01.Milk price war reaches a new low
The Australian Competition and Consumer Commission (ACCC) has accepted a court enforceable undertaking from supermarket giant Coles after an investigation into advertising featuring a video and cartoon called “Our Coles Brand Milk Story”, which was published on social media.
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 on the average price paid to dairy farmers for supplying milk to processors, known as the farmgate price.
The video and cartoon were used by Coles to illustrate the impact of $1 milk on the Australian dairy farmers who supplied the product. The illustration, though, wasn't exactly an honest one. According to the “Our Coles Brand Milk Story”, the farmgate milk price was meant to have increased from 86c per two litre bottle of Coles-brand milk in 2010-11 to around 90c in 2011-12. Meanwhile, in reality, industry figures showed the 2011-12 farmgate milk price actually decreased to 84c.
The ACCC argued that at the time it published the ads, Coles was aware, or should have been aware, of the fact that the farmgate price had decreased to 84c.
The video and cartoon were featured from 7 February 2013 to 5 May 2013 on a variety of platforms including YouTube, Coles’ website and Facebook page, and were promoted in links from Twitter and other social media.
According to the ACCC, Coles has admitted that the video and cartoon are likely to have contravened the Australian Consumer Law, which prohibits misleading or deceptive conduct, 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,” ACCC Chairman Rod 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.
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.