New Zealand's Commerce Commission proposed changes to limit the range of charges that major supermarkets, including Woolworths Group's (ASX:WOW) New Zealand stores, can impose on their suppliers, according to a Thursday statement by the regulator.

The proposal is part of a draft review of the Grocery Supply Code, aimed at addressing the power imbalance between dominant supermarket chains and small suppliers.

The regulator said suppliers are often forced to absorb costs such as shelf-stocking and in-store promotions due to fear of losing access to supermarket shelves.

The commission also raised concerns about promotional payments in the wholesale market, which it says give major retailers a pricing edge that competitors cannot match.

The watchdog also recommends that major supermarkets expand their wholesale ranges and pass on promotional funding to wholesale customers. It also urges suppliers to reduce reliance on promotional deals or share them more broadly across retailers.

It is encouraging voluntary reforms but signals regulatory action if no meaningful progress is made within a year.

Submissions on the draft code are open, with a final report due by the end of September.

"There's always room for improvement, and we're talking to our suppliers all the time so we can keep doing better," Woolworths New Zealand's Interim Managing Director Pieter said in a Thursday statement by the retailer commenting on the regulatory proposal.