Retail NZ says it is sceptical that the Government's move to force the big two supermarkets to sell groceries to their competitors at set prices and terms if they fail to adequately wholesale market voluntarily will deliver better prices for consumers.

Greg Harford, chief executive of the retail industry group, said historically Government intervention had not delivered better prices.

Harford said if the Government wanted to deliver better grocery prices for consumers then it could simply remove GST on fruit and vegetables - resulting in an instant 15 per cent cut on current prices.

"We are supportive of some aspects of the response from the Government on the findings of the Commerce Commission – like the code of conduct and independent dispute resolution scheme.

"However, we are sceptical that Government intervention and further regulation in the wholesale market will deliver better prices for Kiwis. Historically we haven't seen Government intervention in these circumstances deliver better prices, for example the regulation of Telecom," Harford told the Herald.

"New entrants to the market, or other retailers moving into the grocery market haven't required Government intervention in order to set up shop in the New Zealand market or deliver competition in prices. We note that retail is different to markets such as telecommunications or electricity in that retailers tend to want to differentiate themselves by offering products and services that are different from their competitors."

This afternoon Commerce and Consumer Affairs Minister David Clark fleshed out the Government's plan to improve supermarket competition.

He said it would start working on a regulatory backstop to make big supermarket companies, like Foodstuffs and Woolworths, provide wholesale goods to competitors at a fair price.

The idea is to give smaller retailers and new market entrants a leg-up, by helping them source and sell a wider range of groceries at better prices.

The Government is calling the move "a shake-up of the grocery sector" and said that it will ultimately drive cheaper prices for consumers at the checkout.

A year-long study into the grocery market by the Commerce Commission found that supermarkets in this country earn $1 million a day in excess profits because of a lack of competition.

The study found that the sector is not giving Kiwis a fair deal, with a lack of competition to keep prices competitive.

The Government has since been working on ways better govern the supermarket sector and increase competition. It recently announced it had appointed a grocery commissioner to police the sector and "blow the whistle" on rip-offs.

The watchdog would be based within the Commerce Commission and review competition in the sector annually.