Supermarket behemoths Coles and Woolworths have come under increasing scrutiny as critics accuse the retailers of price gouging and reporting record profits while customers struggle to pay for groceries.

In response, the Greens have pushed a Senate bill that would introduce divestiture powers into competition law and allow the government to step in and break up food retail giants.

This could reduce Coles' and Woolworths' market domination and stop them from raising prices for consumers while underpaying farmers.

The proposal has proved popular with Nationals and similar reforms have garnered support from independents but Business Council of Australia (BCA) chief executive Bran Black claims it will exacerbate financial pressures and risk jobs.

"This proposed law doesn't solve the issues currently being reviewed, including price transparency from farm gate to the shelf, and nor does it take pressure off inflation," he said.

Mr Black pointed to competition policy reviews like the 2015 Harper Review, which warns that divestiture laws that are too general could have "negative flow-on effects to consumer welfare".

They would also allow the courts and consumer watchdog to make decisions about which businesses and jobs should be cut, Mr Black said.

Prime Minister Anthony Albanese has also dismissed the prospect of divestiture laws, saying Australia is "not the Soviet Union" and that breaking up Woolworths - one of the nations' biggest employers - would risk thousands of jobs.

Greens senator Nick McKim says the prime minister is "dancing to the tune of the BCA and big corporations".

"It's no surprise at all to say the BCA are waging a war on divestiture," he said.

"Divestiture powers would stop their corporations from price gouging and profiteering."

Divestiture laws already exist in the United Kingdom, the United States, Ireland, Italy and the Netherlands, and former Australian Competition and Consumer Commission chair Allan Fels has supported similar proposals.

Senator McKim also noted other supermarkets including Aldi and IGA employed thousands of Australians.

"This won't change the size of the supermarket sector ... it will just have more competition, which will put downward pressure on food prices," he told reporters in Canberra.

The government has put pressure on the major supermarkets by launching a parliamentary inquiry and at least two external investigations.

A review of the Food and Grocery Code of Conduct, which governs the relationship between supermarkets and producers is underway.

But independent MP Andrew Wilkie has called the review "deeply deficient".

Mr Wilkie and fellow independent Bob Katter have introduced a bill that would reduce the market share of any supermarket to no more than 20 per cent via enforced and progressive divestiture.

The consumer watchdog has also been directed to launch an inquiry into supermarket prices.

The Liberals are yet to lay out their position on the Greens' bill.

Australian Associated Press