The proposed mandatory code of practice requires retailers to display information about the alcohol unit content of drinks on sale, and their impact on consumer health.
The government has also suggested a flexible set of conditions that can be imposed by local authorities on individual stores. These include banning bulk buy promotions, and requiring staff to operate a Challenge 21 policy.
Association of Convenience Stores chief executive James Lowman said the proposal was "ill conceived".
"If a Local Authority imposed this option, a retailer who sold alcohol to a 20-year-old would potentially face a £20,000 fine and six months in prison, which is a tougher penalty than if they had sold alcohol to a 14-year-old," he said.
"We absolutely support Challenge 21 and Challenge 25, but they only work as voluntary industry initiatives. Making them law will undermine their effectiveness," he added.
The government has, however, decided to reject plans for a minimum price for alcohol, for fear of punishing the majority of sensible moderate drinkers.
London-based Londis retailer Raj Chandegra said he would have welcomed minimum unit pricing. "If a reasonable minimum price had been suggested by the government it would have benefited independent stores and stopped supermarkets from undercutting us," he said.
He added that the majority of retailers already took the issue of underage sales seriously.
"Obviously, mistakes do happen, but I think that retailers are now much more careful about who they sell alcohol to, and do not need legislation forced upon them," he said.