efforts to breastfeed.
Christchurch mother-of-two Dawn Blyth, 32, has fed her four-week-old son Xavier infant formula since he was born. Her six-year-old old son Hunter was also fed with infant formula.
"Both of my boys are happy and healthy," she said.
"Our four-week old son has made excellent progress, meeting his milestones and putting on weight as he should be. Our six-year-old son has never had any problems."
Formula debate
• Commerce Commission draft decision:
• Infant formula for babies under six months not to be marketed or advertised.
• Follows a voluntary code already in place in New Zealand.
• Commission says public health benefits outweigh risk of anti-competitive behaviour.
