A new code of conduct developed by the supermarket giants to protect their suppliers has been described as a significant step forward by the federal government.

The code agreed to by Coles, Woolworths and the Australian Food and Grocery Council will restrict the major supermarkets using their market power to alter agreements with suppliers, who have complained of having their profits squeezed by the big retailers.

The voluntary code to be announced on Monday will be included in the Competition and Consumer Act.

Federal Small Business Minister Bruce Billson congratulated the council, Coles and Woolworths for moving to protect small suppliers in the highly-competitive supermarket sector.

“Where that competition is fierce and there is an imbalance in market power there is a greater duty and responsibility on those big businesses to wield that power with care so they’re not causing harm and damage elsewhere,” he told ABC Radio.

AAP