Coles Supermarket, a subsidiary of Wesfarmers (ASX:WES), has been hit with a $2.5m fine by a Federal Court. The court found that Coles had been falsely claiming its bread was freshly baked inside of each store. Evidences came to light showing that the bread was in fact par-baked at a different location, sometimes months before it was even sold. The ruling found more than 100 Coles bakery products had been partially baked, frozen and then baked to completion in the company’s bakeries. Some of the items had labels reading “Baked Today, Sold Today”, “Baked Fresh” and “Freshly Baked In-Store”. James Allsop, the Federal Court judge who made the ruling, said Coles had no intention of deceiving customers. However, by competing with rival bakeries using falsely labelled items, Coles was in breach of Australian consumer law.
A spokesperson for the grocer said the company had no intention of misleading its customers. “In talking to customers about our bread range we did not deliberately set out to mislead anybody, but we accept that we could have done a better job in explaining how these products are made,” the spokesperson said. Last year, the company was banned from advertising its par-baked bread as freshly baked. It was only allowed to advertise bread as freshly baked if the bread was made from scratch in-store. Judge Allsop said that it was understandable that the supermarket chain would try to remain competitive, but that in its attempt to do so, it clearly broke provisions in Australian consumer laws that were previously stated in last year’s ruling. “Competitive behaviour by commercial entities may be fierce and combative. From a legal standpoint there may be nothing inherently wrong with this," Judge Allsop said. "But the manner in which Coles `fought back' constituted a breach of provisions of the ACL.”
Author: Simon Herrmann
Apr 10, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.