Brumby's 'reprehensible' for advising stores to 'let carbon tax take blame for price rises'

LABOR has accused Brumby's of "reprehensible" behaviour after the company advised franchisees to "let the carbon tax take the blame" for price rises.

Retail Food Group's Tony Alford

LABOR has accused the Brumby's bakery chain of "reprehensible" behaviour after the company advised franchisees to "let the carbon tax take the blame" for price rises.

The consumer watchdog will investigate after Brumby's managing director Deane Priest advised store owners in her June newsletter to "take an opportunity to make some (price) moves in June and July".

"Let the carbon tax take the blame, after all your costs will be going up due to it," she said.

Late today the parent company of Brumby's apologised for the advice to franchisees, saying it was foolish and ill-considered.

Assistant Treasurer David Bradbury said the letter from the company, which has 300 stores across Australia and New Zealand, was unacceptable.

"They are treating their customers like mugs," he said.

"This sort of behaviour is reprehensible. Anyone who is found to have been jacking-up prices unnecessarily and blaming the carbon tax will be subject to enforcement by the ACCC.

"This practice, in the Brumby's newsletter, should serve as a reminder to all businesses that they need to very, very careful to not mislead their customers."

The Australian Competition and Consumer Commission said it would make inquiries on price advice.

"The ACCC would be concerned if any franchisor encouraged or induced its franchisees to make misleading price claims about the impact of the carbon price," a spokesman said.

"Businesses are entitled to increase their prices as they see fit. It is business as usual, so long as any claims or representations made about the impact of the carbon price are truthful and have a reasonable basis.

"Consumers are encouraged shop around, think twice and ask questions about carbon price representations that are made to them."

Retail Food Group chief executive Tony Alford said later in a statement to the stock exchange that the comments in the newsletter “were not sanctioned and are of significant concern to the board”.

“Following thorough investigation of the matter we are satisfied that the comments were not made in an effort to encourage our franchisee community to link (price) adjustment to the carbon tax,” he said.

“But rather (they) were foolish and ill-considered remarks when placed in the context of the internal franchisee communication.”

Mr Alford said as a consequence of the carbon tax “there will be further margin and cost pressures on our franchisee community”.

“However, it was inappropriate to link this matter with the imminent RRP increase.”

The ACCC has been tasked with investigating and prosecuting businesses which unfairly jack-up prices as a result of the carbon tax.

If a business is found to have made a false or misleading claim regarding the carbon tax, the ACCC's website says the watchdog has the power to issue infringement notices of $6600 for a corporation (or $66 000 for a listed corporation); take legal action against a business for breaches of the ACL; seek court-imposed penalties of up to $1.1 million for serious breaches of the ACL or injunctions to stop a business from making certain carbon price claims.

The controversial tax came into effect on Sunday with an initial starting price of $23 a tonne. It will move to a floating price emissions trading scheme from 2015.