Coles has come under fire over a 2013 social media campaign in which it misled the public over the price of its milk and has agreed to a court enforceable undertaking.
The Australian Competition and Consumer Commission investigated a video which Coles ran across YouTube, Facebook and Twitter from February 7 to May 5 last year.
The promotion, ‘Our Coles Brand Milk Story’, was a cartoon concerning the price of Coles’ milk.
It was released amid public debate about the impact of $1 milk on the Australian dairy farmers who supplied milk to the supermarket giant.
The ACCC received complaints from dairy farmer organisations about messages in the cartoon relating to the impact of a January 2011 price reduction on Coles milk on the average price paid for milk to dairy farmers.
ACCC Chairman Rod Sims said the video represented that the farm-gate milk price increased from 86 cents per two litre bottle of Coles-brand milk in 2010-11, to around 90 cents in 2011-2012.
However, Sims said this was “an estimate” and that “final industry figures showed the 2011-12 farmgate milk price actually decreased to 84 cents”.
The ACCC reports that Coles based the 90 cent figure on an August 2012 report containing an early estimate of the 2011-12 farmgate milk price. It had the video script reviewed by the same industry expert that prepared the report, so 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.
Coles admitted these representations would be likely to be misleading and contravene Consumer Law.
The retailer has worked with the ACCC to resolve the matter and will publish corrective advertisements on the same online platforms.
“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,” Sims said.
Other misleading elements to the video included that it was a “fact” that on average Coles’ margin on Coles-brand two-litre milk decreased from 55 cents in 2010-11 to 10 cents in 2011-12. It represented that processors received around $1 per two-litres of Coles-brand milk in 2010-11 and 2011-12. However these figures were unsubstantiated estimates.
The ACCC said the ad implied that the Coles’ price cut resulted in increased consumption of milk, and subsequently increased Australian dairy industry production. However the ACCC said the implied connection between lower retail milk prices and increased production of milk was only an opinion.
“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,” Sims said.
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The court enforceable undertaking requires Coles not to make misleading or deceptive representations regarding the price of milk for three years, and it is required to review its Australian Consumer Law compliance program.
Coles said in a statement to SmartCompany that it “believes the key message in the video around funding of the retail price cut was correct, but we accept that some of the supporting information was based on estimates which were subsequently updated and therefore could not be substantiated”.
It said the video was made quickly and, as acknowledged by the ACCC, in the face of intense public debate about $1 milk.
“We used estimated figures, checked with experts, in good faith but with hindsight should have cross checked with other estimated figures before publication. There were many inaccuracies in the misleading allegations made against Coles by lobby groups, including in their own video posted on Youtube which have not been subjected to an investigation,” Coles said.
It said that the video was viewed by less than 9000 people.
“Things have moved on including farmgate prices and the contracts Coles has with dairy suppliers. We have announced new long-term contracts with Australian dairy farmer co-ops Murray Goulburn and Norco which will secure the long-term future of thousands of dairy farmers while also retaining affordable fresh Australian milk for customers,” Coles said.
In 2013 Coles was investigated by the ACCC for its “freshly baked in-store” bread campaign.