FTC-State Study: Checkout Scanner Pricing Largely Accurate, Undercharges Outweigh Overcharges

By and large, grocery stores and other retail outlets using electronic price scanners are charging consumers the correct prices, and when scanned prices don't match the shelf or sale prices, consumers get the slightly better deal overall, according to a study released today by staff of the Federal Trade Commission, the National Institute of Standards and Technology (NIST), and several state Attorneys General and/or other state and local officials. The study did find wide variations in pricing accuracy from chain to chain and store to store, as well as among varying types of retailers, however. On average, food stores, which have used checkout scanners the longest, showed the lowest overall error rate (3.47 percent), and department stores had the highest (9.15 percent). The study sponsors released the results at a press conference in Washington, D.C. today, where they also unveiled efforts to improve scanner accuracy, including advice for industry and new tips for consumers.

"There's some good news for consumers in this study," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "We've known for years that price scanner technology speeds up the checkout process, gives consumers detailed receipts showing what they bought and how much they paid, and reduces overhead costs. Today's study should give consumers some confidence that they're not being cheated. On the other hand, some individual stores and store types have work to do to push back a persistent swell of consumer mistrust in the technology. The organizations sponsoring this study have compiled data and materials to help these retailers, and we encourage consumers to do a little pushing as well."

"The National Association of Consumer Agency Administrators (NACAA), whose members include a large number of local weights and measures offices, has long been concerned about scanner accuracy," said Joseph Goldberg, Chief Deputy Attorney General of Pennsylvania. "We applaud the FTC's efforts. This report will help our enforcement agencies to focus their efforts on the real issues affecting consumers and scanners."

"NIST assisted the FTC in this national survey not only to demonstrate the efficiency and effectiveness of the test procedures, but also to address our priority of ensuring the accuracy of prices in retail stores," said David Edgerly, Deputy Director of Technology Services at NIST. "NIST is committed to assisting both the retail industry and federal, state and local officials in improving price accuracy in all retail stores to restore and maintain consumer confidence in retail pricing practices and technology."

Today's study, titled "Price Check: A Report on the Accuracy of Scanners," analyzes the results of inspections of more than 17,000 randomly-selected items at 294 stores, including food, drug, home improvement, automotive, discount, department and toy stores, over a one-and-a-half year period ending in mid-1996. The stores checked were located in Florida, Massachusetts, Michigan, Missouri, Tennessee, Vermont and Wisconsin. The study then summarizes industry and government efforts in the area, offers advice about how retailers can improve accuracy, and suggests tips for consumers to ensure they pay the correct price.

Of the items checked for the study, 2.58 percent scanned lower than the posted or advertised price, while 2.24 percent scanned higher, for a total error rate of 4.82 percent. The total dollar amount of undercharges, $1,319.67, exceeded total overcharges, $1,172.72, for a net consumer gain of $146.95. The study also showed a net gain for the sampled products at discount stores, where total undercharges exceeded overcharges by $49, at food stores where the net undercharge was $9.83, and at department stores where the net undercharge was $119.51. In the case of drug and home improvement stores, however, the total amount of overcharges exceeded total undercharges, resulting in a net overcharge of $21.57 for drug stores and $40.51 for home improvement stores.

The study suggests that scanner errors are more likely to result from inattentiveness or carelessness, rather than wilfulness, noting that a typical food, drug or discount store may stock as many as 40,000 different items and may change prices on hundreds of them every week. Nonetheless, the sponsors conclude better accuracy is critically important to helping consumers make price comparisons and avoid the hassles of bringing errors to a store's attention. Given the total net undercharges noted above, better accuracy also can save retailers money, the study states.

The study summarizes private and government efforts in response to allegations of scanner inaccuracy, noting that several retailers have set up certification and inspection programs to improve scanner accuracy and compensate consumers who are overcharged. In addition, 42 states and the District of Columbia have price verification programs, 32 of which are based on a testing procedure developed by the National Conference on Weights and Measures (NCWM), a voluntary standards organization established by NIST in 1905. (The study released today also employed this method.) Officials in California, Wisconsin, Kansas, North Carolina and Washington state all have taken law enforcement action in recent years against retail stores in connection with allegations of scanner overcharges, and state law in Michigan requires retailers to pay consumers who are overcharged 10 times the difference in price up to $5. Michigan has conducted an extensive education program to alert consumers of this right. The study also notes that some jurisdictions have adopted laws requiring item pricing.

Among the advice offered industry for improving scanner accuracy, the study sponsors suggested conducting periodic price audits; designating a person with overall responsibility as the pricing coordinator; adopting procedures for immediate correction of, and consumer compensation for, pricing errors; requiring ongoing training for employees about procedures and about dealing politely with customers who report errors; arranging the check-out set up so that consumers can see the prices as they are rung up; and taking advantage of technological improvements such as hand-held scanners for spot-checking prices, portable label printers for printing corrected price labels on the spot, and electronic shelf tags that are connected to the same data base as the checkout scanner. More information is available in a brochure for industry titled "Good Pricing Practices? Scan Do," being distributed through retail organizations, including the National Association of Chain Drug Stores.

The study sponsors also offered tips for consumers in a brochure titled "Making Sure the Scanned Price is Right." This information is being distributed by the study sponsors and by retailers, including Giant Food, Inc. of Maryland. The tips include:

• watch the scanner for prices and point out errors immediately;
• check your receipt, even before you leave the store if possible;
• bring a copy of the store's sale flyer to the checkout counter;
• jot your own prices down on items as you move through the store; and
• report to the store and, if warranted, law enforcement authorities, any patterns of electronic scanning errors in a particular store.

Copies of the study "Price Check: A Report on the Accuracy of Checkout Scanners," [in PDF format] the industry brochure "Good Pricing Practices? Scan Do," and the consumer brochure "Making Sure the Scanned Price is Right" are available on the Internet at the FTC's World Wide Web site at https://www.ftc.gov (no period). They also are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases, related documents and other materials also are available on the FTC's web site.

(FTC Matter No. P944206)