An investigation by ABC's Four Corners program found weaknesses in consumer protections, limited testing of imported goods and inaccurate country-of-origin labels.
The investigation highlighted examples of processed tomatoes, turmeric, eggs, seafood and alcohol that were mislabelled or bulked up with hazardous substances.
The Australian Competition and Consumer Commission has started to look into the claims raised in the program.
Commissioner Luke Woodward said consumers must be confident that any claims made on food labelling, packaging and in advertisements were "truthful, accurate and not misleading".
"We know that consumers may be guided by non-price factors, including claims about the country of origin or supply chain, when choosing which food products to buy," Mr Woodward said.
Assistant Competition Minister Andrew Leigh has commended the commission for starting investigations into the allegations, calling them disturbing.
"Australians shouldn't be duped by misleading labels," he said.
"Australians should be able to walk into a store and know that what it says on the tin is accurate."
Dr Leigh batted away suggestions the commission should already have been taking action on food mislabelling, saying the commission "responds to inquiries that are put in".
"This is a significant inquiry, as demonstrated by the fact that the ACCC has put out a media statement about it," he said.
"Whether a product is marketed as Australian‑grown, cage‑free, or made from particular ingredients, consumers have a right to expect the label tells the truth.
"When people pay a premium based on those claims and do not get what they paid for, they are being ripped off."
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