A new report from the Australian Competition and Consumer Commission has found many Australians have lost trust in supermarkets as it investigates Coles and Woolworths' market power and potential barriers to entry in the sector.

The ACCC's interim report into supermarkets marks the half-way point of its year-long inquiry, which was ordered by Prime Minister Anthony Albanese in January.

As part of its investigation, the competition watchdog spoke to more than 21,000 customers, many of whom said they were concerned about higher prices and had difficulties finding the best value for products.

Customers also said they don't trust "sale price" claims and were worried about being penalised for not signing up to loyalty programs.

It follows a separate ACCC investigation into misleading claims on discounts on hundreds of products at Coles and Woolworths, which resulted in legal action against the two retailers earlier this week.

Mick Keogh, deputy ACCC chair, said a number of issues were identified by Australian shoppers and suppliers during the inquiry so far.

"Consumers have raised a lot of concerns about high prices, their concerns about profit margins and their concerns about confusing pricing policies," he told the ABC.

"Suppliers raised with us unfair contracting arrangements, their concerns about risk transfer and variations in contracts and the information imbalances they feel significantly weaken their bargaining position."

He said the next stage of the inquiry will examine all these issues in great detail, drawing on a huge volume of data and information the ACCC obtained from supermarkets.

A consumer survey conducted as part of the ACCC's inquiry indicated the majority of respondents in low-income households were spending more than 20 per cent of their net income on groceries.

With the cost of everyday items a pressing issue for customers, the ACCC found the price of a typical basket of groceries had increased by more than 20 per cent in the past five years but they said it was in line with inflation.

Mr Keogh said food price inflation is lower in Australia than in most OECD countries but they will be looking closely at the extent to which any market power held by the supermarkets "has a role in increasing prices to consumers or decreasing prices to suppliers".

The competition watchdog provided the federal government with its findings and details about its next steps at the end of last month but it was only made public on Thursday night.

It said it would spend the remaining five months of its inquiry scrutinising whether, and if so, how, the supermarkets may be using market power and its potential impact on consumers and suppliers.

ACCC to investigate market power and barriers to entry

The ACCC said it was focusing on barriers to entry in the sector after observing Aldi had taken 20 years to build up a nine per cent share of national retail sales.

"That's a pretty slow level of growth compared to the dominance of the two majors who have increased their dominance over that period of time," Mr Keogh said.

Its preliminary view is that Costco's entry in 2009 and ALDI's successful expansion demonstrates the "significant investment, time and differentiated offering" required to expand in the Australian supermarket landscape.

Coles and Woolworths together control 67 per cent of supermarket sales nationally.

The findings also showed the grocers hold significant numbers of undeveloped supermarket sites, which could prevent competitors from building new stores.

Woolworths has interests in 110 sites, while Coles has interests in 42 sites. Information provided by Aldi suggests it holds only 13 undeveloped sites.

"That really does raise questions with us about whether that is a mechanism to make it more difficult for competitors, or whether, in fact, it's just the planning and approval process," Mr Keogh said.

"Certainly that's the subject of quite considerable further investigation as part of our ongoing inquiry."

Coles, Woolworths, IGA owner Metacash and Aldi have all been approached for comment.

Retail competition and prices also in focus

The ACCC is looking at a whole range of issues in the supermarket sector, including the relationship between wholesale, farmgate and retail prices.

It has identified 14 products — including beef, bananas and pork — that it will analyse and use for comparisons for the remainder of the inquiry.

The competition watchdog said it will use its powers to obtain information on detailed pricing and margins data from the retailers.

In its report, it found Coles and Woolworths provide broadly similar supermarket offerings and "appear to price at similar levels and offer similar non-price offerings".

The ACCC said it will continue to assess the nature and extent of competition between Coles and Woolworths, which will be "a material factor in our assessment of the level and nature of retail competition more broadly".

This week has brought fresh scrutiny to the supermarket sector, following the ACCC's court action against Australia's two biggest supermarkets.

Choice's second quarterly report also found a basket of goods not on special at Aldi was $18 cheaper than the same items at Coles and Woolworths.

The Albanese government has also released its draft mandatory Food and Grocery Code for consultation, which will mean supermarkets could face significant penalties if found to be breaching the Code.

As part of the next stage of its inquiry, the ACCC has announced it will be conducting public hearings with senior executives from the supermarkets in November.

Grocery suppliers have also been consulted as part of the probe, with many reporting they sometimes receive prices "below the cost of production and have little choice but to agree to highly unfavourable terms".

The report details that these terms include being subject to ongoing changes by the major retailers.

Mr Keogh said the issues raised by a number of suppliers were concerning and that the ACCC's examination of supermarket behaviour will be included in its findings.

Its final report is not due to be released until February 2025.