Coles' Misleading Conduct Fine Leads to Public Outcry
Monday 20 April 2015 @ 10.38 a.m. | Trade & Commerce
The Federal Court has ordered Coles Supermarkets Australia Pty Ltd to pay penalties of $2.5 million for making false and misleading representations in relation to the promotion of its baked bread products. The decision comes after a two year long battle with the original proceedings commencing in June 2013 as was previously reported by TimeBase here.
Background
The misleading conduct was alleged by the Australian Competition and Consumer Commission (ACCC) after Coles promoted their products as “Baked Today, Sold Today” and in some cases “Freshly Baked In-Store.” However, it was discovered that they were in fact partially baked and frozen off site by a supplier, transported and ‘finished’ at in-store bakeries within Coles supermarkets.
Decision
Chief Justice Allsop described Coles’ contravention as substantial and serious. Justice Allsop went on to say that despite the absence of evidence of specific loss or damage to a consumer or a competitor,
“…it is clear that the significant potential to mislead or deceive and thus to damage competitors, the duration of the conduct, and the fact that the goods in relation to which the impugned phrases were used were “consumer staples” indicate that the objective seriousness of the offending conduct was considerable”.
In September 2014, the Court declared that by using the phrase “Baked Today, Sold Today”, Coles represented to customers that certain bread products were entirely baked on the day on which they were offered for sale, when this was not the case, in contravention of the Australian Consumer Law.
ACCC Chairman Rod Sims described the $2.5 million penalty as a strong message to companies that they should not use broad phrases in promotions that are deliberately chosen to sell products to consumers but which are likely to mislead consumers.
Public Response
The decision has met with a great deal public outcry. Tony Smith, executive officer of the Baking Association of Australia, described the fine as “laughable”. “That sort of money is a drop in the ocean for them,” Smith said. Jos de Bruin, chief executive of Master Grocers, said he applauds the ACCC for taking action against Coles but agreed a $2.5 million penalty was “nothing” to Coles. “The fine clearly demonstrates that when you are a large organisation, you can be quite belligerent when dealing with the laws of the land,” de Bruin added.
However, as pointed out by competition lawyer and Hall & Wilcox partner Sally Scott the law restricts penalties for misleading conduct to $1.1 million per offence. Despite this sum being relatively small to a company like Coles, the size of a company is not a determining factor for the size of the fine. Scott also pointed out that the Federal Court had restrained Coles from making similar comments on its products and promotional material for three years and ordered to place a corrective notice on its website and in its in-store bakeries. She explained that this ban alone is more harmful to Coles than the fine.
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.
