trolley of goods are pictured at Tesco's in Leeds, northern England,June 25, 2010.
Trolley of goods are pictured at Tesco's in Leeds REUTERS/Nigel Roddis

New powers that could be handed to the Groceries Code Adjudicator could give it the option to fine major supermarkets millions of pounds if they are found guilty of mistreating suppliers.

Under plans tabled by Business Secretary Vince Cable, the Groceries Code Adjudicator, Christine Tacon, would be able to impose fines of up to 1% of the supermarkets' annual UK turnover if they were found to be in breach of the Groceries Code in relationships with their suppliers.

The new regulations would mean that the supermarkets could be punished if they do not deal fairly with their suppliers, which includes the "pay to stay" principle, which was brought to light in a recent Newsweek investigation. However, it will not apply to pricing.

Cable said: "This important final step will give the Groceries Code Adjudicator the power it needs to address the most serious disputes between the large supermarkets and their direct suppliers."

The relationship between supermarkets and suppliers has come under increasing scrutiny in recent months with one report suggesting that ongoing price wars between Britain's major supermarkets could put 100 suppliers out of business.

This was preceded by a study from the Federation of Small Businesses (FSB) which said that one in five small businesses have been the victim of "supply chain bullying" in the past two years.