By Melinda Upton and Matthew Evans 

The Federal Court has ordered Coles Supermarkets to pay a $2.5 million AUD penalty for making false and misleading claims regarding its bakery range in contravention of section 18 of the Australian Consumer Law (ACL).

Coles promoted its bread products as ‘Freshly Baked In-Store’, ‘Baked Today, Sold Today’, ‘Baked Fresh’ and ‘Freshly Baked’ (claims), when in actuality they were already partially baked and frozen off site, and then baked to completion at Coles Supermarket. The Court heard evidence that the par-baking occurred as far away as Ireland, Denmark and Germany.

In reaching the $2.5 million dollar figure, Allsop CJ had regard to:

  • the deliberateness of the conduct;
  • Coles’ senior managements’ role in promoting claims;
  • the claims’ purpose of improving Coles’ market share vis-à-vis its competitors;
  • the size and revenue of Coles combined with the need for both specific and general deterrence to prevent similar future conduct;
  • Coles’ prior breaches of the ACL; and
  • Coles’ lack of co-operation with the ACCC.

Coles’ overall conduct was assessed by Allsop CJ as ‘substantial and serious’ notwithstanding the lack of evidence showing detriment to Coles’ competitors. The fine of $2.5 million reflects approximately 30% of the $7.28 million earnings before interest and tax Coles received from its par-baked bakery section. His honour made further orders restraining Coles from making any further representations that par-baked goods are freshly baked and to advertise a correction on both its website and in store.

ACCC chairman Rod Sims was pleased with the outcome calling it a ‘strong message to companies that they should not use broad phrases in promotions that are deliberately chosen to sell products to consumers [and] are likely to mislead’. Others have criticised what they see as a ‘laughable’ fine in light of the Coles Groups $35,780 million dollar revenue in the 2013 financial year.