Food producers and manufacturers say they are forced to obey supermarkets' unfair demands because there are not enough other retailers for them to sell to.
It comes after the Commerce Commission released its first findings into the New Zealand grocery market on Thursday. It's threatening to force Woolworths and Countdown to sell some of their stores to create a third retailer as the present "duopoly" is "not working well for consumers".
Independent Auckland fruit and vegetable store owner James McLean says some suppliers won't sell to him at all because supermarkets won't let them.
"Going up against the bigger players is challenging, [along with] getting supply of products," he says.
"They often say, 'go and buy it from those places, from our competitors'."
The Food and Grocery Council, which represents suppliers, claims they have no choice but to obey the duopoly's demands.
"Things like increasing margins by double because the supermarket demands it," says CEO Katherine Rich.
She says suppliers aren't price makers - they're price takers.
"Suppliers do not have the ability to negotiate, that's why supermarkets have, over a period of time, put a lot of costs and risks and uncertainty onto suppliers.
"They've made suppliers agree to things that just wouldn't happen if there was competition."
Newshub tried to speak to suppliers on Thursday, but none would go public out of fear of retribution from supermarkets, who they said could punish them by pulling their products off the shelves.
Commerce and Consumer Affairs Minister David Clark has a warning for anyone who may not be following the rules.
"To anyone in the sector, who is not behaving as they should, I would say they should take the opportunity now that they do have the best interests of customers at heart," he says.
The Commerce Commission has recommended giving suppliers collective bargaining power or having them deal directly with the Government.
Clark says whether New Zealand will get a state-owned supermarket is "not the issue for today".
