Australian bakery chain Brumby's apologised on Wednesday after being caught by regulators attempting to make more dough by blaming the carbon tax for price increases. Brumby's parent company, Retail Food Group Limited, apologised for the unacceptable error of judgment.

The apology came after the Australian Competition and Consumer Commission (ACCC) investigated an advice made by Brumby's Managing Director Deane Priest to franchisees through the firm's internal publication. The incident confirms consumer fears that some businesses would take advantage of the carbon price introduction to gouge shoppers and the seriousness of the regulator in running after such unscrupulous enterprises.

"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 a memo.

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

Retail Food Group said in a statement that Mr Priest's comments were innocent, but foolish and ill-considered remarks. Tony Alford, the chief executive officer of the company, said the comments were not sanctioned.

ACCC Deputy Chair Dr Michael Schaper clarified that businesses could raise their prices due to higher costs at reasonable levels, but should not wrongly blame the carbon tax for huge price tag hikes.

The Gillard government, which started to collect the $23 per tonne carbon price on Sunday, July 1, estimated price of a bread loaf should just go up by just 2 cents on account of the carbon tax while its average cost-of-living impact should be 0.7 percentage points or less than 1 cent per dollar.

Mr Schaper said the ACCC has sought more information about Brumby's newsletter to look further into the matter and to whom it was sent. Brumby's has 300 outlets across Australia and New Zealand.

ACCC has the power to impose fine of up to $1.1 million on erring firms that unjustly use the carbon tax as a reason to take advantage of consumers.

Tony Abbott, the Coalition leader who has vowed to repeal the carbon tax once he wins the 2013 election, said he does not approve of what Brumby's did but said he understood its reasons.

"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," The Sydney Morning Herald quoted Mr Abbott.

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