Breaking up major supermarkets could push up prices and hurt Australians, a peak business body warns.
In a bid to tackle anti-competitive behaviour, the coalition has drafted laws that would break up or fine grocery giants who abuse their market power.
This could decrease costs at the check-out and increase the range of grocery providers in Australia, Shadow Treasurer Angus Taylor said when introducing the bill in the House of Representatives.
"If a consumer has competition, they regulate the market and they regulate it via the choices they make every single day," Mr Taylor said on Monday.
"Competition is far better than anything any regulator can do here in (Canberra)."
The legislation would give the courts divestiture powers to force the break up of large supermarkets and hardware businesses.
To prevent potential job losses, price increases or negative impacts on shareholder value, divestiture would only be allowed if it substantially increased competition, or was in the public interest.
But the Business Council of Australia warns it would do little to improve outcomes for consumers.
"It would risk an array of unintended negative consequences for businesses, impacting regional communities, suppliers and supply chains, while also hurting consumers," the council's chief executive Bran Black said.
"The likely consequence is less scale, less competitiveness and higher prices."
The council instead prefers the Labor government's changes that will make the Food and Grocery Code of Conduct mandatory and strengthen merger laws.
But the opposition maintains laws are intended to be a deterrent rather than a weapon.
"This is a last resort for egregious behaviour and there are many, many other penalties that can be imposed along the way," Mr Taylor said.
Addressing competition would allow international and smaller domestic brands to expand their presence in sectors dominated by Woolworths, Coles or Bunnings.
This would be especially beneficial to under-served areas in the regions, Nationals leader David Littleproud said.
"If there's a reduction at the farm gate, you should see a commensurate drop at the check-out," he told AAP.
The market share of Woolworths and Coles has increased 3.6 per cent since 2002 and accounts for about 67 per cent of supermarket sales.
The coalition claims the Labor government had failed on competition policy by refusing to adopt divestiture reforms.
But treasurer Jim Chalmers warns Australians should be wary.
"If you force one supermarket to divest and the only other viable buyer is is another supermarket, it makes it less competitive," he said during Question Time.
"Divestiture powers are a blunt instrument, they are rarely used in any other jurisdiction and frankly ... we have better ways."
