Supermarket giant Coles could be facing a fine of up to $1.1 million per violation or over $3 million total penalty after the Federal Court found on Wednesday its claim of selling freshly baked bread as false and breached three sections of the Australian Consumer Law.

The decision agrees with the case filed by Australia's consumer watchdog, triggered by a complaint made by former Victorian Premier Jeff Kennett, that the grocery's Cuisine Royale and Coles Bakery bread products engaged in false advertising that the products were baked and sold on the same day, The Sydney Morning Herald reports.

In reality, some of the bread were pre-baked months ago overseas such as one the Cuisine Royale bread and muffins from Ireland. Loaves from Denmark and Germany were initially frozen and shipped to Australia.

"It is not the place of the court to provide an advice ... as to how Coles might sell bread that has been par-baked from frozen product ... A start would, however, be to make it tolerably clear to the public that the recent baking was the completion of a baking process that had taken place before, off site, and that 'freshly baked' actually meant the completion of the baking process of frozen product prepared and frozen off site by the suppliers," Chief Justice James Allsop said.

Philip Crutchfield, the lawyer for Coles, argued that the supermarket is giving shoppers a comparison that the bread sold by competitors keeps longer because of preservatives, while the bread it sells that doesn't contain preservatives is baked in-store.

Coles accepted the guilty verdict and said it would not contest the court's decision but added that it could have done better to explain how its bread products were baked. The supermarket said it is now in the advanced stage of changing product packaging and the information on it.

YouTube/7NEWS