Labour would force Foodstuffs and Woolworths to run their wholesale operations independently from their retail stores, if elected in November.
The party says the policy would give smaller grocers more places to buy products, and make it easier for new supermarkets to open and grow.
Having previously criticised National's plan to pursue splitting Foodstuffs up as just another review, Labour's commerce and consumer affairs spokesperson Arena Williams said Labour would take immediate action.
"The big supermarkets can favour their own retail stores, meaning smaller shops and independent supermarkets end up paying more. That makes it harder for them to compete and offer you a better deal," she said.
The previous government had told Woolworths and Foodstuffs to strike supply deals with retailers, or face being forced to sell at prices set by regulation.
A review into wholesale by the Commerce Commission, which reported back earlier this year, found Woolworths had strengthened its wholesale offer, including establishing a dedicated wholesale business and implementing initiatives to improve access and customer support.
Foodstuffs North Island had made more incremental improvements, while Foodstuffs South Island had been slower to act, the Commission said.
But the review found competition was still weak in pricing, range, and access.
Labour's plan would be to create two independently run wholesalers, Foodstuffs Wholesale and Woolworths Wholesale.
It would also prevent them from cutting off supply when smaller stores begin gaining customers, and remove restraint of trade rules that stop individual stores like Four Square from lowering their prices, switching to another chain, or going independent.
National's finance and economic growth spokesperson Nicola Willis dismissed Labour's policy as "concerningly light on detail".
"The idea has already been examined and rejected as complex, costly and high-risk.
"A separation of supermarkets' wholesale and retail operations, as Labour is now proposing, was given the lowest score of every option considered by independent experts commissioned by the previous Labour Government.
"It was not taken forward for detailed analysis, meaning Labour cannot say what it would cost, whether it would work, or whether shoppers would pay less as a result. That is a fundamental problem.
"Families deserve grocery reform that is properly tested before it is announced, not policy made in reverse," Willis said.
"National's proposal has been developed from extensive evidence and a cost-benefit analysis that has been rigorously peer-reviewed by independent experts.
"All that work showing this option is likely to deliver the greatest net benefits to Kiwi shoppers is what has led to our proposal."
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