Supermarket giant Coles has been busted by the Australian Competition and Consumer Commission for deceiving consumers about the price paid to farmers for milk.
The ACCC has received court enforceable undertaking from Coles following an investigation into the supermarket’s video and cartoon social media campaign ‘Our Coles Brand Milk Story’, published 12 months ago at the height of the debate over $1 per litre milk and whether it was sustainable for farmers.
As part of the deal struck with the ACCC, Coles has promised to “not make misleading or deceptive representations in relation to the impact of reductions in the retail price for Coles brand milk on the farmgate milk price” for three years.
The undertaking also involves Australian milk production in general. Coles admitted it ” would be likely” to contravene the “misleading or deceptive conduct” provisions of Consumer Law.
The ACCC’s investigation occurred after complaints from dairy farmer organisations that Coles claimed the farmgate price paid for milk had increased from 86 cents for two litres to 90 cents as they cut the store price to $2.
But ACCC Chairman Rod Sims said the opposite was true.
“In fact this was an estimate and final industry figures showed the 2011-12 farmgate milk price actually decreased to 84 cents,” he said.
Mr Sims said that Coles based the 90 cent figure on an August 2012 report with an early estimate of the 2011-12 farmgate milk price. The script was reviewed by the same industry expert who prepared this report.
The ACCC said Coles was aware, or should have been aware, of other reports that predicted the final industry figures would show a decrease.
“The ACCC was concerned that Coles presented estimates and opinions as facts and that a number of representations made in the video and cartoon could not be substantiated by Coles,” Mr Sims said.
It got worse for Coles, with the ACCC finding the following:
In addition to the representation about the farmgate price, Coles represented that:
it was a “fact” that on average Coles’ margin on Coles-brand 2 litre milk decreased from 55 cents in 2010-11 to 10 cents in 2011-12 and that processors received around $1 per 2 litres of Coles-brand milk in each of 2010-11 and 2011-12.
In fact, these figures were estimates that were unable to be substantiated; and
Coles’ price cut resulted in increased consumption of drinking milk and subsequently increased Australian dairy industry production, when in fact any implied connection between lower retail milk prices and increased production of milk was only an opinion, which ignored the impact of other relevant factors on milk production.
“Businesses should also be aware that even where a representation might seek to inform the public about a matter that is the subject of political debate, if it goes further and encourages or promotes the sale of a product or service, it must be compliant with the Australian Consumer Law,” Mr Sims said.
Coles will publish corrective advertisements on the same online platforms where the original representations were published.
Coles as also said it will review its Australian Consumer Law compliance program and identify specific compliance processes and training for employees of the Coles media relations team.
Business Insider Emails & Alerts
Site highlights each day to your inbox.