Coles last week agreed to pay dairy cooperative Norco $5.25 million after the consumer watchdog accused the company of not fully passing on a 10-cent drought levy on milk to farmers.
Mr Littleproud called for shoppers to boycott the grocery giant until it put a 20-cent levy on all dairy products.
“They told their customers they were helping farmers, then tried keeping the money,” he said on Sunday.
“Coles has shown its true colours and needs to put things right.”
Mr Littleproud, the former agriculture minister, said he negotiated a deal with Coles to ensure the levy would flow to farmers.
“Coles should now lead the way and put at least 20 cents a litre right across its dairy range, not just on milk to show they really do care about dairy farmers,” he said.
“They owe it to dairy farmers and the public for failing to live up to their promises.”
The Australian Competition and Consumer Commission claims Coles did not raise its payment to Norco, which supplies the chain’s own-branded milk, by the 10 cents a litre it had claimed.
Coles disagreed with the ACCC’s decision but agreed to the payments in order to avoid “an unnecessary dispute” and help farmers.