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Coles coughs up the dough

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Coles will have to pay $2.5 million to the Commonwealth after successful court action by the Australian Competition and Consumer Commission (“ACCC”).

On 10 April 2015, Chief Justice Allsop in the Federal Court of Australia ordered Coles to pay $2.5 million as well as pay the ACCC’s costs of the proceeding. Chief Justice Allsop, in an earlier decision on 18 June 2014, found that Coles had made false and misleading claims about their bread products and how the bread was manufactured.  

The contraventions involved a course of conduct, over a period of three years, where Coles advertised that the bread sold at in-store bakeries was “Baked Today, Sold Today”, “Baked Fresh” and Freshly Baked In-Store”. By advertising the bread products using these phrases, the court found that Coles had represented to its customers that the bread had been baked entirely at the in-store bakery on the day it was offered for sale when this was not at all correct.

The bread had, in fact, been partially baked overseas, snap frozen and baked again at Coles’ in-store bakeries.

In coming to the figure of $2.5million, the court recognised the need to deter other businesses from engaging in similar types of conduct, which was a focal point of the ACCC’s submissions to the court. The ACCC and the courts have sought to ensure that the cost of a pecuniary penalty for contravening Australia’s consumer protection laws is not simply another cost of doing business.

The large size of the penalty was also due to the fact that the representations were made regarding 106 product lines, which were sold at 637 supermarkets in Australia. Additionally, Coles had failed to cooperate with the ACCC’s investigation, which meant that no discount for cooperation could be applied.

Businesses must ensure that their advertising and descriptions of products are accurate. If you have any concerns about your conduct or would like more information about misleading and deceptive representations, please contact us as soon as possible.

For further information, please contact our Franchise Law and Corporate Advisory team by email at corporate@mst.com.au or by telephone +61 8540 0200.