Business secretary Vince Cable has put the measures before the House of Commons which would give new powers to the Groceries Code Adjudicator (GCA). The regulator would impose the fine depending on the seriousness of the offence.
The government hopes the measures will become law before this year's General Election. The GCA was set up in 2009 to enforce the Groceries Supply Code of Practice. The GCA also names and shames those retailers that break the code. Cable said on Thursday:
I am pleased today to be giving the Adjudicator the final element in a set of powers that will give this new body all the tools it needs to succeed in this challenging and important role.
The proposals come in the wake of heated debate over whether top supermarkets have been giving British dairy farmers a raw deal. Last week, MPs urged the government to intervene and protect farmers from the collapsing price of milk.
Milk prices have been falling steadily for the last year as a result of falling demand in China, as well as Russia's ban on EU food products. Moscow's bans have led to approximately 2.5bn litres of milk not being sold in Russia, according a report from MPs.
Cable's proposals represent something of a victory for the Environment, Food and Rural Affairs Committee and the National Farmers' Union which has lobbied intensely for intervention to prop up the dairy industry.
It's not just in the dairy industry where supermarkets have been in trouble over their relationships with suppliers. Tesco suffered hugely in the wake of an accounting scandal that stemmed from supplier contracts.