L.A. County to Beef Up Price Tag Policing

Outraged by a Los Angeles County report that 60% of retailers failed to charge customers the prices posted on shelves, the Board of Supervisors voted Tuesday to punish wayward sellers with the county’s version of a scarlet letter.

Written in the spirit of the county’s restaurant letter grade rule, which requires eateries to post their Health Department grade, the new measure will require retailers to post notices of convictions for overcharging customers. It also will boost the number of county inspectors from one to 19.

The action comes after undercover investigators were overcharged on one in 10 items bought during visits to 108 retail stores in Los Angeles County. In fewer instances, customers were charged a lower price. The inspections were conducted over three weeks, ending Jan. 14.

Inspectors did not test grocery stores, which have a history of overcharging in California and will be required to comply with the new county rules.

Undercover agents were overcharged at 80% of Kmart, Macy’s and Wal-Mart stores, Cato R. Fiksdal, the county’s agricultural commissioner and director of weights and measures, said in his report to the board.

When investigators returned to 10 Kmart stores, four Macy’s and three Wal-Marts, Fiksdal said, they were again overcharged--this time for nearly one out of every three items purchased.

Overcharges are mostly a result of failing to change a sale price posted on store shelves after a higher price has been entered into the store’s computer. Many customers don’t notice at the cash register and pay the higher price.

The nation’s biggest retail trade group said it has not heard of any government agency drafting a similar a measure and warned that consumers could suffer under the rules.

“The surest way not to get a bad letter grade is not to reduce prices,” said Mallory Duncan, general counsel for the National Retail Federation in Washington, D.C. “Just keep prices where they are and never have specials and you’ll score an A, if that’s what the [county] wants to accomplish.”

Wal-Mart Stores Inc., Kmart Corp. and Macy’s, a division of Federated Department Stores Inc., each issued statements saying they were committed to charging customers fairly and accurately, and were dismayed by findings of errors.

Supervisor Gloria Molina, who spearheaded both the report and the new county regulations, said she hopes the notices will “shame” retailers into accurately programming their scanners to reflect prices listed on store shelves.

After being overcharged last year at a Macy’s and a Kmart, Molina ordered a report from the county Department of Weights and Measures, whose agents found price discrepancies among 60% of retailers. They also discovered that stores overcharging on sale items tend to do so repeatedly.

“I was deceived as a consumer,” Molina said. “Every single time I have raised this issue with a store they are not at all sorry about it.”

Molina’s staff said about 100 businesses each year are convicted of misdemeanor charges of deceptive advertising for overcharging customers, infractions found with a single county inspector.

That, combined with the stores’ readiness to accept misdemeanor convictions and fines, she said, makes her believe that retailers intentionally boost profits by overcharging. Molina wants the ordinance to be effective immediately after adoption, which requires a second vote by the board.

In the county survey, Wal-Mart--the world’s biggest retailer and widely recognized as the industry’s technology leader--fared better than Kmart and Macy’s in terms of pricing accuracy.

Kmart, which last week became the largest retailer in history to file for bankruptcy, was the worst, overcharging at every one of its stores, with an error ratio of four overcharges for every undercharge.

Although the 60% of discrepancies found by investigators include both overcharges, which penalize consumers, and undercharges, which work in consumers’ favor, both are significant because they point out the stores’ problems in making the shelf price match the actual charge at the register.

Scanning accuracy, the industry’s term for the problem of incorrect charges at the checkout counter, is a misnomer since scanners are almost foolproof in their ability to correctly read bar codes and charge the price the merchant entered into the main computer system.

The problem lies in the tedious human work of making sure the signs on the shelves match the price in the computer. Most discrepancies happen as a result of frequently changing prices. Duncan, of the National Retail Federation, said no checkout method is foolproof. The retail group found that the old-fashioned method of putting prices on each item and then having them read by a cashier resulted in an error rate of 10% to 15%, mostly as a result of cashiers punching in the wrong price.

During Tuesday’s hearing, grocery store representatives complained that they had not been consulted about the measure.

“Accidents will happen,” said Nick Verdugo of Ralphs Grocery Co. “But we put a lot of safeguards in place to try to minimize that human error.”

The California Grocers Assn. argued that its statistics show that scanner errors just as frequently favor consumers.

Rifling through a list of convictions, Molina interrupted several of the speakers, pointing out that each of their chains had been convicted of overcharging customers.

“Do you know how many times in L.A. County your members have been convicted?” she asked the grocers association representative. “You’re convicted three to five times a month--those are the ones we catch. . . . It’s public information, by the way. I want to put it on the front door.”

As part of the new county measure, the board also voted to increase to 19 the number of undercover inspectors who check store scanner accuracy--a motion by Supervisor Zev Yaroslavsky. The $2-million cost would come from fees on businesses. A final vote by the board is scheduled in two weeks.

In a nearly two-hour debate, Supervisor Don Knabe said he worried that the costs of increased fees would cripple small businesses.

“I think we have to be careful . . . how it will affect the corner Hallmark,” he said.

Consumer advocates, however, voiced their support.

“The ones most affected by this are consumers who are on a fixed budget, stretching their dollars by buying sale items and instead are charged full price,” said Guadalupe Aguilar of Consumer Action, a nonprofit consumer protection group.

The Board of Supervisors ordered its lawyers to draw up an ordinance requiring businesses to post convictions, which board members will have to approve.

The county counsel and Fiksdal’s agency were told to meet with retailers to discuss details and a fee schedule. Supervisors said, however, that they are committed to increasing the number of inspectors and requiring stores to post their violation notices.

“If there’s anything we’re supposed to do, it’s protect the interest of the consumers,” Yaroslavsky said. “If we had given the restaurant industry the option of whether to have a posting [of letter grades] or not, there wouldn’t be a posting.”