Supermarket giant Coles is facing a multi-million dollar fine after a court found it guilty of misleading consumers by claiming its bread was freshly baked.
The Australian Competition and Consumer Commission declared the case a win for consumers and small bakeries that genuinely offer fresh bread.
The case against Coles began more than a year ago at the urging of former Victorian premier Jeff Kennett.
Mr Kennett sent the consumer watchdog a box of Irish-made Cuisine Royal bread and muffins carrying labels that claimed to be "baked today, sold today".
The Federal Court found on Wednesday that Cuisine Royale's bread was baked in Ireland months before Coles sold it.
Coles had engaging in false, misleading and deceptive conduct, breaching three sections of Australian Consumer Law, Justice James Allsop ruled in Melbourne.
The company gave the impression that its bread and other products were freshly baked on the day, when much of it was partially or par-baked and frozen off site by suppliers before being transported to Coles and baked again days or weeks later.
The ACCC sent people to supermarkets around Melbourne where bread was promoted as "baked today, sold today and freshly baked in-store" alongside prominent signs stating "freshly baked or baked fresh".
Justice Allsop said Coles should make it clear to the public the actual process in which its recently baked bread is made off site and already been frozen.
"To place emphasis on advertising licence that bends the truth will not only degrade the language, but lead to a culture of deception in the market," he told the court.
ACCC chairman Rod Sims said the watchdog wanted to signal to corporate Australia that if they make claims about where a good is from "get it right".
The big companies' legal advisers noticed legal judgments such as Wednesday's, he said.
"People should be able to rely on what they are told, they shouldn't be turned into people who are so cynical they don't believe what they are being told in the marketplace," he told reporters.
"To make a market work properly and fairly consumers need accurate information."
It was also unfair to independent small businesses such as hot bread shops that compete on the basis that they bake from scratch and have freshly baked bread, he said.
The big supermarkets Coles and Woolworths dominate the industry selling more than half the bread sold in Australia.
The maximum penalty for a single consumer law offence is $1.1 million and the ACCC will seek penalties, costs and other orders at the court.
Coles said it never set out to deliberately mislead anybody.
Spokesman Jon Church said its 'par baked' products were of a high quality and tasted great.
"We completely accept that we could have done a better job in explaining how the products are baked. We are already well advanced in changing product packaging and other information," he said.
