Nit-Pickers Carry the Day in Rite Aid Case

Sixty-nine cents isn’t much. But when it represents an overcharge on a bag of Ricola cough drops--well, that’s the kind of thing that sticks in the craw of government nit-pickers like David Dyas.

To say nothing of a $3.74 overcharge for a plastic table. Or the buck too much for sugar substitute.

So when Dyas and his staff at the Kern County Department of Weights and Measures discovered a pattern of such scanner errors at Rite Aid drugstores in their territory, they swung into action and sued.

The result: a landmark announcement last week that Rite Aid would settle the lawsuit by paying $2.1 million--believed to be the largest payout for scanner inaccuracies in California history.

The county lawyers who filed the lawsuit credit their legal ammunition to an anonymous bunch of fussbudgets like Dyas, a churchgoing supervising inspector who says he finds additional motivation in Bible references such as Proverbs 11:1: “A false balance is an abomination to the Lord; but a just weight is his delight.”

Dyas and his ilk spend their working lives inspecting grocer scales, gas pumps and other arcane services to make sure you get what you pay for.

“They’re out there making sure these basic assumptions we make every day are accurate,” said Kern County Deputy Dist. Atty. John T. Mitchell, who spearheaded the Rite Aid suit.

Weights and measures, a chronically underfunded bureaucratic backwater in almost every county, has jurisdiction over anything that’s weighed, measured or counted for commercial use.

Uniformed inspectors roam the landscape, spot-checking boxes of pre-weighed dry goods, taking octane and gallon readings at gas pumps, making sure cords of firewood are true, checking scales used by moving companies and even testing to determine if delis are illegally charging you for the weight of that plastic tub that holds your macaroni salad.

Inspectors also check prices, and whether the price that pops up on the checkout scanner screen is different than promised consumers on the shelf or in sale ads.

A nationwide Federal Trade Commission survey released last month found discrepancies occur nearly 3.4% of the time--in excess of the 2% attributed to normal human error.

The error rate is far greater in Los Angeles, according to spot checks by the county, which found that overcharges alone occurred in 6.7% of all transactions.

Those few customers who notice the discrepancies are either too embarrassed to make a fuss or so intimidated by the computerized scanners that they second-guess themselves, say inspectors. Most simply don’t care or only realize they’ve been shortchanged after they leave the store.

That’s what happened to Kathleen Tuttle, the Los Angeles County deputy district attorney who worked on the Rite Aid case after L.A. County and nine other jurisdictions joined the Kern County lawsuit.

Tuttle said she was recently lured to a bookstore through an advertised sale, only to discover once she got home that she never received the $2.50 discount.

“People care a lot about this, and they get mad as hell when they don’t get the deal they believed they had coming,” said Tuttle. “This is the meat and potatoes of life.”

To keep the stores honest, inspectors drop in unannounced, gather 20 or so items, write down their advertised prices and then check them through the scanner. Of particular interest are items on sale, where most of the overcharges occur.

The infrequent victories are small and anonymous, usually resulting in “fix-it” citations for retailers. Occasionally, there’s a noteworthy catch, like the 1998 Kmart case in which Los Angeles and two other counties won a $450,457 settlement stemming from scanner inaccuracies. But nothing compares to the Rite Aid case in terms of the amount involved and the breadth of the scanner glitches.

Officials of the national chain say the pricing problems were unintentional, inherited with the acquisition of the old Thrifty PayLess stores in December 1996. They stressed that once they discovered the severity of the scanner inaccuracies, they initiated extra--and expensive--steps to ensure that all prices in the aisles matched those at the registers.

Government officials acknowledge Rite Aid’s problems originated with the Thrifty stores, but say they continued after Rite Aid took over.

In fact, Dyas said, it was talk within professional circles about scanner problems in Northern California that prompted him and his crew of five inspectors to give Rite Aid a closer look.

Dyas, 45, who makes $41,500 a year, said he decided to take a job with weights and measures 17 years ago because the “whole idea of keeping the playing field level and honest appealed to me.”

When Kern County weights and measures staffers first launched the Rite Aid inspections, the first store they tested in Bakersfield came back 100% accurate on 30 items, he said.

But following “inspector intuition,” Dyas said, they trudged on and soon documented scanner inaccuracies in excess of the 2% standard of acceptability.

“On a normal inspection, if you do 30 items, you might find one overcharge and one undercharge,” said Dyas. “That’s not an alarm. . . . But when we start finding three or four . . . we take it pretty serious.”

At a store in rural Rosamond, for example, there were seven overcharges in 30 items--a 23% error rate. A sugar substitute that was marked $3.99 rang up at $4.99; a $26.25 plastic table came in at $29.99. The biggest overcharge: $10 on a $14.99 lounge chair.

In all, Dyas’ troops performed three waves of inspections of Rite Aid stores in the Central Valley county between September 1997 and May 1998. Of 609 items, 6.25% were overcharged and 1.5% undercharged.

Prodding also came from at least two Kern County consumers who filed separate complaints against Rite Aid outlets, Dyas said.

Originally, Dyas said he hoped to handle the scanner inaccuracies quietly by imposing administrative penalties on Rite Aid. But when the district manager failed to return his calls for months, Dyas said he forwarded the case to the district attorney, who filed a consumer-protection lawsuit last February.

As it happened, 10 other jurisdictions had outstanding injunctions or were pursuing pricing investigations of the chain: the city of San Diego and the counties of San Diego, Los Angeles, Ventura, San Bernardino, Santa Barbara, Merced, Marin, Sonoma and Sacramento. They heard about the new Kern suit in May and joined in.

Rite Aid officials said they were already trying to fix the errors. They said they realized by the spring of 1997 that the nearly 700 Thrifty PayLess stores they had acquired in California had “endemic” pricing problems.

Company officials explained that most of the overcharges happened when store employees failed to take down signs or retag shelves after items were no longer on sale. They also said many items were put in incorrectly priced bins while crews renovated each of the old Thrifty PayLess stores.

Once the problem was discovered, they said, Rite Aid accelerated a planned overhaul of scanners and their software, which now sets prices out of a central location. And the chain sent teams of employees to each store to correctly mark every shelf.

Still, rather than fight the weights and measures lawsuit in court, the chain agreed to a stringent injunction in which it promised to install “pricing accuracy coordinators” in every California store and to use regionwide e-mail to correct problems. The settlement also pledges that any customer who catches an overcharge will receive the item free.

Of the $2.1-million settlement, $1.65 million in civil penalties will be shared among the agencies, in part to pay for legal costs.

But a good chunk has been earmarked for those invisible government nit-pickers who made the suit happen in the first place:

To the tune of $400,000, Rite Aid will buy 40 state-of-the-art computers that will be used by weights and measures inspectors throughout most of California to check scanners in all types of stores.

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The Price of Inaccuracy

Weights and measures officials continually monitor stores to compare prices on electronic scanners with the posted or advertised prices for items. The Federal Trade Commission recently released results of its 1998 price survey, which included 1,669 inspections of 107,096 items in 36 states and the Virgin Islands. Los Angeles County weights and measures officials compiled their own 1998 statistics after checking 699 items. Federal regulators consider an error rate of 2% to be acceptable.

THE RESULTS:

* Nearly 3.4% of the items (or one out of 30) was mispriced in the FTC survey. Half were overcharges averaging $3.20; the rest were undercharges averaging $5.28.

* Those nationwide numbers represent an improvement in scanner accuracy since 1996, when the FTC conducted its first survey and found that 4.8% of items had been mismarked.

* Of the sale items tested by the FTC last year, nearly 3.6% (or one out of 28) were mispriced. And two-thirds of those mistakes were overcharges.

* More than 70% of the 1998 survey inspections found stores with scanner accuracy within the 2% error rate, including 43% that had perfect scores.

* In the nearly 30% of stores where inspectors found problems greater than the 2% rate, the average error rate was at 9%, or more than four times the acceptable level.

* Food stores had the highest accuracy rate; hardware stores the lowest.

* In Los Angeles County, scanner accuracy was worse, with 8.8% of the items found to be mismarked. Of the Los Angeles County scanner errors, three-fourths were overcharges averaging $1.84; the rest were undercharges averaging $2.20.

Sources: Federal Trade Commission; Los Angeles County Department of Weights and Measures statistics, fiscal year 1997-98