Coles will pay a NSW dairy co-operative $5.25 million after the consumer watchdog threatened to take the retailer to court over claims that milk price increases were being passed on to farmers.

The boost is worth an average of $10,000 to each of the Norco co-operative’s 300-plus farmers, and will be paid within a week.

It follows ACCC investigation into whether the supermarket giant gave Norco the full extra 10 cents a litre it charged consumers for Coles-branded fresh milk, as it had claimed in marketing material that it would.

Norco, which is based in northern NSW, supplies Coles own-branded milk to the company’s supermarkets.

Coles’ marketing material. Source: ACCC

The ACCC said the 10 cents should have been on top of an unrelated 6.5 cents a litre rise Coles had already agreed with Norco, but which had not yet taken effect.

Instead, Coles added an additional 3.5 cents to Norco’s per litre price.

Labelling the move an “egregious breach of Australian consumer law”, the ACCC said it had been prepared to take the retailer to court. But its investigation was resolved when Coles agreed to up its payment by 7 cents per litre.

That totals about $5.25 million between April 2019 and June 2020, the ACCC said. Farmers will get an average of $10,000 each – most of it within a week.“Coles allowed farmers, consumers and the Australian public to believe that its 10 cents per litre price rise would go straight into the pockets of dairy farmers, when the ACCC alleges this was not the case for Norco farmers,” Mr Sims said.

“We are pleased that Norco farmers will now receive additional money, commencing within seven days.”

Mr Sims said suing the retailer would have taken months – or years – with no guarantee of a payout to farmers.

He said the supermarket chain had allowed farmers, consumers and the public to believe that its 10-cent-a-litre price rise would go straight into the pockets of dairy farmers.

The ACCC said Coles’ advertising material included statements such as: ‘An extra 10 cents per litre to Australian Dairy Farmers’, and, ‘Coles will pass the extra 10c per litre to processors who will distribute all of the money to the farmers who supply them with milk for Coles Brand’.

The ACCC said it understood that Coles had passed the increase to other processors, but not to Norco, which also sells milk under its own brand.

“Coles respects the regulatory process but disagreed with the ACCC’s interpretation of these issues,” Coles said.

It said it had proposed the 7-cents-a-litre payment agreed to by the ACCC to avoid a lengthy and costly dispute.

-with AAP