Tesco is one of the supermarkets under investigation

They are giving evidence to the Competition Commission, which is carrying out an official inquiry into allegations of monopoly behaviour.

It is spending two days gathering evidence in Scotland.

Tesco, Asda, Sainsbury's and Morrisons argue they offer value for money and provide what the consumer wants.

The market dominance of the big four is being investigated for the third time in seven years.

We would encourage people, despite the fear factor, to give evidence to us Peter Freeman Competition Commission chairman

The Office of Fair Trading referred the �120bn supermarket sector to the Competition Commission in May, amid claims that top supermarkets had become too powerful and smaller stores were being squeezed out.

The commission is holding hearings with the Scottish Grocers Federation, the Scottish Executive, Scottish Parliament and the NFU Scotland among others.

Peter Freeman, chairman of the Competition Commission, is leading the inquiry.

'Fear factor'

He told BBC Radio's Good Morning Scotland programme he was keen to gather as much evidence as possible over the two-year investigation.

Mr Freeman said: "We would encourage people, despite the fear factor, to give evidence to us, we will not threaten their anonymity.

"There are people who would also extol what the supermarkets are doing, it's our job to form a balanced judgement.

Producers claim they are being squeezed by low prices

"We have very extensive powers, but one of the reasons we are in Edinburgh is to make sure that whatever powers we exercise, in what is a reserved matter - competition - take full account of Scottish policies on the environment, on agriculture, on the food supply chain and on retailing."

Farmers say the supermarkets buy milk at 18p a litre, less than the cost of production, and sell it for more than 50p.

James Withers, of the Scottish NFU, warned that farmers were going out of business.

He said: "Farmers are not crying for any special favours, they're not supposed to be immune from business pressures, but they need recognition from the supermarkets that if they're going to produce high quality that comes at a cost."

The supermarkets are currently abusing their power Shiona Baird Green enterprise spokeswoman

The Scottish Grocers Federation said its members were being hit by promotions such as supermarkets selling beer at less than the wholesale price as a loss leader.

And the Green Party said the voluntary code of practice governing the supermarkets needed an independent adjudicator, or else Scottish farmers and small suppliers would be forced out of business.

Enterprise spokeswoman Shiona Baird said: "The supermarkets are currently abusing their power, leaving farmers struggling to cope with pitiful payments for their goods.

"A vibrant farming industry means consumers can buy a range of high quality goods - but this cannot happen if supermarkets do not take a more responsible approach to their business."