Brumby's under fire over 'blame carbon tax' memo

One of Australia's largest bakery chains, Brumby's, is under fire for an internal memo that suggests franchisees increase their prices and "let the carbon tax take the blame".

In the memo, Brumby's managing director Deane Priest says there are some simple things franchisees can do to find extra sales.

"We are doing an RRP (recommended retail price) review at present which is projected to be in line with CPI (Consumer Price Index), but take the opportunity to make some moves in June and July," Mr Priest wrote in the June edition of Backmix - an internal publication.

"Let the carbon tax take the blame, after all your costs will be going up due to it." The memo, which was obtained by the West Australian Newspaper and provided to the ABC, has prompted action by the competition watchdog.

In a statement, the Australian Competition and Consumer Commission says it will be making direct enquires with Brumby's in light of the document.

"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," it 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," the ACCC said.

'Gobsmacked' The ABC has tried to contact Brumby's for a response.

The bakery chain is part of the publicly listed Retail Food Group, which also owns Donut King and Michel's Patisserie.

One franchisee, who spoke to the ABC on the condition of anonymity, said they were "gobsmacked" that someone in such a senior position within the Brumby's business would make such a comment.

But they went on to say that many franchisees were already facing higher costs - including shopping centre rental payments that have increased by up to 10 per cent in some cases.

Opposition Leader Tony Abbott today visited a drink manufacturer in Adelaide as part of his anti-carbon tax campaign.

In responding to questions about the Brumby's memo, Mr Abbott said the tax has "got to raise prices or it's not doing its job".

"Sure, businesses have got be fair dinkum - there can be no rip-offs and the ACCC is right to police any business that is threatening to rip off its customers," Mr Abbott told reporters.

"But I can fully understand why every single business in this country is looking at its costs and thinking of how much its prices have got to go up, because that's what the carbon tax is going to do to them." Warning But Climate Change Minister Greg Combet says the issue should serve as a warning to others about linking price rises to the carbon tax.

"I haven't seen the actual letter...

but I'd caution Brumby's to be very careful because this is exactly the sort of thing that the ACCC has been warning about," Mr Combet told journalists in Melbourne.

"People can increase their price to the extent that it is justified on the basis of the carbon price impact...

but you can't go around misrepresenting price rises." The Government has previously warned businesses of making misleading claims about the effects of the carbon tax, saying they risk fines of up to $1.1 million.

The ACCC has set up a hotline for people to report concerns relating to carbon tax pricing.

The watchdog's acting chairman, Dr Michael Schaper, says the ACCC has already received a "reasonable number" of complaints and queries from members of the public about the tax, which took effect on Sunday.

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