Walgreens, Duane Reade To Pay $500,000 For Overcharging, Misleading Customers

Image courtesy of oracorac

When you see a “sale” price on a store shelf, you expect to pay that price at the register. When you see something marked as a “Great Buy,” you might believe that it’s been discounted. And when a store advertises a “Last Chance” or “Clearance” sale, you probably have reason to think that those items won’t be in stock much longer. But Walgreens — and its subsidiary Duane Reade — have different ways of thinking about the above scenarios, and it’s gotten them into trouble with the state of New York.

This morning, NY state Attorney General Eric Schneiderman announced a settlement with the national drugstore chain over a variety of its policies that resulted in misled and overcharged shoppers.

Between Walgeens and Duane Reade stores, the company operates more than 450 stores in New York. According to Schneiderman’s office, these stores were charging different prices at the register than they advertised in print and on shelf tags. Some Walgreens stores were leaving up these sale-price shelf tags after the discounted price had already expired. If the shopper didn’t pay attention at the register, they would end up being paying more than they expected.

Walgreens also flagged items as “Smart Buy” or “Great Buy” even though the prices on these products was no less than the retail price Walgreens regularly charged. Customers who assumed they were getting a deal may have been misled into making these purchases instead of paying for a better product.

Similarly, customers may have felt an urgency to purchase items marked as “Last Chance” or “Clearance,” thinking these products would soon be gone for good, or that the price would soon bounce back to its original level. But the AG’s office says that some products were listed in this way for upwards of 10 months.

Members of the Walgreens Balance Rewards Points loyalty program also received inconsistent information about when or how they could redeem the points they had earned. Depending on which page you visited on the Walgreens website, you’d see one chart telling program members they could begin redeeming with as few as 1,000 points (equal to a $1.00 discount), while a separate chart indicated that you’d need to reach 5,000 points before you could redeem them at the store.

To settle these allegations with the state, Walgreens has agreed to pay $500,000 in penalties — which is a wee slap on the wrist, given that the Walgreens Boots Alliance is currently worth more than $85 billion — and change some of its bad habits.

Expired shelf tags must be removed within 36 hours, and there will be internal and external price check audits for the stores; for each store that fails to consecutive external audits, Walgreens pays an additional penalty.

“Last Chance” or “Clearance” tags will only apply to items that are indeed only available for a limited time at that price; the company will also restrict how it tags things with loaded phrases like “Great Buy.”

When Balance Rewards Points members check out, they will see their accumulated rewards points listed on the PIN pad. Additionally, Walgreens employees will be periodically cued to remind these customers that they have points they could redeem for discounts.

“Businesses are required to ensure that their advertisements are truthful and not misleading,” said Attorney General Schneiderman. “When consumers purchase products at retail stores in New York, they should be able to rely on the prices displayed in advertisements and on shelf tags and not have to worry about being overcharged when they get to the register.”

A number of the problems turned up by Schneiderman’s investigation are similar to the results of this 2013 report from Change to Win, which found mislabeled products, out-of-stock items, and inaccurate signs at a number of Walgreens stores around the country. At the time, Walgreens dismissed the report as little more than rabble-rousing by labor unions.

“Walgreens has failed to provide the staffing and systems needed to accurately price its products,” said Michael Zucker, Director of Change to Win Research Initiatives. “We’ve seen these deceptive practices in a number of other states, costing consumers and violating the public trust.”