Safeway To Refund Customers $30.9M For Online Ordering Overcharges

Nearly nine months ago, a federal court in California ruled that Safeway must refund customers the amount of money they were overcharged when the company broke its own terms and conditions by marking up prices of items ordered online. We finally know how much the supermarket chain will hand over: about $30.9 million.

The fine marks the end of a four-year legal battle in which the plaintiffs alleged that Safeway “secretly” marked up prices for home-delivered groceries by nearly 10% in apparent violation of its own online customer agreement.

On Monday, U.S. District Judge Jon Tigar ruled [PDF] that the class was entitled to recover all the mark-ups for online purchases between 2006 and 2014, totaling about $31.18 million.

Because both Safeway and the consumers have agreed to deduct $209,000 in estimated refunds, the total damages is equal to $30.9 million.

The class-action suit, filed in 2011, argued that the terms for home delivery service on the Safeway website stated that “The total amounts you shall pay for the Product per each order shall be the sums of the respective prices for the items you select and submit via the online order form, plus all applicable sales taxes and shipping charges.”

Since the site explicitly states that the items ordered through the site are coming from your local Safeway, the plaintiff contends that the terms imply that you’ll be charged the same as what you pay for the same items in the store.

But the plaintiff says that when he actually compared online prices against those of the store from which the items were presumably being delivered, he found the website prices to be higher.

Safeway argued that there is no indication of price parity in these terms and that the agreement is only explaining that a customer will be charged the total of the prices listed on the website. The company revised its terms in 2011.

Back in December, the judge sided with the class, saying that because the terms indicated that your groceries are selected from “your local” store and that you’d be charged the “prices in the store on the date your order is filled and delivered,” they imply that customers will pay the in-store price plus delivery fees.

As part of his ruling on Monday, Tigar rejected Safeway’s request for partial summary judgement based on its claim that customers knew that online prices were higher than those charged in stores, based on responses to surveys of shoppers between 2009 and 2014.

According to court documents, in 2009 Safeway administered a survey to about 3,400 customers in response to internal speculation that a markup of online products could negatively impact in-store shopping. Nearly 83% of respondents said they expected prices to be the same in-store and online.

The following year, the company implemented a markup on online orders. A survey that year found about 14% of customers were either “dissatisfied” or “very dissatisfied” with pricing differences between online and in-store shopping.

Finally, a survey in 2011 found that 35% of respondents felt that promotions offered on the site are the same as in the local stores.

Safeway argued that the survey results indicate consumers knew they were begin charged more. Tigar disagreed with that assertion.

“A customer’s response that they were dissatisfied does not indicate that that customer knew of the existence of the markup or their right to price parity,” he wrote.

While Tigar sided with the plaintiffs in many instances, he did reject their attempt to recover overcharges prior to 2006.

Safeway argues that it can not be liable for order placed between 2001 to 2006, when delivery of the company’s goods was outsourced to GroceryWorks, which used its own employees and headquarters.

[via Courthouse News]