As Coles and Woolworths record more than a billion dollars in profits, consumers are struggling to pay for groceries as farmers have their own prices undermined.
The Greens' divestiture bill, which will go to the Senate on Wednesday, proposes powers to allow the courts and the consumer watchdog to sell off parts of supermarkets' businesses if they are found to be misusing their market power.
While the government and the Liberals have rejected the plan, the Nationals — who represent farmers complaining of underpayment by Coles and Woolworths — have supported its intent and even appeared to have formed an unusual coalition with the progressive party.
However, Nationals leader David Littleproud now says there are issues with its design and his party has instead struck a deal with the Liberals to draft an alternative proposal that implements safeguards around divestiture.
"The bill that the Greens put in place was deficient in design," Mr Littleproud said.
"We're very proud of the fact that Peter (Dutton) and the Liberals want to work through this to make sure there are no unintended consequences and there's fairness in prices from the farm gate to your plate."
Mr Littleproud said the Coalition will be targeting supermarkets specifically, whereas the Greens' plan addresses the economic architecture more broadly.
He also mentioned the opposition's proposal will explore real estate banking by big supermarkets and tens of millions in penalties to enforce codes of conduct.
Grocery retailers that engage in "egregious" behaviour that removes competition could still be forced to sell off stores to smaller independents via divestiture powers, but safety tests must be applied to ensure there are no unintended consequences on competition, the Nationals leader said.
"That makes sure that there is a smaller competitor that can come in and take that," he said.
The government has rejected divestiture proposals for the supermarkets, citing potential job losses at the nation's biggest employers as a major deterrent.
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