The Federal Court has found that Coles Supermarkets contravened the Australian Consumer Law in relation to claims made about some of its baked bread products.1  The case is one in a number of recent ACCC actions in relation to misleading credence claims in the food and beverage industry (i.e., claims which involve a representation of a premium or special characteristic about a product).

Lessons

  1. Companies need to make sure they have adequate substantiation for the credence claims they make about their products.
  2. Companies need to make sure that every possible interpretation of a credence claim is able to be substantiated otherwise they risk being misleading.
  3. The ACCC was not concerned that the product may not be of inferior quality to what was indicated by the misrepresentation.  The ACCC’s concern was that based on the representation by Coles, customers would be likely to purchase the bread on a mistaken belief.
  4. Credence claims are one of the ACCC’s enforcement priorities and it is an area of high ACCC activity, particularly in the food and beverage industry. The ACCC has undertaken a number of investigations and has had a lot of success in this area recently, not only in Court, but also through court enforceable undertakings and infringement notices.

Facts of the case against Coles

The case concerned par-baked bread supplied by Coles through its in-house bakeries in its supermarkets.  The bread was partially baked and frozen off site of Coles’ supermarkets by a supplier, and then transported to the Coles supermarkets where the baking process was finished off.  This par-baked bread was promoted by Coles using the claim “Baked Today, Sold Today” and in some cases “Freshly Baked in-store”.  Some of the bread was also offered for sale close to prominent signage stating “Freshly Baked” or “Baked Fresh”.

The Federal Court found Coles’ claims to be misleading

The Federal Court found it was not inaccurate to say that the process at Coles involved some baking, however half-truths may be misleading.   Where claims may not have a precise meaning, reasonably available different meanings may arise, and if one or more of those reasonably available different meanings is misleading, the conduct may be found misleading or deceptive.

The Federal Court considered that to many reasonable and ordinary people, the way the phrase “Baked today, sold today” was used would convey that the baking process, and not some heating or baking processes, took place that day. It was found misleading or deceptive to say on packaging or signage that par-baked frozen product was “baked today” if it had been partly baked previously.  The phrases “freshly baked”, “baked fresh” and “freshly baked in-store” were viewed similarly by the Federal Court.  The addition of the words “freshly” and “fresh” were found to reinforce the claim, and in the context of in-store bakeries the words gave the impression there had been a baking of fresh dough as opposed to frozen dough. 

The Federal Court considered that Coles should make it clear that the recent baking was the completion of a baking process that had taken place some time before, off site, and that “freshly baked” actually meant the completion of the baking process of frozen product prepared and frozen off site by suppliers.

Information cards with information about the baking processes to be positioned with the bread were found not adequate to remedy the misconception.  Further, information about the baking processes on Coles’ website was considered not adequate or appropriate to deal with misleading conduct contained in store at the point of sale of a staple product such as bread.

Penalties sought by the ACCC

The ACCC has said it is seeking declarations of contravention, injunctions to restrain Coles from engaging in similar conduct, pecuniary penalties, orders that Coles review its compliance program, orders that Coles publish corrective notices both on its website and in Coles supermarkets that have in-store bakeries and payment of the ACCC’s costs.  There will be a hearing at a later date in respect of the relief to be ordered against Coles.

Other recent ACCC action in this area

  • 23 June 2014 - Basfoods (Aust) Pty Ltd paid 3 infringement notices totalling $30,600 and gave a court enforceable undertaking in relation to its “Victoria Honey”.  The product was prominently labelled with “VICTORIA” and “HONEY”, contained a picture of honeycomb and two bees and was described as “honey” on its website.  The ACCC found that a sample of the product was comprised predominantly of sugars from C-4 plants, which include corn and sugar cane.  The ACCC considered Basfoods had misled consumers that the product was honey produced by honey bees and had misled consumers that Victoria was the place of origin of the product, when these were not the case.  The fact the sides of the label contained in a smaller font “Produced from east and southeast Anatolians plant cover and rich mountain pasture” and “Product of Turkey” did not change the ACCC’s view.  Basfoods ceased its supply of Victoria Honey and ceased its supply of other products sourced from the same Turkish supplier as a precautionary measure.  It also gave undertakings including with respect to testing; was required to provide correctives notices to its wholesale customers, on its website, in its retail stores and in a trade journal; and was required to implement a compliance program.
  • 13 June 2014 - Barossa Farm Produce Pty Ltd, whose director is Saskia Beer, gave a court enforceable undertaking in relation to representations that its Black Pig labelled small goods used free range pork and used pork from heritage Berkshire pigs or other heritage black pig breeds, and that it knew the origin of every animal used in its Black Pig labelled small goods, when these were not the case.  The company gave undertakings; was required to provide corrective notices on its websites; and its current directors were required to attend a compliance program.
  • 29 April 2014 – CUB Pty Ltd trading as Carlton & United Breweries paid 2 infringement notices totalling $20,400 and provided a court enforceable undertaking in relation to the Byron Bay Pale Lager it supplied.  CUB was licenced the right to manufacture, market and distribute the beer from the Byron Bay Brewing Company.  The labelling incorporated the name “Byron Bay Pale Lager”, a pictorial representation of a lighthouse, text regarding Byron Bay and a map of the Byron Bay region showing the location of the Byron Bay Brewing Company.   The ACCC considered the labelling to be misleading as the beer was brewed by CUB at its brewery in Warnervale, 630km away from Byron Bay.  CUB gave undertakings including to cease distributing remaining inventory with that labelling; was required to provide corrective notices on its website, to customers, on a trade website and in a trade journal; and was required to implement a supplementary compliance program.