The supermarket giant has conceded it relied on figures that could not be proven when it claimed that shaving the price of a two-litre milk container from $2.41 to $2 early last year would increase farm-gate prices for producers and lift national dairy production.

Coles has agreed to correct the claims, admitting to the Australian Competition and Consumer Commission that its social media advertising blitz “would be likely to have” breached consumer law that prohibits misleading and deceptive conduct.

“If any customer feels misled by the video we made more than a year ago, then of course we are sorry for that,” Coles spokesman Jon Church said.

In January 2011, Coles slashed the price of its store-branded two-litre milk to $2. In February last year, it launched a social media ad campaign, posting up a video on its official website, YouTube, Twitter, Facebook and Google Plus accounts, as well as a cartoon called “Our Coles Brand Milk Story” (pictured below).

The material claimed cheaper milk prices increased farm-gate prices for producers and boosted national dairy production. Coles also said it had reduced its profit margin.

An investigation was launched into the ads after receiving complaints from dairy farmer groups. The ads were swiftly pulled in May last year.

“The ACCC is concerned that Coles presented estimates and opinions as facts and that a number of representations made in the video and cartoon could not be substantiated by Coles,” chairman Rod Sims said.

The ACCC investigation found Coles falsely asserted three “facts”:

The average price paid to dairy farmers for supplying milk to processors increased from 86 cents per two litres of Coles-branded milk to 90 cents between 2010 and 2012, the ad said. The ACCC found the price had actually decreased to 84 cents.

Price reductions would boost consumption, the ad claimed, leading to increased dairy production. This was quashed as an opinion.

It said Coles' margin on its two-litre milk product had decreased from 55 cents to 10 cents in two years and processors received about $1 per two litres in that same time. The ACCC labelled this claim as an estimate that could not be substantiated.

The consumer watchdog has accepted Coles' offer to execute an undertaking that prohibits the grocery retailer from making misleading and deceptive claims linked to milk prices, milk-related profit margins and dairy industry production. The grocery giant will also review its legal obligations related to its store-brand milk.

“We believe the key message in the video around funding of the retail price cut was correct, but we accept that some of the supporting information was based on estimates which were subsequently updated and therefore could not be substantiated,” Mr Church said.

It will publish corrective ads at its own expense on the same online platforms within 21 days, as ordered by the ACCC. The corrective YouTube clip will be online for 87 days.

Dairy farmers welcomed the results of the ACCC investigation.

“It backs up farmers' assertions that the supermarkets were being a bit clever with their portrayal of the dollar-a-litre milk that's had a dire affect on the dairy industry,” said Karl Liebich, spokesman for Australian Dairy Farmers.

“They were playing hardball with the farmers, and it backs up our case for a mandatory code of conduct between farmers, processors and the grocery chains.”