The corporate watchdog would be armed with powers to force Coles and Woolworths to sell parts of their operations if found guilty of practices such as predatory pricing, price gouging and market abuse under a private senator's bill tabled by the Greens on Wednesday.
The bill would cover all big business, including banks and energy companies, but would initially be aimed squarely at busting the market dominance of the supermarket duopoly by introducing divestiture powers into Australian competition law.
Greens economic justice spokesman Nick McKim said the party would seek support for the bill across party lines while the Nationals are already championing the idea.
"The market domination of Coles and Woolworths gives them the power to crush farmers, squeeze out competition and shaft their customers," he said.
"Giving our courts and competition regulators the power to smash the supermarket duopoly will help rein them in.
"This isn't a controversial or radical proposition. The UK has this power, and the US has been using it for well over a century."
The competition agencies of Ireland, Italy and the Netherlands have all recently required the divestment of supermarket assets in order to increase local competition.
Meanwhile, Nationals leader David Littleproud said he was having "constructive conversations" to convince its Coalition-partner to also jump on board.
If the Liberals were to back the bill Labor, which has already dismissed introducing divestiture powers as Soviet-type overreach, would suddenly become a political outlier on the issue.
The "big stick" legislation proposed by the Greens would allow the Australian Competition and Consumer Commission to seek court orders forcing Coles and Woolworths - who currently control 74 per cent share of the national grocery market - to sell supermarkets on a geographic basis, chains such as Big W or Dan Murphy's or home brand product lines, to competitors.
Senator McKim also said that political donations from Coles and Woolworths have meant that "successive governments have stood by and watched the supermarket duopoly dominate."
A Senate inquiry will soon report on the price setting practices and market power of major supermarkets, it has already heard many poignant stories from farmers and farming groups on the impact of a "disproportionate" David versus Goliath style relationship between suppliers and retailers.
It is one of six probes currently delving into supermarket and supply chain issues.
Mr Littleproud said while supermarkets had been dealing with suppliers in an "unconscionable" manner, there was now "direct evidence" of encroachment of the trend onto consumers with beef and sheep market prices dropping up to 70 per cent in the middle of 2023 "yet they only dropped at 8 per cent at the checkout."
"That's when governments should interfere and should put regulatory guide rails in place," he said.
Mr Littleproud also said his perspective was coloured from his time in agri-banking when approving loans to farmers after supermarkets told them to buy and develop more land and "we'll buy it all off you."
He told ABC radio that "because you're dealing in a perishable commodity" supermarkets would hold off price negotiations until the commodity was at a "tipping point of freshness" and farmers were "over a barrel."
"And then go and actually walk away from the agreements around supplying them and going to other suppliers after you put out all this capital," he said.
"And the banks are sitting there going, well, we've given you the money, you've got to pay it back."
Former ACCC Allen Fels called for divestiture powers in a recent union-commissioned report.
Senator McKim also pointed out that Reserve Bank of Australia Governor Michelle Bullock "agrees that some corporations are using a lack of competition and the cover of high inflation" to hike prices above what would be required to meet increases in their input costs.
