The government has launched its Grocery Code of Conduct, saying it is calling time on the coercive behaviour of the big supermarket chains.

Last year, the government announced it planned to introduce an industry regulator, a mandatory code of conduct, compulsory unit pricing and other measures in response to a market study which found the industry was not working well for consumers and competition was stifled.

Minister of Commerce and Consumer Affairs Duncan Webb is launching the new code at an event at Canterbury company Cookie Time on Friday morning.

"The big supermarket chains have not been treating local suppliers fairly - they have been taking advantage of their dominance and imposing unreasonable terms and conditions," Webb says.

Minister of Commerce and Consumer Affairs Duncan Webb. Photo: RNZ / Samuel Rillstone.

"It's entirely reasonable and hardly too much to ask. Local suppliers have been stretched for a long time, and that's stifled innovation and the development of our food supply chain."

The new rules will initially apply to the two main supermarket chains, Woolworths, formerly Countdown, and Foodstuffs, which runs the PAK'nSAVE, New World and Four Square brands.

The code requires supermarkets to act in good faith with suppliers, to pay them on time, have plain-English supply contracts, and bans retrospective contract changes.

Breaches of the Code will result in penalties with fines up to $3 million or 3 percent of turnover, whichever is the greater. Individuals face fines up to $200,000.

The code comes into force on September 28 and will be monitored and enforced by Grocery Commissioner Pierre van Heerden, who was appointed in July.

More details on the code are available on the Ministry of Business, Innovation and Employment website.

-RNZ.