Coles has been declared guilty by the Federal Court of misleading shoppers with claims its bread and other baked goods were “freshly baked” when that was not the case.
The Australian Competition and Consumer Commission launched proceedings against Coles in June last year, accusing the supermarket giant of misleading consumers into thinking bread was made on the day at the store when, in some cases, the bread had been partially baked months earlier in overseas factories.
Federal Court chief justice James Allsop said Coles had breached three sections of Australian Consumer Law, in his ruling, handed down on Wednesday.
"There has been, in my view, a misleading representation available to be understood that these goods have been baked on the day of sale, or baked in a fresh process, using fresh, not frozen, product. Thus, in my view, there has been a contravention of section 29, 1a, also," he said in his judgement.
During the court case, Coles’ barrister Philip Crutchfield SC, said the supermarket did not intend to suggest the bread was baked on the day with the labelling.
“What is happening with this ‘baked today, sold today’ in a Coles supermarket is that a consumer is being given the choice between the juxtaposition, the commercially manufactured bread, which has preservatives and keeps for longer, with the bread that is baked in-store and doesn’t have preservatives,” he told the court earlier in the year.
“The bread that is baked in-store is crunchier, and smells and has the flavour of freshly baked bread. That’s what we submit it is.”
Coles could face fines of up to $1.1 million per breach.
The offending breads were sold under the brands ‘Cuisine Royale’ and ‘Coles Bakery’, with labelling and advertising claims that they were “Baked Today, Sold Today” and/or “Freshly Baked In-Store”.
ACCC investigators said the goods had in fact been made months earlier on the other side of the world, namely, Denmark, Germany and Ireland, before being frozen and transported to Australia.
The former Victorian premier Jeff Kennett triggered the furore after discovering his “freshly baked” Cuisine Royale breads and muffins were made in Ireland. He mailed the offending items to the chairman of the ACCC, Rod Sims, and vented on talkback radio for a year, garnering enough public support to prompt the watchdog into action.
Mr Kennett said he took no personal pleasure from the decision handed down today.
"The ramification is wider than just to Coles - it's to every advertising agency, every marketer, every promoter of goods and services. They must accurately portray what they're offering or be prepared to pay a penalty," he said.
Mr Sims said: “Today’s decision confirms that Coles misled consumers about the baking of these bread products. Consumers should be able to rely on the accuracy of credence claims made by businesses like Coles to promote their products, especially where those claims are used to compete with smaller businesses which are genuinely offering a differentiated product."
Coles said it accepted the guilty verdict, conceding that it could have done more to explain how products were baked.
“We certainly never set out to deliberately mislead anybody,” a statement by the Coles Group said. “We are already well advanced in changing product packaging and other information.”
In a separate legal battle launched by the ACCC in May, Coles is fighting allegations it engaged in unconscionable conduct towards 200 small suppliers to reap $16 million in rebates.