(Bloomberg) -- New Zealand’s government is stepping up efforts to increase supermarket competition and drive down grocery prices that are among the highest in the world.

The two big supermarket chains in New Zealand will be required to sell products to their competitors at fair wholesale prices, Commerce and Consumer Affairs Minister David Clark said Wednesday in Wellington. If they fail to do so, they will be forced to offer certain products at prices determined by a regulator, he said.

“Supermarkets are well advised to lock in good-faith wholesale arrangements on their own terms, or we will have no problem stepping in to make it happen,” Clark said. “The grocery sector needs to change, so that competing retailers -- whether they are independent dairies, smaller chains, or a new entrant -- can offer a wider selection of products at competitive prices.”

New Zealand’s high grocery prices reflect the fact that two companies -- Foodstuffs New Zealand and the local unit of Australia’s Woolworths -- form a dominant duopoly. Earlier this year, a report by fair trading watchdog the Commerce Commission said it was very difficult for other players to enter the market and provide the competition necessary to drive down prices.

The Commission found that the two big players earn NZ$1 million ($620,000) a day in excess profits because of a lack of competition. 

The government has already introduced a law to stop existing operators from putting covenants over land in certain suburbs and shopping malls where rivals may seek to build.

It has also announced plans to establish a new regulator to provide annual state-of-competition reviews “to keep supermarkets honest.” 

Clark said that alongside their retail stores, supermarkets have behind-the-scenes wholesale operations and the changes announced today will open these up to would-be competitors.

“Our plan will give a leg up to the likes of smaller retailers and new market entrants,” he said. “It means other retailers will now be able to source and sell a wider range of groceries at better prices.”

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