Misleading conduct costs Coles a lot of dough: ACCC v Coles Supermarkets Australia Pty Limited [2015] FCA 330

A further update to our articles published on 23 July 2014 and 30 September 2014.

Background

On 18 June 2014, The Court concluded that Coles had engaged in misleading conduct, contravening a number of provisions of the ACL arising from Coles’ use of certain expressions including “Baked Today, Sold Today” and “Freshly Baked” in advertising bread products which had been par-baked off-site, snap frozen and then baked to completion.

On 29 September 2014, the Court made various declarations and injunctions, consequent on the decision made on 18 June 2014.  Coles was, among other matters, ordered to display a corrective notice for a period of ninety (90) days in a prominent location on counters in Coles Bakery Stores and through a prominent “one-click link” displayed in the top one-third of its website.

On Friday, 10 April 2015, Chief Justice Allsop of the Federal Court of Australia delivered his reasons for judgment following a penalties hearing held on 24 February 2015. A Copy of his Honour’s judgment can be found here.

The Court ordered that Coles pay to the Commonwealth within 30 days the sum of $2.5 million by way of pecuniary penalty under s 224(1) of the Australian Consumer Law (ACL).

The Court is obliged to have regard to “all relevant matters”, including specific factors listed in section 224(2) of the ACL.  In his concluding paragraphs, the chief Justice stated:

“Having taken into account the matters in s 224(2) and the other relevant factors identified by the parties, bearing in mind the capacity to assess the conduct as falling into four courses of conduct and taking into account all the matters to which I have referred, in particular revenue and EBIT for par-baked products over the period, I would impose a penalty of $2.5 million. One way of looking at this is that the offending was above the mid-range for four courses of conduct with a notional maximum penalty of $4.4 million. Another way of looking at it is that it is a sum which (ignoring the opportunity advantage of the use of the funds brought by the revenue, which may have been considerable) strips Coles of over one third of its EBIT of the par-baked products (recognising the imprecision of the calculation, and making a rough adjustment for the asserted higher costs of the bakery sections). Neither is a mechanical calculation. Both are useful checks. In my view, the sum is in all the circumstances the appropriate penalty.”

Key messages

• Section 18 of the ACL proscribes in trade or commerce, engaging in conduct which is misleading or deceptive or likely to mislead or deceive.
• The ACCC has been active in recent times in progressing actions against corporate Australia for contraventions of the ACL.
• In the small to medium business space, companies need to be aware of their obligations under the Competition and Consumer Act and the ACL.

Links and further references

Legislation

Australian Consumer Law – (Schedule 2 – Competition and Consumer Act 2010 (Cth))

Competition and Consumer Act 2010 (Cth)

Cases

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2014] FCA 634

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited (No 2) [2014] FCA 1022

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330

Further information

If you need further information about how your business or a competitor advertises its products, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstance.

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