Supermarket chain fined over in-store bakery claims

by Josh Sosland
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SYDNEY — Coles Supermarkets Australia Pty Ltd., a leading supermarket chain in Australia, has been fined A $2.5 million ($1.9 million) because of misleading claims over the chain’s in-store baked foods.

The ruling last week by the Federal Court of Australia follows legal action dating back to two years, when representatives of the Australian Competition and Consumer Commission (A.C.C.C.) investigated baked foods promoted as “fresh, baked today and sold today” or “freshly baked in-store.”

The case in Australia bears similarities to legal actions in the United States. In December, class action lawsuits were filed against Wegmans Food Markets, Inc.; Whole Foods, Inc.; and Acme Markets, Inc. by individuals questioning the grocers’ use of the terms “store baked,” “baked in store” and “made in house.” The lawsuits, filed in Camden County Superior Court in New Jersey, contain allegations the defendants “engaged into deceptive, false, misleading, fraudulent and unconscionable commercial practices in the sale, marketing, and advertising of bread and bakery products.”

‚ÄčIn Australia, investigators found that many products had been par-baked about 10,000 miles away – in Ireland, Denmark and Germany – before being frozen, transported and then baked weeks or months later at the Coles supermarkets.

After the A.C.C.C. in June 2013 accused Coles of engaging in false, misleading and deceptive conduct, Coles insisted it would “vigorously defend” itself against the accusations. The company in 2014 was subsequently found guilty.

James Allsop, Chief Justice of the Federal Court of Australia, Sydney, last week described Coles’ actions as “substantial and serious.”

“The evidence before the court showed that Coles had engaged in the campaign with the clear purpose of improving its market share vis-à-vis its competitors,” Mr. Allsop said. He concluded Coles conduct breached Australian Consumer Law.

“Notwithstanding the absence of any specific evidence as to loss or damage by 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,” he said.

Competitors expressed disappointment the judge did not adopt an A.C.C.C. recommendation of a doubling of the A$2.5 million fine.

In addition to the fine, the ruling restricts Coles from making similar claims about its products for a period of three years, and the chain has been ordered to place a corrective notice on its web site and in its in-store bakeries.

The notice may be found here.

With the ruling, Coles said it will do a “better job at explaining” the manner in which its products are baked.

“In talking to customers about the ‘par-baked’ bread range we certainly never set out to deliberately mislead anybody, but we completely accept that we could have done a better job in explaining how the products are baked,” the company said.

The company said toward that end it already has changed its packaging and in-store signage.

One of the largest supermarket chains in Australia, Coles since 2007 has been owned by WesFarmers, a Western Australian farmer cooperative. Coles operates more than 2,300 retail outlets under the Coles and BiLo supermarkets, First Choice Liquor, Liquorland, Vintage Cellars and Coles Express names. The company has more than 99,000 employees and conducts about 19.9 million transactions a week.
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