Coles has been reprimanded by the ACCC

Coles has been reprimanded by the ACCC

Coles has "admitted" it is likely to have misled customers after dropping its milk prices and claiming farmers would receive a higher cut, the Australian Competition and Consumer Commission (ACCC) has said.

Australia's number two food retailer has accepted a court-enforceable undertaking to the ACCC after it published a social media campaign between February and May last year.

The video, entitled "Our Coles brand milk story" and which ran on platforms including Facebook and YouTube, was launched at a time the of "intense public debate about the impact of A$1 (US$0.93) milk on Australian dairy farmers who supplied the product", the ACCC said.

The campaign claimed Coles would absorb the profit loss and pay out a higher share to farmers. The ACCC's investigation followed complaints from dairy farmers about representations in the cartoon and video about the impact of Coles' move to cut prices in 2011.

"Coles represented in a video and cartoon on social media that the farmgate milk price increased from 86 cents per two-litre bottle of Coles-brand milk in 2010-11 to around 90 cents in 2011-12, when in fact this was an estimate and final industry figures showed the 2011-12 farmgate milk price actually decreased to 84 cents," ACCC chairman Rod Sims said.

He said: "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.

"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.

Show the press release

The Australian Competition and Consumer Commission has accepted a court enforceable undertaking from Coles Supermarkets Australia Pty Ltd (Coles) following an investigation into a video and cartoon ‘Our Coles Brand Milk Story’, which was published on social media. 

The video and cartoon ran from 7 February 2013 to 5 May 2013 on a variety of platforms including YouTube, Coles’ website and Facebook page, and was promoted in links from Twitter and other social media.

Coles published the video and cartoon during a time of intense public debate about the impact of $1 milk on Australian dairy farmers who supplied the product.

The ACCC’s investigation followed complaints from dairy farmer organisations about representations in the cartoon and video about the impact of Coles’ 26 January 2011 retail milk price reduction (Coles’ milk price cut) on the average price paid to dairy farmers for supplying milk to processors (the farmgate price).

ACCC Chairman Rod Sims said, “Coles represented in a video and cartoon on social media that the farmgate milk price increased from 86 cents per two litre bottle of Coles-brand milk in 2010-11 to around 90 cents in 2011-12, when in fact this was an estimate and final industry figures showed the 2011-12 farmgate milk price actually decreased to 84 cents”.

Whilst Coles based the 90 cent figure on an August 2012 report containing an early estimate of the 2011-12 farmgate milk price and had the script reviewed by the same industry expert that prepared this report, at the time it published the material Coles was aware, or should have been aware, of other reports that predicted that final industry figures would show a decrease in the farmgate milk price to 84 cents in 2011-12.

Coles has admitted that its making of these representations would be likely to have contravened section 18 of the Australian Consumer Law, which prohibits misleading or deceptive conduct. Coles has worked with the ACCC to resolve these concerns, and will publish corrective advertisements on the same online platforms that the original representations were published.

“The ACCC is concerned to ensure that companies are applying the same degree of Australian Consumer Law compliance to representations made in social media versus other forms of advertising. For this reason, the ACCC considered it was important that Coles used social media to correct any misleading impressions formed by viewers,” Mr Sims said.

“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.

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.

The undertaking also requires Coles to:

  • for a period of three years, 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, Coles’ or processor margins on Coles brand milk, and/ or Australian milk production generally; and
  • review its Australian Consumer Law compliance program as it relates to the application of section 18 of the Australian Consumer Law to advertising and promotional strategies relating to Coles brand milk, including social media, and to identify specific compliance processes and training for employees of the Coles Media Relations Team to ensure the conduct of concern to the ACCC does not occur again.

Original source: ACCC