Coles has been fined $2.5 million for falsely claiming its bread was freshly baked in-store when it had been par-baked off-site, sometimes months before it was sold.
The federal court found more than 100 Coles bakery product lines labelled as "Baked Today, Sold Today", "Baked Fresh", and "Freshly Baked In-Store" had been partially-baked, snap frozen, then baked to completion at Coles.
One line of the bakery products promoted under the freshly-baked campaign, Cuisine Royale, was pre-baked in Ireland.
Federal Court judge James Allsop on Friday said Coles had not intended to deceive customers, but by engaging in fierce competition with market rivals such as Baker's Delight it had breached Australian consumer law.
"Competitive behaviour by commercial entities may be fierce and combative. From a legal standpoint there may be nothing inherently wrong with this," Judge Allsop said.
"But the manner in which Coles `fought back' constituted a breach of provisions of the ACL."
The supermarket giant said in a statement it did not set out to mislead.
"In talking to customers about our bread range we did not deliberately set out to mislead anybody, but we accept that we could have done a better job in explaining how these products are made," a Coles spokesman said.
Coles was last year slapped with a three-year ban preventing it from advertising its par-baked bread as freshly baked.
It was allowed advertise bread made from scratch in-store and sold on the same day as fresh.
But Coles was ordered to display signs saying it had breached Australian consumer law, after the federal court ruling found it guilty of the breach in June.
The supermarket has been given one month to pay the penalty and ordered to pay the court costs of the Australian Competition and Consumer Commission.
The consumer watchdog brought the case after former Victorian premier Jeff Kennett complained when he discovered a loaf of Coles bread that was advertised as freshly baked in-store had been made in Ireland.
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