In June 2014, the Federal Court made findings that Coles Supermarkets had contravened the Australian Consumer Law:
- by packaging bread products with labels, namely “Baked Today, Sold Today” and “Freshly Baked In-Store”, and
- by using signage namely “Freshly Baked” and “Baked Fresh” where the bread products were displayed for sale in Coles Bakery Stores.
Refer case note [Lexology - When fresh ain’t fresh] here.
On 29 September, the Federal Court of Australia made declarations in line with these findings, and also made three orders:
- to restrain Coles from using these descriptions for 3 years;
- to order Corrective Notices be displayed for 90 days in store and on websites;
- to order Coles to pay the legal costs of the ACCC in the proceedings.
The decision is Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited (No 2)  FCA 1022 (Chief Justice Allsop). Click here to view the decision.
Why was the labelling and signage false, misleading and deceptive?
- The decision is restricted to bread products which were ‘finish baked’ by Coles, from frozen par-baked stock. The decision does not apply to bread products which were baked from frozen dough. In fact, the Court found that the customers were misled and deceived because bread products baked from frozen par-baked stock, were packaged with the same “Freshly Baked In-Store” labelling and were placed in the same racks for sale under the same “Freshly Baked” signage as bread products baked from frozen dough.
- The Court declared that to package and display for sale bread products baked from frozen par-baked stock as “Baked Today, Sold Today” contravened the Australian Consumer Law because it misrepresented to customers that the products “were entirely baked on the day on which they were offered for sale” when “only some baking … had taken place on the day”.
- The Court also declared that to package for sale bread products baked from frozen par-baked stock packaged as “Freshly Baked In-Store”, and to display for sale under “Freshly Baked” or “Baked Fresh” signage contravened the Australian Consumer law because it misrepresented to customers that the products “were baked from fresh dough”, “had been entirely baked on the day on which they were offered for sale” and “had been entirely baked in the Coles Bakery Store in which they were sold on the day they were offered for sale”, when this was not true.
- The Court placed emphasis on the word ‘baked’, as in ‘par-baked’ because of the way that the ACCC presented the case. The Court indicated that had the ACCC presented a case that only bread prepared from scratch could be considered ‘fresh’, then it might have found that labelling bread baked from frozen dough as ‘Freshly Baked’ may also have been misleading.
- The specific provisions of the Australian Consumer Law which the Court found were contravened were:
- Engaging in misleading and deceptive conduct under section 18
- Making a false or misleading representation as to the history of the goods under section 29(1)(a); and
- Engaging in misleading conduct as to the nature, the manufacturing process and characteristics of the goods under section 33.
What were the restraining orders and corrective advertising orders made by the Court?
- The Court made restraining orders against Coles, which were not limited to outlawing the labelling and signage which the Court found was misleading and deceptive. These orders cover all representations made by Coles for three (3) years for bread product. These orders apply to packaging, signage, website or other promotional material. The orders are that these representations for bread products must be true and not misleading or deceptive:
- The bread products were entirely baked on the day on which they were offered for sale: or
- The bread products were entirely baked in a Coles Bakery Store on the day on which they were offered for sale; and
- The bread products were baked from fresh dough.
- Coles submitted that it should be allowed to continue to use the phrases with “a disclaimer or qualification to the effect that the words could be used if it made clear that the baking process was only partly undertaken on the day”. The Court rejected this submission.
- The Court made corrective advertising orders against Coles in the form of requiring a Corrective Notice to be prominently displayed, on a counter or elsewhere, in each in-store bakery section of each Coles Bakery Store in Australia, and in prominent places on the Coles website – on the homepage and on the Coles bakery internal webpage. The Corrective Notice must be displayed within 14 days of the date of order, and must remain on display for 90 days. The Court stated that the Corrective Notice “will amply act as a discipline for the need for compliance” and so no other forms of corrective advertising were considered necessary.
- To see the Corrective Notice to be displayed in the Coles Supermarkets to be published on the www.coles.com.au website, click here and find it in the Judgment.
- The Court reserved the question of the pecuniary penalties that Coles may be ordered to pay for breach of sections 29(1)(a) and 33 of the Australian Consumer Law to a date to be fixed by the Court.
- The Court ordered that Coles pay the ACCC’s legal costs in the proceedings.
A marketing perspective on the decision follows.
Marketing Commentary provided by Michael Field, Managing Director of Michael Field Strategic Marketing Consultants
This court ruling is a serious blow to the Coles brand and a huge win for the Woolworths marketing team.
Coles has historically positioned themselves as the ‘price-cutter’ with their ‘Everyday Low Prices’ and more recently the ‘Down, down – prices are down’ positioning statement and taglines. Their major competitor Woolworths has always owned ‘fresh’ with ‘The Fresh Food People’ as their longstanding tagline.
I believe Coles forged ahead with various ‘fresh’ claims to:
- erode Woolworth’s stranglehold on the use of the term ‘fresh’ and their resultant market position in the eyes of the consumer as the real ‘Fresh Food People’, and;
- escape the unwinnable ‘price’ position they have occupied for years, now under threat from new market entrants such as Aldi and Costco
The court order puts Coles on notice to be scrupulously honest in all of their marketing representations and affords Woolworths a three-year head start to cement their position as the genuine ‘Fresh Food People’.
Coles will feel the watchful eye of the regulator and I anticipate they will amend their production and marketing methods quickly to ensure compliance and keep up the competitive pressure on Woolworths. I doubt the order, or the Corrective Notices will alter consumer behaviour or cause any decline in sales. It will however make consumers more aware and retailers more careful.
All retailers would be well advised to review how they market their product and if their claims are a true representation of the product and its production process. The real gains to be made are by Woolworths and are dependent on how well they flex their marketing muscle to leverage their existing Fresh Food People brand position.