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**PRICECHECK**

A Report onthe Accuracy of Checkout Scanners 

A REPORT BY THE STAFF OF THE FEDERAL TRADECOMMISSION, TECHNOLOGY SERVICES OF THE NATIONAL INSTITUTE OFSTANDARDS AND TECHNOLOGY, THE STATES OF FLORIDA, MICHIGAN, TENNESSEE, VERMONT AND WISCONSIN AND THE COMMONWEALTH OF MASSACHUSETTS 

October 22, 1996 

*Contributors to this Report*

* Bureau of Consumer Protection, Federal Trade Commission 

This Report represents the views of the staff of the Bureau ofConsumer Protection. It does not necessarily represent the viewsof the Federal Trade Commission or any individual Commissioner. 

* Technology Services, National Institute of Standards andTechnology 

* States of Florida, Michigan, Tennessee, Wisconsin andVermont and the Commonwealth of Massachusetts 

* The state offices participating in this study include: theFlorida Attorney General's Office; the Florida Department ofAgriculture and Consumer Services; the Michigan AttorneyGeneral's Office; the Michigan Department of Agriculture, Weights& Measures Section; the Massachusetts Attorney General'sOffice; the Massachusetts Office of Consumer Affairs and BusinessRegulation, Division of Standards; the Tennessee AttorneyGeneral's Office; the Tennessee Division of Consumer Affairs; theTennessee Department of Agriculture, Weights and Measures; theVermont Attorney General's Office; the Vermont Department ofAgriculture, Consumer Assurance Section; and the WisconsinDepartment of Agriculture, Weights & Measures Section. 

* The Missouri Department of Agriculture, Weights andMeasures, also participated in the collection of data for thisstudy. 

***Executive Summary*******

Almost $2 trillion is spent in retail stores every year, and alarge portion of those sales is rung up with electronic checkoutscanners. Checkout scanners have been in use for over 20 years,but there are ongoing concerns about their accuracy. Theseconcerns led to this study of scanner practices across thecountry. The staff of the Federal Trade Commission, TechnologyServices of the National Institute of Standards and Technology,the States of Florida, Michigan, Missouri, Tennessee, Vermont andWisconsin and the Commonwealth of Massachusetts participated inthis study. 

Since their introduction in the 1970s, electronic checkoutscanners have provided benefits for both retailers and consumers.For retailers, scanner technology has increased checkoutproductivity and has improved sales and inventory records thatcreate greater efficiencies in reordering and shelf spaceallocation. The use of checkout scanners has also resulted inlower labor costs because stores no longer have to mark prices onindividual items, unless required to do so by law. Consumers havebenefited from faster checkout times and detailed cash registerreceipts that provide both product and price information. 

The replacement of manual cash registers with checkoutscanners was also supposed to reduce the number of pricingerrors. In recent years, however, state and local enforcement ofpricing accuracy laws has resulted in large fines against anumber of retailers using scanners, evidencing the continuingconcerns about scanner accuracy that led to this study. 

For this study, the states, using an inspection proceduredeveloped by the National Conference on Weights and Measures,inspected pricing accuracy in 294 department, discount, drug,food and other retail stores. Inspectors compared scanned priceswith the lower of the posted or advertised price of a sample ofrandomly selected items. 

Overall, the results of the study are fairly positive forconsumers. The inspection results showed that *the totalnumber of undercharges exceeded the total number of overcharges*.Of the 17,928 items checked, 2.58 percent scanned lower than theposted or advertised price and 2.24 percent scanned higher thanthe posted or advertised price, for a total error rate of 4.82percent. The total dollar amount of undercharges also exceededthe total dollar amount of overcharges. Nonetheless, consumerswho are being overcharged are not likely to be mollified by theknowledge that other consumers are being undercharged. 

Wide variations in pricing accuracy were found, with thenumber of errors and the ratio of overcharges to underchargesvarying among types of retailers, from one retail chain toanother and from store to store. For example, food stores as agroup had a lower error rate than non-food stores. Among non-foodstores, department stores had the highest rate of pricing errors;however, the number and total dollar amount of undercharges wasgreater than the number and total dollar amount of overcharges. 

How do errors happen? Some scanner errors are probablyinevitable. Store employees must maintain shelf tags and signsfor thousands of items and make sure that the posted prices matchthe prices in the store's computer. In addition, stores maychange prices on hundreds of items every week. Errors can occurwhen prices in the store's computer are not updated in a timelyand correct fashion. Errors can also occur when shelf tags andsale signs are not changed to correspond to the new computerprices. 

The study shows that scanner errors adversely affect retailersand consumers. Retailers lose profits on undercharges and see adecrease in consumer satisfaction as a result of overcharges. Afailure to comply with pricing accuracy laws can lead to theimposition of substantial fines and administrative or judicialorders. Consumers are injured when they pay too much because ofovercharges and are inconvenienced when they bring errors to thestore's attention. In addition, consumers are thwarted in theirefforts to make price comparisons due to inaccurate posted oradvertised prices. 

The study results suggest that inattentiveness or carelessnessis the cause of many scanner errors--not wilfulness. This reportaddresses how retailers can increase and maintain pricingaccuracy. The first step is making a commitment to pricingaccuracy. Information on practices and procedures that have beendemonstrated to improve pricing accuracy is widely available fromtrade associations and weights and measures officials. Thisinformation can be helpful to those retailers that want to reviewand change their pricing practices. In addition, retailers canask their trade associations and wholesalers to set up anindustry monitoring program, such as the Scanning CertificationProgram implemented by the Pennsylvania Food MerchantsAssociation. Such programs can help retailers establish andmaintain high quality pricing practices. 

The organizations participating in this study are hopeful thatincreased public attention to the problem of scanner pricingerrors will lead retailers to examine and, if necessary, reformtheir pricing practices voluntarily. Retailers that fail to paysufficient attention to their pricing practices run the risk ofgovernment enforcement actions with the possibility of fines andgovernment mandates to change their practices. Furthermore, ifretailers do not achieve high levels of scanner accuracy,consumer mistrust in scanner technology may increase and may leadto calls for a return to item pricing. To help ensure thatconsumers are charged the correct price at checkout, the staff ofthe Federal Trade Commission, the National Institute of StandardsandTechnology, and state and local officials will continue tocoordinate their efforts to monitor pricing accuracy. 

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***Table of Contents*******

IntroductionScanner TechnologyOrganizationsParticipating in this StudyBureauof Consumer Protection of the Federal Trade CommissionTheNational Institute of Standards and Technology and the NationalConference on Weights and MeasuresStateEnforcement AgenciesJoint StudyNCWM ProcedureInspection ResultsIndustry& Government Efforts to Improve Pricing AccuracyCertificationand Inspection ProgramsIndustryCertification and Inspection ProgramsGovernmentInspection ProgramsNationwideInformation SharingOther State ActionsConsumer BountiesItem PricingCash RegisterDisplayInjuriousEffects of Pricing Errors on RetailersFailure toComply with the LawReduction in ProfitsConsumerDissatisfactionRecommendationsfor RetailersBest PracticesAdvances inTechnologyRecommendationsfor ConsumersSpotting ScannerErrorsEffectiveComplainingConclusionEndnotes

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**Introduction**

Almost $2 trillion is spent in retail stores every year,(1) and a large portionof those sales is rung up with electronic checkout scanners.Checkout scanners have been in use since the 1970s, but there areongoing concerns about their accuracy. These concerns led to thisstudy of scanner practices across the country. 

To examine the issue of checkout scanner accuracy, the staffof the Federal Trade Commission (FTC) coordinated this jointstudy with Technology Services at the National Institute ofStandards and Technology (NIST),(2)state Attorneys General, and state and local weights and measuresoffices. To obtain data on scanner pricing accuracy, Florida,Massachusetts, Michigan, Missouri, Tennessee, Vermont andWisconsin conducted inspections of pricing accuracy in a varietyof retail stores. In addition, other government officials andindustry members have provided information contained in thisreport. 

Part Two of this report provides information about scannertechnology. The role of the organizations participating in thisstudy is discussed in Part Three of this report. Data from thestate inspections of pricing accuracy have been compiled for thisreport and are presented in Part Four. Part Five of this reportprovides an overview of some of the measures taken thus far byindustry and government to reduce scanner pricing errors. PartSix discusses the adverse effects of scanner errors on retailersand consumers and why retailers need to take additional steps toimprove scanner accuracy. Part Seven offers recommendations onwhat retailers can do to reduce scanner errors. Part Eightdescribes steps consumers can take to detect and avoid scannererrors. 

Overall, this study shows that checkout scanners usuallyresult in fewer errors than manual entry of prices at checkout,but that scanner errors may be a significant problem for someindividual stores and retail chains. This study also shows thatscanner pricing errors adversely affect retailers and consumers.Stores lose profits on undercharges, and see a decrease incustomer satisfaction as a result of overcharges. Consumers paytoo much because of overcharges, and may be thwarted in theirefforts to make price comparisons due to inaccurate posted oradvertised prices. 

The organizations participating in this study hope thatincreased public attention to the problem of scanner pricingerrors will lead retailers to examine and, if necessary, reformtheir pricing practices voluntarily. Retailers that fail to paysufficient attention to their pricing practices run the risk ofgovernment enforcement actions with the possibility of fines andgovernment mandates to change their practices. Furthermore, ifretailers do not achieve high levels of scanner pricing accuracy,consumer mistrust in scanner technology may increase and may leadto calls for a return to item pricing.(3)In the future, FTC staff, NIST and state and local officials willcontinue to coordinate their efforts to monitor pricing accuracyand to ensure that consumers are charged the correct price atcheckout. 

**Scanner Technology**

From lollipops to laundry detergent, most everyday items beara Universal Product Code (UPC). This symbol--a series of numbersand vertical bars of varying thicknesses--is shorthand for priceand other product information. When a cashier passes the UPCsymbol over an electronic scanner, a computer decodes the symbol,sending the price and other product information to the register.At the same time, the price is shown on the display screen and areceipt is printed for the consumer. 

Electronic scanner technology has been around since the1970's. The first checkout scanner was installed in a MarshSupermarket store on a trial basis in Troy, Ohio in 1974.(4) Although food storeswere the first to use scanners extensively, many other types ofretail stores--such as department, hardware, discount, drug,automotive supply, convenience, toy, and club stores--have alsoadopted electronic scanner technology. 

Retailers report that electronic scanner technology hasseveral advantages, such as improved checkout productivity, lowerlabor costs, and improved sales and inventory records that creategreater efficiencies in reordering and shelf space allocation.(5) In particular,retailers save money when they no longer mark individual itemswith a price. It is estimated that item pricing costs the averagesupermarket $154,000 a year.(6)Retailers also say that electronic scanning results in fewerpricing errors than manual entry. Studies showed that manualentry of prices by a cashier resulted in 4.4 percent to 16percent errors in the prices charged to consumers.(7)

Some scanner pricing errors are probably inevitable. Retailstores must post prices for thousands of items. For example, atypical food, drug or discount store may stock 10,000 to 40,000different items and must maintain shelf tags and signs for all ofthese items.(8) Inaddition, stores may change prices on hundreds of items eachweek. Many chains, especially larger ones, have a centraldatabase that electronically sends anywhere from several hundredto several thousand weekly price changes to each store. Errorscan occur when prices in the store's computer are not updated ina timely and correct fashion. Errors can also occur when shelftags and sale signs are not changed to correspond to the newcomputer prices. 

**OrganizationsParticipating in this Study**

The role and interests of each of the organizationsparticipating in this study are described below. 

**Bureau of ConsumerProtection of the Federal Trade Commission**

The Federal Trade Commission is a law enforcement agencycharged by Congress to protect the public against deceptive orunfair practices and anticompetitive behavior. The FTC, throughits Bureau of Consumer Protection, has been involved in issuesconcerning retail pricing for many years. In 1971, the FTCpromulgated the Trade Regulation Rule Concerning Retail FoodStore Advertising and Marketing Practices, 16 C.F.R.Part 424. This Rule, amended in 1989, requires food storesto have sufficient supplies of advertised specials on hand tomeet reasonably anticipated demand and to sell the advertisedspecial at or below the advertised price. In the mid-1970s theFTC brought a series of cases against food stores for failing tosell items at or under advertised prices.(9)

The FTC's interest in scanner accuracy stems from its role inprotecting consumers from deceptive practices. Because numerousreports of scanner errors involved stores operating on a nationalor regional level, FTC staff decided to look into this issue incoordination with its colleagues at NIST and the states. 

**The National Institute ofStandards and Technology and the National Conference on Weightsand Measures**

The National Conference on Weights and Measures (NCWM) wasestablished by NIST in 1905. The NCWM is a voluntary standardsorganization. It provides a national forum for industry,business, government, consumers and other persons who areinterested in issues relating to weights and measuresadministration, regulation and enforcement. Its goal is toachieve uniformity in laws, regulations and test proceduresthrough local adoption of its standards. 

In 1993, the NCWM focused its attention on the issue of priceaccuracy in retail stores because numerous national and localmedia stories were alleging that widespread scanner errors wereoccurring and resulting in millions of dollars in overcharges toconsumers.(10)Government and industry members became concerned about the lossof consumer confidence in scanner technology. The NCWM found thatpricing inspection procedures and enforcement practices variedwidely from state to state. For example, a number of statesconducted periodic inspections of scanner prices in food stores,while other states conducted pricing inspections only in responseto consumer complaints.(11)

Weights and measures and other public officials, retailers andtrade associations worked together to develop uniform testprocedures and uniform enforcement practices. In 1995, the NCWMadopted the ***Examination Procedure for PriceVerification*** (NCWM Procedure).(12) The NCWM Proceduresets forth a sampling and inspection procedure that can be usedby weights and measures officials to conduct price verificationinspections in all kinds of retail stores. 

**State Enforcement Agencies**

Many states have been active in the area of pricing accuracy.Generally, weights and measures officials have authority to checkthe accuracy of prices in stores and can impose fines forviolations of the state weights and measures act. The stateAttorneys General may bring actions based on the state's consumerprotection act or business and professions act. In addition, cityand county attorneys often bring actions pursuant to state andlocal laws prohibiting price misrepresentations. 

For example, in 1994, the California Attorney General, theRiverside District Attorney and the San Diego City Attorneyassessed a large discount store chain $985,000 in civil penaltiesand costs for alleged scanner overcharges. In addition, the 1994order requires that, if a customer is overcharged, the store mustpay a bounty of a $3 reduction in price or, if the price is under$3, give the item free to the customer. The order furtherrequires the store chain to initiate a three-year program in eachof its California stores to correct pricing errors reported bycustomers. 

The Department of Trade, Agriculture and Consumer Protectionin Wisconsin, in early 1996, negotiated a consent with a massmerchandiser based on allegations of scanner overcharges. Theconsent requires payment of a "bonus" in the event ofan overcharge. The store chain has agreed to pay a"bonus" of $2.50 to any customer who is overcharged byless than $5.00 and a "bonus" of $5.00 to any customerwho is overcharged by $5.00 or more. Furthermore, if the customeris overcharged on multiple quantities of the same item, the storemust pay that customer the $2.50 or $5.00 "bonus" foreach overcharged item, up to a maximum of $50.00 per transaction.

In 1995, the District Attorney in Sedgwick County, Kansas,obtained civil penalty settlements with four Wichita retailersthat allegedly had scanner overcharges. A department store, adiscount store, an automotive supply company and a drug chainwere assessed a total of $75,000 in civil penalties. In addition,each of these four retailers agreed to pay investigative fees andcourt costs totaling $3,816.50. Similarly, in North Carolina, theDepartment of Agriculture fined each of five stores of a discountchain $5,000 in civil penalties, the maximum fine allowed forviolations of North Carolina's Weights and Measures Act. 

The Consumer Affairs Unit of the Department of Finance of theCity of Seattle, Washington, has recently instituted a pricinginspection program. In the last two years, the City of Seattleobtained one-year settlement agreements with six chain storesthat repeatedly failed inspections. These agreements obligatedthe store chains to institute frequent self-inspection programs,assign pricing managers, and post refund policies for pricescanning errors. 

Because of ongoing concerns about scanner practices, a numberof states agreed to participate with FTC staff and NIST in ajoint study of scanner accuracy. 

**JointStudy**

In 1994, FTC staff, working with NIST, began to explore theissue of checkout scanner pricing accuracy. The NCWM Procedurewas still in development and there was limited data on the extentof scanner pricing errors in different types of retail storesover a diverse geographic area. To obtain more information aboutscanner accuracy, FTC staff invited a number of states toparticipate in a joint study. Florida, Massachusetts, Michigan,Missouri, Tennessee, Vermont and Wisconsin agreed to conductscanner pricing inspections using the current draft of the NCWMProcedure.(13) Eachstate randomly selected retail stores for inspections.(14) The inspectionswere begun in late 1994 and were completed in mid-1996. 

**NCWMProcedure**

Under the NCWM Procedure, a pricing error occurs when theprice charged for an item at checkout does not agree with thelowest advertised, quoted, posted or marked price. The NCWMProcedure recognizes that some pricing errors are inevitable dueto human and other errors. Thus, rather than requiring 100percent accuracy, the procedure provides that a store"passes" an inspection if 98 percent or more of theitems sampled are priced accurately. The total error rate--bothundercharges and overcharges--is used to determine whether astore should be inspected more frequently. Higher levels ofenforcement, such as fines or penalties, are based only onovercharges.(15)

The NCWM Procedure is based on the randomized selection ofmerchandise to be price checked and provides for two samplingprocedures. In the "randomized" sample, all of theitems in an "area" of the store (such as a section oran aisle) have an equal chance of being included in the sample.For example, an inspector may randomly select 25 items from eachof the toy, sports, linen and men's wear sections of a departmentstore, for a total sample of 100 items. In the"stratified" sample, items are selected from specificmerchandise groups, such as advertised specials, in-storespecials, and end of aisle displays. For example, an inspector ina food store may randomly select 10 advertised items, 10 in-storespecials, 10 end-of-aisle items, and 70 items from the rest ofthe store. For both randomized and stratified sampling, the NCWMProcedure provides illustrations on how to choose items in arandom fashion. 

The NCWM Procedure divides retail stores into twogroups--small stores, such as convenience stores, and largerstores, such as food, department or drug stores. Sampling can bedone in a single or two stage process. In the single stageprocess for small stores, the inspector will check a singlesample of 50 items. With one error or less, the store passesinspection. If there are two or more errors, the store failsinspection. In a two-stage process for small stores, theinspector will check an initial sample of 25 items. If two ormore items are incorrect, the store fails inspection. If one itemis priced incorrectly, the inspector will check a second sampleof 25 items and then will total errors found in the entire sampleof 50 items to determine whether the store passes or failsinspection. With two or more errors, the store fails. 

For larger stores, in a single stage inspection, the inspectorwill check a single sample of 100 items. With two errors or less,the store passes and with three or more errors, the store fails.In a two-stage inspection of larger stores, the inspector willcheck an initial sample of 50 items. If more than two items arepriced incorrectly, the store fails inspection. If two items areincorrect, the inspector will check a second sample of 50 itemsand then will total errors found in the entire sample of 100items to determine if the store passes or fails inspection. Withthree or more errors, the store fails. 

**Inspection Results**

Inspection results for 294 stores in Florida, Massachusetts,Michigan, Missouri, Tennessee, Vermont and Wisconsin have beentabulated. Of the 294 stores, 113 were food/grocery stores. Theremaining stores (181 stores) have been divided into thefollowing categories: auto, department, discount/generalmerchandise, drug, home improvement, toy and miscellaneous. 

*Table I*

**SUMMARY OF INSPECTION RESULTS****FOOD V. NON-FOOD STORES**

|                            | **FOOD**
(113 Stores) | **NON-FOOD**
(181 Stores) | **TOTAL**
(294 Stores) |
|----------------------------|-----------------------|---------------------------|------------------------|
| Total No. Of Overcharges   | 115                   | 273                       | 388                    |
| Percentage of Overcharges  | 1.92%                 | 2.42%                     | 2.24%                  |
| Total $ of Overcharges     | $60.47                | $1,112.15                 | $1,172.62              |
| Average $ of Overcharges   | $0.53                 | $4.07                     | $3.02                  |
| Total No. of Undercharges  | 93                    | 353                       | 446                    |
| Percentage of Undercharges | 1.55%                 | 3.12%                     | 2.58%                  |
| Total $ of Undercharges    | $70.30                | $1,249.37                 | $1,319.67              |
| Average $ of Undercharges  | $0.76                 | $3.54                     | $2.96                  |
| Total No. of Items Checked | 5,999                 | 11,299                    | 17,298                 |
| Total Percentage of Errors | 3.47%                 | 5.54%                     | 4.82%                  |

*Table II*

**SUMMARY OF INSPECTION RESULTS****BY STORE CLASSIFICATION**

| **Classification**
(No. of Stores) | **AUTO**
(4) | **DEPT**
(30) | **DISC**
(80) | **DRUG**
(39) | **FOOD**
(113) | **HOME**
(17) | **TOY**
(9) | **MISC**
(2) | **TOTAL**
(294) |
|------------------------------------|--------------|---------------|---------------|---------------|----------------|---------------|-------------|--------------|-----------------|
| Total No. Of Overcharges           | 6            | 60            | 95            | 79            | 115            | 32            | 1           | 0            | 388             |
| Percentage of Overcharges          | 2.02%        | 3.25%         | 1.87%         | 3.56%         | 1.92%          | 2.52%         | 0.20%       | 0.00%        | 2.24%           |
| Total $ of Overcharges             | $6.90        | $457.41       | $249.64       | $80.69        | $60.47         | $313.49       | $4.02       | $0.00        | $1,172.01       |
| Average $ of Overcharges           | $1.15        | $7.62         | $2.63         | $1.02         | $0.53          | $9.80         | $4.02       | $0.00        | $3.02           |
| Total No. of Undercharges          | 2            | 109           | 136           | 61            | 93             | 36            | 8           | 1            | 446             |
| Percentage of Undercharges         | 0.67%        | 5.90%         | 2.68%         | 2.75%         | 1.55%          | 2.84%         | 1.60%       | 1.01%        | 2.58%           |
| Total $ of Undercharges            | $2.09        | $576.92       | $298.64       | $59.12        | $70.30         | $262.98       | $39.62      | $10.00       | $1,319.67       |
| Average $ of Undercharges          | $1.05        | $5.29         | $2.20         | $0.97         | $0.76          | $7.31         | $4.95       | $10.00       | $2.96           |
| Total No. of Items Checked         | 297          | 1846          | 5071          | 2218          | 5999           | 1269          | 499         | 99           | 17298           |
| Total % of Errors                  | 2.69%        | 9.15%         | 4.56%         | 6.31%         | 3.47%          | 5.36%         | 1.80%       | 1.01%        | 4.82%           |

*Table III*

**DISTRIBUTION OF FOOD V. NON-FOOD STORES****BY PRICING ACCURACY**(16)

|                      | **FOOD**
(113        Stores) | **NON-FOOD**
(181 Stores) | **TOTAL**
(294 Stores) |
|----------------------|------------------------------|---------------------------|------------------------|
| 100 percent          | 32                           | 34                        | 66                     |
| 98 - 99.9 percent    | 26                           | 40                        | 66                     |
| 96 - 97.9 percent    | 24                           | 27                        | 51                     |
| 94 - 95.9 percent    | 13                           | 24                        | 37                     |
| 92 - 93.9 percent    | 7                            | 17                        | 24                     |
| 90 - 91.9 percent    | 5                            | 11                        | 16                     |
| Less than 90 percent | 6                            | 28                        | 34                     |

These data show that pricing accuracy varies widely. First,all types of stores experience pricing errors. For all stores asa group, the accuracy rate is 95.18 percent. Food stores as agroup have a higher accuracy rate (96.53 percent) than drugstores (93.69 percent), discount stores (95.44 percent) ordepartment stores (90.85 percent). (Table II.) The higheraccuracy rate for food stores may stem in part from the fact thatfood stores have the most experience with scanner technology. 

Second, the data show that, overall, the number and totaldollar amount of undercharges (446 undercharges totaling$1,319.67) was greater than the number and total dollar amount ofovercharges (388 overcharges totaling $1,172.62). (Table I.)There were, however, differences among categories of stores. Forexample, for department stores, there were 109 underchargestotaling $576.92 compared to 60 overcharges, totaling $457.41.For food stores, there were more overcharges than undercharges(115 to 93), but the total dollar amount of overcharges ($60.47)was less than the total dollar amount of undercharges ($70.30).For drug stores, there were more overcharges than undercharges,both in number (79 to 61) and dollar amount ($80.69 to $59.12).(Table II.) 

Third, there is a wide variation in pricing accuracy fromchain to chain and store to store. Inspection results for eachretail chain are provided in Appendix B.(17) Of the 16 retailchains with five or more stores included in the study, pricingaccuracy ranged from 88.31 percent to 98.89 percent. (AppendixB.) The data also show that, of the 294 stores inspected, 45percent (132 stores) had accuracy rates of 98 percent or more,and thus would have complied with requirements of the NCWMProcedure. Of the food stores, 51 percent (58 of 113) hadaccuracy rates of 98 percent or more. Of the non-food stores, 41percent (74 of 181) had accuracy rates of 98 percent or more.(Table III.) 

Fourth, the data show that overcharges and undercharges do notbalance out for most individual retailers. For some retailers,the dollar amount of overcharges outweighs the dollar amount ofundercharges, resulting in a net overcharge. For other retailers,the undercharges outweigh overcharges and result in a netundercharge. (Appendix B.) 

**Industry & GovernmentEfforts to Improve Pricing Accuracy**

Because pricing accuracy affects all retailers and allconsumers, industry and government representatives haveundertaken a variety of efforts to improve pricing accuracy. 

**Certification andInspection Programs**

**Industry Certification andInspection Programs**

To promote and ensure scanner accuracy, some retailers haveset up their own certification and inspection programs. In 1991,the Pennsylvania Food Merchants Association (PFMA), representingfood retailers throughout the state, set up the first industryinspection program--the "Scanning CertificationProgram." This is a voluntary program that provides publicrecognition for stores that have established standards ofaccuracy in the administration of their pricing and scanningprograms. 

To be certified under this program, stores must earn at leasta 98 percent accuracy rate on a random sample of 200 items takenfrom throughout the store. Once a store has been certified,periodic inspections are made to assess continued compliance.Participating stores also agree, that in the event of anovercharge, one item will be given free to the customer, up to alimit of $10. There are additional program requirements for thesize and content of shelf tags and training of store employees.Since its inception, the PFMA certification program reports anincrease in overall pricing accuracy from 96.9 percent to 98.55percent in 1995.(18)Currently 232 stores are certified under this voluntary program.(19)

Associated Grocers, Inc., of Seattle, Washington, has recentlyinstituted a similar program for its customers. AssociatedGrocers, Inc., is a food wholesaler that has about 240 customersoperating about 350 stores. The program is voluntary and issimilar to the PFMA program. Thus far, about 50 stores areparticipating in this program.(20)

**Government Inspection Programs**

State weights and measures offices in 42 states and theDistrict of Columbia currently have a price verification programin place.(21) Ofthese jurisdictions, 32 base their inspections on the NCWMProcedure. NIST has offered week-long training programs to statesinterested in using the NCWM Procedure. Thus far, over 30 stateshave sent weights and measures officials to these trainingsessions. 

Several state and local jurisdictions have or are setting upformal inspection programs that include development of baselinedata. For example, in 1994, the Consumer Affairs Unit of the Cityof Seattle instituted a periodic price inspection programcovering all types of retail stores. Initial baseline datacollected in 1994 store inspections showed an overall pricingerror rate of 6.7 percent. Since then, with continuinginspections, overall pricing error rates have decreased to 3.7percent in 1996. The average percentage of overcharges hasdropped from 4 percent in 1994 to 2.5 percent in 1995 and 1.4percent in 1996.(22)

Louisiana's Division of Weights and Measures is currentlysetting up a division that will focus on scanner pricing usingthe NCWM Procedure. The Division of Weights and Measures isconducting a series of inspections to develop baseline data forretail stores in Louisiana. Similarly, the Division of Weightsand Measures of Kansas is setting up a program for inspections ofall types of retail stores. Initially, they will select a randomsample of retail stores to inspect, using the NCWM Procedure.After the random sample is completed and the results have beenanalyzed, Kansas Weights and Measures may shift resources toconcentrate on problem areas. 

## Nationwide Information Sharing

Recognizing that information sharing is essential to efficientstate and federal enforcement, NCWM is considering the creationof a computer database that would link weights and measuresoffices across the country. Thus, weights and measures officialsin all 50 states would be able to input inspection reports andother data onto a central database. Then, an inspection ofpricing in stores in one state would be readily available toofficials in other states. Problem areas could be identifiedquickly and enforcement efforts by multiple jurisdictions couldbe coordinated more easily.(23)

**Other State Actions**

**Consumer Bounties**

Michigan has adopted a law requiring retailers to payconsumers who are overcharged 10 times the difference in price,with a minimum recovery of $1 and a maximum of $5. The Office ofthe Attorney General of Michigan has conducted extensiveeducational efforts to bring these rights to consumers' attentionand reports that it has distributed approximately 100,000 itempricing bill of rights handouts on bounties. This is its mostpopular consumer piece. The Attorney General believes that thebounty system encourages retailers to maintain pricing accuracy.(24)

**ItemPricing**

A few jurisdictions have adopted laws requiring retailers tomark individual items with prices. For example, Michigan requiresitem pricing in all types of retail stores.(25) Connecticut has alaw that requires item pricing but exempts any retailer thatimplements an electronic shelf labeling system with the approvalof the commissioner of consumer protection.(26) Massachusetts andCalifornia require item pricing in grocery stores and in fooddepartments in other retail stores.(27)

The City of Philadelphia does not impose any general itempricing requirement. As a remedial measure, however, the lawrequires that retail food stores item price when the store has athree to one, or greater, ratio of overcharges to underchargesfor three consecutive inspections. The store must item priceuntil it passes four consecutive inspections.(28)

**Cash Register Display**

Massachusetts has adopted a law requiring any retailer using acash register at a counter to total the dollar amount of customerpurchases to make sure that the total dollar amount of thepurchases can be seen by the customer.(29)

**Injurious Effects ofPricing Errors on Retailers**

As the study shows, many retailers need to take a good look attheir pricing practices to ensure compliance with the law. Thereare good business reasons for a retailer to make a commitment topricing accuracy. Increasing pricing accuracy is likely toincrease profits and increase consumer satisfaction. 

**Failure to Comply with the Law**

This study shows that scanner errors are prevalent and thatmany retailers need to take a good look at their pricingpractices. In addition to taking steps to ensure that accurateprices are posted or advertised, retailers need to adoptprocedures to ensure that reported errors are correctedimmediately. In the study, inspectors in several states conductedreinspections and found that errors noted in an initialinspection were not always corrected by the time of thereinspection. 

As noted earlier, some state and local governments havealready been active in enforcing pricing accuracy and haveimposed fines and judicial or administrative orders against anumber of retailers. With the adoption of the NCWM Procedure bymore states, state and local enforcement efforts are likely toincrease. In addition to the obvious expense of any finesimposed, retailers must bear additional costs in complying withorder requirements. Furthermore, retailers' reputations and salescan be adversely affected by resulting negative publicity. 

**Reduction in Profits**

Many retailers do not realize that scanner pricing errors canreduce profits. Although some studies have found that overchargesoutnumber undercharges,(30)this study, as well as other studies, show that, overall, thenumber of undercharges is greater than the number of overcharges.(31) In addition, thetotal dollar amount of undercharges is greater than the totaldollar amount of overcharges. Thus, stores can lose thousands ofdollars through undetected undercharges. 

The Pennsylvania Food Merchants Association estimates that theaverage supermarket, with weekly sales of $250,000, loses $31,096per year as a result of scanning errors. This figure is based onthe assumption that accuracy rates average 98 percent, thatundercharges average 39 cents and overcharges average 30 cents,and that undercharges outnumber overcharges 70 to 30.(32) If accuracy ratesfall below 98 percent, retailers risk even higher losses fromundercharges.(33)

**Consumer Dissatisfaction**

Retailers also are injured when poor pricing practices resultin consumer dissatisfaction. Consumers are affected in severalways by scanner pricing errors. First, consumers lose money whenthey are overcharged and they are not likely to be mollified bythe knowledge that other consumers are being undercharged.Second, consumers are inconvenienced by errors. If a consumerpoints out a mistake at checkout, whether an overcharge or anundercharge, the consumer (and everyone in line) must wait whilethe cashier corrects the mistake. In addition, consumers complainthat some stores are not helpful and may even be rude. 

Consumers also complain that, in many stores, they cannot seethe price of items being rung up at cash registers. Thus, theymust wait until the transaction is completed before they receivethe receipt and can check the prices charged for the items.Getting errors corrected at that point often involves a wait atthe customer service desk. 

Inadequate or poor customer service practices can lead toconsumers taking their business elsewhere. It is estimated thatbetween one and three percent of customers will stop shopping ata particular store if they discover they have been overcharged.(34)

The next part of this report describes steps that retailerscan take to ensure they comply with applicable laws and increasecustomer satisfaction with their practices for handling pricingerrors. 

**Recommendations for Retailers**

There are a number of steps that a retailer can take toincrease and maintain pricing accuracy.(35) Implementing goodpricing practices may involve some initial expense, but, in thelong run, is likely to provide net benefits to the retailer.(36) Some practices thatcan help involve designing and implementing better procedures.Others can involve using technological advancements that are nowavailable. 

As a first step, retailers can obtain information about goodpricing practices, which is readily available from a variety ofsources.(37) Forexample, the Food Marketing Institute and the National RetailInstitute, the research foundation of the National RetailFederation, publish and sell detailed manuals on pricingprocedures, and have sponsored conferences dealing with pricingissues.(38) Retailerscan also contact their local weights and measures officials forinformation about the NCWM Procedure and pricing accuracy laws.Some local weights and measures offices are providing training tolocal retailers. NIST has also opened its training sessions toretailers. 

Once the retailer makes a commitment to achieve higher pricingaccuracy, that retailer can evaluate the adequacy of its pricingpractices and implement necessary changes. The most basicquestion is: Can the retailer state with any certainty itspricing accuracy rate? 

Some retailers may believe that good pricing practices arelargely a matter of devoting substantial resources to computertechnology and the development of software. The focus of goodpricing practices, however, is not on whether, for example, theprices in the store's computer file match the prices in thecompany's central computer file. To the customer, the price inthe store's computer is not the important price. Instead, thecustomer expects to be charged the lowest price posted oradvertised. Thus, good pricing practices focus on whether theprice at checkout matches the posted or advertised price--a goalthat can be achieved through proper procedures, employee trainingand periodic price inspections. 

**BestPractices**

No one set of pricing practices will guarantee pricingaccuracy. There are, however, a number of practices that make alot of sense and are used by retailers with outstanding pricingaccuracy. 

Most basic is the adoption of written procedures for all formsof pricing activity in the store. Adopting procedures forimmediate correction of pricing errors, whether discovered bystate or local inspectors, employees or customers, is importantto reduce exposure to possible law enforcement action and toensure customer satisfaction. On-going training of employees,with an emphasis on the store's commitment to pricing accuracy,ensures that the procedures are properly implemented. 

Designating one person as the pricing coordinator, withoverall responsibility for pricing accuracy, also is important.In some stores, such as grocery and drug stores, it may be usefulto make one employee responsible for the accuracy of prices onall Direct Store Delivery items.(39)

An essential component of good pricing practices is periodicprice audits. Price audits of a randomized sample, perhaps 50items, can be done on a daily basis. Regular price audits of theentire store can be done several times a year. At a minimum, anaudit of the entire store can be done at the same time that aninventory is done. Procedures for checking and replacing damagedor missing shelf tags and signs on a regular basis will helpensure that consumers can determine the correct price of items. 

Special procedures may be necessary when prices of sale itemscannot be entered into the store's computer. For example, a storemay offer a "Buy one, get the second one at half price"sale where the cashier must manually enter the sale price of thesecond item. In such cases, a cashier who is not aware that theitem is on sale may scan the second item at full price, thusovercharging the consumer. To avoid this problem, a store may,for example, mark all such sale items with a color-coded tag,thus alerting the cashier that the item is on special. 

Other practices that can benefit stores by increasing consumersatisfaction include: (1) arranging the checkout set-up so thatcustomers can see the prices as they are rung up at the register;(2) training employees to treat customers reporting pricingerrors politely; and (3) adopting a policy of rewarding consumerswho report pricing errors--such as giving the consumer one itemfree. 

**Advances in Technology**

Improvements in technology can help retailers achieve greaterpricing accuracy at a lower cost. One of the most importantdevelopments in shelf price verification is the use of thehand-held scanning device. These portable devices enable anemployee to walk down an aisle, scan the UPC code on an item andimmediately check the posted or advertised price against theprice in the store's computer.(40)Hand-held scanners can reduce the labor required for pricechecks, which otherwise might require taking items to a cashregister for scanning or taking a printout of prices around thestore and checking it against shelf and sign prices. 

Another very useful tool is the portable label printer. Once asection of a store has been scanned and checked, with a portableprinter missing and incorrect shelf labels can be printed andreplaced immediately.(41)Without the portable printer, the retailer likely has to make alist of missing shelf tags, request replacement tags fromheadquarters or print them elsewhere in the store and then havean employee go back in the aisle and find the right spots for thereplacement labels. 

Another recent development is the use of electronic shelftags. These are relatively new devices that a number of chainshave been testing out in selected stores.(42) The shelf tags areconnected to the same data base as the checkout scanner. Thus,the shelf price and the scanner price are always the same. When aprice is changed in the computer it is automatically changed onthe shelf tag. The advantages are pricing conformity betweenposted and scanned price and savings in labor costs associatedwith replacing paper shelf labels, which are no longer needed.Currently, however, there are several disadvantages. At thepresent time, installation of electronic shelf tags throughout astore is fairly costly. The estimated cost per store forapproximately 20,000 electronic shelf tags is between $120,000and $150,000.(43)Second, electronic shelf tags cannot be used everywhere in astore. They generally cannot be used in freezers or coolers, andcan be damaged by shopping carts when used on bottom shelves.Third, the liquid crystal readout is not always as clear and easyto read as printed shelf labels. 

**Recommendations for Consumers**

Consumers expect and demand accurate pricing. Obviously,consumers do not want to lose money from overcharges. They alsowant to be able to make informed and correct purchasing decisionsbased on shelf tags and signs. For example, a consumer may be ledinto making value comparisons that are incorrect because ofinaccurate posted prices. Thus, a consumer may choose to buyBrand X because its posted price is lower than the price postedfor Brand Y. This decision turns out to be incorrect if the priceactually charged for Brand X at checkout is higher than the priceof Brand Y. 

The FTC has published a "Facts for Consumers"pamphlet that focuses on the issue of scanner accuracy and whatconsumers can do to ensure that the price charged is the rightprice.(44) Below,some of the key steps consumers can take to protect themselvesagainst scanner errors are described. 

**Spotting Scanner Errors**

There are simple steps consumers can take to avoid paying thewrong price. First, consumers can watch the display screen forprices as they are rung up. If an error occurs, consumers canimmediately point the error out to the cashier, ask about thestore's policy on pricing errors, and ask the cashier to make theappropriate adjustment before paying. Although some stores simplyadjust the price, other stores may offer a bonus, such as givingthe consumer one item free. Even after consumers have left thecheckout line, but before leaving the store, consumers can reviewtheir receipt and identify and report errors to the store manageror customer service desk. 

If the store is having a sale, consumers can bring a copy ofthe store's flyer or newspaper ad to the checkout counter andcompare prices as they are rung up. Some advertised specials--15percent off an item for two hours, for example, or a two-for-onepromotion--may not be in the computer and must be enteredmanually by the cashier. These types of promotions meritparticular attention from consumers to ensure they are chargedthe correct price. 

When purchasing more than a few items, consumers may want toconsider jotting down prices or special sale prices as they walkthrough the store. Some grocery stores may provide a marking penso that consumers can write the prices on the packages. 

**Effective Complaining**

Consumers who notice a pattern of electronic scanning errorsin a particular store may want to talk to the customer servicedepartment or the store manager. Consumers can also write aletter to the company's corporate headquarters. The retailer maynot realize a problem exists until it is pointed out. 

Consumers can also report recurring problems to their stateAttorney General's office, state or local consumer protectionoffice, or state or local weights and measures officials. In manystates, weights and measures offices will follow up on consumercomplaints with an inspection of the store's prices. 

Finally, consumers can file a complaint with the Federal TradeCommission. Although the FTC usually does not intervene inindividual cases, the information provided by consumers willassist the FTC in its continued monitoring of scanner pricingaccuracy. Letters should be addressed to: Correspondence Branch,Federal Trade Commission, Washington, D.C. 20580.

**Conclusion**

Overall, this study shows that the news is fairly positive forconsumers. Many retailers have already achieved high levels ofpricing accuracy. Furthermore, when averaged across all retailcategories, undercharges exceed overcharges in both number anddollar amount. On the other hand, scanner errors continue to beprevalent, and overcharges outnumber undercharges for some retailcategories and some retail chains. Thus, scanner pricing errorscontinue to be a problem meriting increased retailer attention. 

The government participants in this study are hopeful thatincreased public attention to the problem of scanner pricingerrors will lead retailers to examine and reform their pricingpractices voluntarily. Achieving higher levels of scanneraccuracy will benefit both consumers and retailers. By reducingthe number of scanner errors, stores ensure compliance withpricing accuracy laws, reduce losses from undercharges andprevent customer dissatisfaction caused by overcharges. 

In the future, FTC staff, NIST and state and local officialswill continue to coordinate their efforts to monitor retailers'pricing accuracy. It is hoped that information contained in thisreport will assist retailers in their efforts to reduce scannererrors and consumers in their efforts to ensure that they pay thecorrect price at checkout. 

----

----

**APPENDIXA**

**DISTRIBUTION OF FOOD V. NON-FOOD STORES****BY PRICING ACCURACY**

|                   | **FOOD**
(113        Stores) | **NON-FOOD**
(181 Stores) | **TOTAL**
(294 Stores) |
|-------------------|------------------------------|---------------------------|------------------------|
| 100 percent       | 32                           | 34                        | 66                     |
| 99 - 99.9 percent | 1                            | 4                         | 5                      |
| 98 - 98.9 percent | 25                           | 36                        | 61                     |
| 97 - 97.9 percent | 3                            | 6                         | 9                      |
| 96 - 96.9 percent | 21                           | 21                        | 42                     |
| 95 - 95.9 percent | 3                            | 8                         | 11                     |
| 94 - 94.9 percent | 10                           | 16                        | 26                     |
| 93 - 93.9 percent | 4                            | 3                         | 7                      |
| 92 - 92.9 percent | 3                            | 14                        | 17                     |
| 91 - 91.9 percent | 0                            | 3                         | 3                      |
| 90 - 90.9 percent | 5                            | 8                         | 13                     |
| 89 - 89.9 percent | 0                            | 3                         | 3                      |
| 88 - 88.9 percent | 3                            | 5                         | 8                      |
| 87 - 87.9 percent | 0                            | 3                         | 3                      |
| 86 - 86.9 percent | 2                            | 7                         | 9                      |
| 85 - 85.9 percent | 0                            | 0                         | 0                      |
| 84 - 84.9 percent | 1                            | 3                         | 4                      |
| 83 - 83.9 percent | 0                            | 1                         | 1                      |
| 82 - 82.9 percent | 0                            | 1                         | 1                      |
| 81 - 81.9 percent | 0                            | 1                         | 1                      |
| 75 - 75.9 percent | 0                            | 1                         | 1                      |
| 72 - 72.9 percent | 0                            | 1                         | 1                      |
| 69 - 69.9 percent | 0                            | 1                         | 1                      |
| 68 - 68.9 percent | 0                            | 1                         | 1                      |

 

----

----

**APPENDIXB**

| **Store        Pseudonym** | **Total        # of        Stores        Checked** | **Total        # of         Items         Checked** | **Total        # of        Over        Charges** | **Total        $ of        Over Charges** | **Avg $        of        Over        Charges** | **Total        %        Over        Charges** | **Total        # of        Under        Charges** | **Total        $ of        Under        Charges** | **Avg $        of        Under        Charges** | **Total        %        Under        Charges** | **Total        %         of Error** |
|----------------------------|----------------------------------------------------|-----------------------------------------------------|--------------------------------------------------|-------------------------------------------|------------------------------------------------|-----------------------------------------------|---------------------------------------------------|---------------------------------------------------|-------------------------------------------------|------------------------------------------------|-------------------------------------|
| Auto1                      | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Auto2                      | 1                                                  | 99                                                  | 5                                                | 4.90                                      | 0.98                                           | 5.05%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 5.05%                               |
| Auto3                      | 1                                                  | 98                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Auto4                      | 1                                                  | 50                                                  | 1                                                | 2.00                                      | 2.00                                           | 2.00%                                         | 2                                                 | 2.09                                              | 1.05                                            | 4.00%                                          | 6.00%                               |
| Department1                | 2                                                  | 150                                                 | 5                                                | 12.20                                     | 2.44                                           | 3.33%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 3.33%                               |
| Department2                | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Department3                | 2                                                  | 200                                                 | 1                                                | 3.00                                      | 3.00                                           | 0.50%                                         | 2                                                 | 39.49                                             | 19.75                                           | 1.00%                                          | 1.50%                               |
| Department4                | 10                                                 | 650                                                 | 32                                               | 276.56                                    | 8.64                                           | 4.92%                                         | 44                                                | 191.07                                            | 4.34                                            | 6.77%                                          | 11.69%                              |
| Department5                | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 8                                                 | 59.04                                             | 7.38                                            | 16.00%                                         | 16.00%                              |
| Department7                | 1                                                  | 50                                                  | 2                                                | 1.70                                      | 0.85                                           | 4.00%                                         | 6                                                 | 10.89                                             | 1.82                                            | 12.00%                                         | 16.00%                              |
| Department8                | 1                                                  | 50                                                  | 2                                                | 14.50                                     | 7.25                                           | 4.00%                                         | 5                                                 | 10.40                                             | 2.08                                            | 10.00%                                         | 14.00%                              |
| Department9                | 10                                                 | 596                                                 | 17                                               | 147.05                                    | 8.65                                           | 2.85%                                         | 42                                                | 264.51                                            | 6.30                                            | 7.05%                                          | 9.90%                               |
| Department10               | 1                                                  | 50                                                  | 1                                                | 2.40                                      | 2.40                                           | 2.00%                                         | 2                                                 | 1.52                                              | 0.76                                            | 4.00%                                          | 6.00%                               |
| Discount1                  | 1                                                  | 50                                                  | 1                                                | 3.00                                      | 3.00                                           | 2.00%                                         | 3                                                 | 4.01                                              | 1.34                                            | 6.00%                                          | 8.00%                               |
| Discount2                  | 41                                                 | 2,546                                               | 62                                               | 179.99                                    | 2.90                                           | 2.44%                                         | 76                                                | 147.49                                            | 1.94                                            | 2.99%                                          | 5.42%                               |
| Discount7                  | 1                                                  | 40                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 10                                                | 67.91                                             | 6.79                                            | 25.00%                                         | 25.00%                              |
| Discount3                  | 1                                                  | 99                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 2                                                 | 0.50                                              | 0.25                                            | 2.02%                                          | 2.02%                               |
| Discount4                  | 2                                                  | 147                                                 | 4                                                | 5.53                                      | 1.38                                           | 2.72%                                         | 6                                                 | 2.85                                              | 0.48                                            | 4.08%                                          | 6.80%                               |
| Discount5                  | 4                                                  | 200                                                 | 3                                                | 3.39                                      | 1.13                                           | 1.50%                                         | 12                                                | 15.65                                             | 1.30                                            | 6.00%                                          | 7.50%                               |
| Discount6                  | 32                                                 | 2,039                                               | 28                                               | 58.26                                     | 2.08                                           | 1.37%                                         | 31                                                | 62.31                                             | 2.01                                            | 1.52%                                          | 2.89%                               |
| Drug1                      | 3                                                  | 197                                                 | 6                                                | 7.84                                      | 1.31                                           | 3.05%                                         | 2                                                 | 0.30                                              | 0.15                                            | 1.02%                                          | 4.06%                               |
| Drug2                      | 7                                                  | 350                                                 | 7                                                | 7.91                                      | 1.13                                           | 2.00%                                         | 5                                                 | 1.33                                              | 0.27                                            | 1.43%                                          | 3.43%                               |
| Drug3                      | 1                                                  | 98                                                  | 3                                                | 0.70                                      | 0.23                                           | 3.06%                                         | 2                                                 | 1.13                                              | 0.56                                            | 2.04%                                          | 5.10%                               |
| Drug4                      | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Drug5                      | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 6                                                 | 4.05                                              | 0.67                                            | 12.00%                                         | 12.00%                              |
| Drug7                      | 3                                                  | 200                                                 | 6                                                | 6.80                                      | 1.13                                           | 3.00%                                         | 5                                                 | 12.75                                             | 2.55                                            | 2.50%                                          | 5.50%                               |
| Drug8                      | 1                                                  | 41                                                  | 2                                                | 0.76                                      | 0.38                                           | 4.88%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 4.88%                               |
| Drug9                      | 21                                                 | 1,182                                               | 52                                               | 56.15                                     | 1.08                                           | 4.40%                                         | 37                                                | 37.48                                             | 1.01                                            | 3.13%                                          | 7.53%                               |
| Food1                      | 5                                                  | 245                                                 | 3                                                | 1.58                                      | 0.53                                           | 1.22%                                         | 6                                                 | 2.84                                              | 0.47                                            | 2.45%                                          | 3.67%                               |
| Food2                      | 8                                                  | 416                                                 | 11                                               | 2.39                                      | 0.22                                           | 2.64%                                         | 5                                                 | 2.44                                              | 0.49                                            | 1.20%                                          | 3.85%                               |
| Food3                      | 6                                                  | 296                                                 | 2                                                | 0.18                                      | 0.09                                           | 0.68%                                         | 5                                                 | 2.09                                              | 0.42                                            | 1.69%                                          | 2.36%                               |
| Food4                      | 1                                                  | 100                                                 | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Food5                      | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Food6                      | 1                                                  | 100                                                 | 2                                                | 1.10                                      | 0.55                                           | 2.00%                                         | 2                                                 | 1.63                                              | 0.81                                            | 2.00%                                          | 4.00%                               |
| Food7                      | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Food8                      | 2                                                  | 149                                                 | 3                                                | 0.42                                      | 0.14                                           | 2.01%                                         | 3                                                 | 1.40                                              | 0.47                                            | 2.01%                                          | 4.03%                               |
| Food9                      | 1                                                  | 100                                                 | 1                                                | 0.10                                      | 0.10                                           | 1.00%                                         | 3                                                 | 0.36                                              | 0.12                                            | 3.00%                                          | 4.00%                               |
| Food10                     | 11                                                 | 549                                                 | 34                                               | 9.48                                      | 0.28                                           | 6.19%                                         | 9                                                 | 3.57                                              | 0.40                                            | 1.64%                                          | 7.83%                               |
| Food11                     | 1                                                  | 100                                                 | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 1                                                 | 0.10                                              | 0.10                                            | 1.00%                                          | 1.00%                               |
| Food12                     | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Food13                     | 1                                                  | 50                                                  | 1                                                | 0.11                                      | 0.11                                           | 2.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 2.00%                               |
| Food14                     | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Food15                     | 15                                                 | 749                                                 | 20                                               | 9.09                                      | 0.45                                           | 2.67%                                         | 25                                                | 7.59                                              | 0.30                                            | 3.34%                                          | 6.01%                               |
| Food16                     | 3                                                  | 150                                                 | 2                                                | 2.02                                      | 1.01                                           | 1.33%                                         | 1                                                 | 0.15                                              | 0.15                                            | 0.67%                                          | 2.00%                               |
| Food17                     | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Food18                     | 7                                                  | 349                                                 | 3                                                | 1.70                                      | 0.57                                           | 0.86%                                         | 2                                                 | 0.90                                              | 0.45                                            | 0.57%                                          | 1.43%                               |
| Food19                     | 1                                                  | 49                                                  | 2                                                | 0.80                                      | 0.40                                           | 4.08%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 4.08%                               |
| Food20                     | 1                                                  | 50                                                  | 3                                                | 0.34                                      | 0.11                                           | 6.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 6.00%                               |
| Food21                     | 10                                                 | 498                                                 | 6                                                | 1.58                                      | 0.26                                           | 1.20%                                         | 4                                                 | 2.37                                              | 0.59                                            | 0.80%                                          | 2.01%                               |
| Food22                     | 14                                                 | 699                                                 | 10                                               | 27.00                                     | 2.70                                           | 1.43%                                         | 17                                                | 38.39                                             | 2.26                                            | 2.43%                                          | 3.86%                               |
| Food23                     | 2                                                  | 150                                                 | 3                                                | 0.30                                      | 0.10                                           | 2.00%                                         | 3                                                 | 1.57                                              | 0.52                                            | 2.00%                                          | 4.00%                               |
| Food24                     | 3                                                  | 150                                                 | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 1                                                 | 0.05                                              | 0.05                                            | 0.67%                                          | 0.67%                               |
| Food25                     | 3                                                  | 150                                                 | 3                                                | 0.72                                      | 0.24                                           | 2.00%                                         | 1                                                 | 2.72                                              | 2.72                                            | 0.67%                                          | 2.67%                               |
| Food26                     | 1                                                  | 100                                                 | 4                                                | 0.66                                      | 0.17                                           | 4.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 4.00%                               |
| Food27                     | 9                                                  | 450                                                 | 1                                                | 0.60                                      | 0.60                                           | 0.22%                                         | 4                                                 | 1.83                                              | 0.46                                            | 0.89%                                          | 1.11%                               |
| Food28                     | 2                                                  | 100                                                 | 1                                                | 0.30                                      | 0.30                                           | 1.00%                                         | 1                                                 | 0.30                                              | 0.30                                            | 1.00%                                          | 2.00%                               |
| Home Improvement1          | 1                                                  | 100                                                 | 2                                                | 5.15                                      | 2.58                                           | 2.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 2.00%                               |
| Home Improvement2          | 1                                                  | 43                                                  | 4                                                | 26.52                                     | 6.63                                           | 9.30%                                         | 2                                                 | 22.01                                             | 11.01                                           | 4.65%                                          | 13.95%                              |
| Home Improvement3          | 1                                                  | 100                                                 | 1                                                | 2.00                                      | 2.00                                           | 1.00%                                         | 3                                                 | 4.04                                              | 1.35                                            | 3.00%                                          | 4.00%                               |
| Home Improvement4          | 6                                                  | 279                                                 | 7                                                | 177.04                                    | 25.29                                          | 2.51%                                         | 8                                                 | 159.00                                            | 19.88                                           | 2.87%                                          | 5.38%                               |
| Home Improvement5          | 1                                                  | 100                                                 | 7                                                | 17.03                                     | 2.43                                           | 7.00%                                         | 4                                                 | 11.69                                             | 2.92                                            | 4.00%                                          | 11.00%                              |
| Home Improvement6          | 1                                                  | 100                                                 | 2                                                | 7.00                                      | 3.50                                           | 2.00%                                         | 5                                                 | 40.92                                             | 8.18                                            | 5.00%                                          | 7.00%                               |
| Home Improvement7          | 3                                                  | 300                                                 | 1                                                | 0.57                                      | 0.57                                           | 0.33%                                         | 10                                                | 20.58                                             | 2.06                                            | 3.33%                                          | 3.67%                               |
| Home Improvement8          | 2                                                  | 150                                                 | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Home Improvement9          | 1                                                  | 97                                                  | 8                                                | 78.18                                     | 9.77                                           | 8.25%                                         | 4                                                 | 4.74                                              | 1.19                                            | 4.12%                                          | 12.37%                              |
| Miscellaneous1             | 1                                                  | 49                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Miscellaneous2             | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 1                                                 | 10.00                                             | 10.00                                           | 2.00%                                          | 2.00%                               |
| Toy1                       | 4                                                  | 200                                                 | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 2                                                 | 3.49                                              | 1.75                                            | 1.00%                                          | 1.00%                               |
| Toy2                       | 1                                                  | 50                                                  | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 0                                                 | 0.00                                              | 0.00                                            | 0.00%                                          | 0.00%                               |
| Toy3                       | 3                                                  | 200                                                 | 0                                                | 0.00                                      | 0.00                                           | 0.00%                                         | 5                                                 | 27.13                                             | 5.43                                            | 2.50%                                          | 2.50%                               |
| Toy4                       | 1                                                  | 49                                                  | 1                                                | 4.02                                      | 4.02                                           | 2.04%                                         | 1                                                 | 9.00                                              | 9.00                                            | 2.04%                                          | 4.08%                               |
|                            | **294**                                            | **17,298**                                          | **388**                                          | **$1,172.62**                             | **$3.02**                                      | **2.24%**                                     | **446**                                           | **$1,319.67**                                     | **$2.96**                                       | **2.58%**                                      | **4.82%**                           |

----

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**Endnotes**

1. For 1992, retail sales totaled $1.949trillion. U.S. Department of Commerce, ***StatisticalAbstract of the United States*** 779 (115th ed. 1995).

2. NIST, in the Department of Commerce, wasformerly known as the National Bureau of Standards. 

3. See, e.g., City of New York,Department of Consumer Affairs, ***The Scanner Scam:Report on the Need for a Stronger Item-Pricing Law***11-13 (May 1991); and Kevin Collison, "Legislators OK 2Plans for Item-Pricing: Decision Up to Gorski," ***BuffaloNews***, Oct. 8, 1993, at A1. 

4. Mitch Betts, "Human Error Trips UpLaser Scanner Accuracy," ***Computerworld***,June 27, 1994, at 8. 

5. See Joe L. Welch and Tom K.Massey, Jr., "Consumer Cost Implications of Reducing ItemOmission Errors in Retail Optical 

Scanner Environments," ***Akron Bus. & Econ.Rev.***, Summer 1988, at 97, 97-98. 

6. Steve Weinstein, "Playing Politicswith Item Pricing," ***Progressive Grocer***,Oct. 1991, at 21, 21. 

7. Edward M. Harwell, ***CheckoutManagement*** 2-7 (1963). It should also be noted thatreceipts printed by older manual cash registers merely listed aseries of prices and did not identify the items purchased, thusmaking it difficult to check prices charged for specific items.Today, most cash register receipts specify the item purchasednext to the price. 

8. Commonwealth of Virginia, Department ofAgriculture and Consumer Services, ***Report on the Useof Bar Codes in the Commonwealth to the Governor and the GeneralAssembly of 1990***, at 21-23 (1991). 

9. The orders issued in those cases trackthe requirements of the Rule, including the mandate to selladvertised specials at or below the advertised price. SeeAlbertson's,Inc., 85 F.T.C. 500 (1975); The Great Atl. & Pac. TeaCo., Inc., 85 F.T.C. 601 (1975); Baza'r, Inc., 86F.T.C. 1026 (1975); Pacific Gamble Robinson Co., 86 F.T.C.1034 (1975); Fred Meyer, Inc., 87 F.T.C. 112 (1976); MayfairSuper Markets, Inc., 87 F.T.C. 286 (1976); The Kroger Co.,90 F.T.C. 459 (1977); Fisher Foods, Inc., 90 F.T.C. 473(1977); Food Fair Stores, Inc., 90 F.T.C. 491 (1977); ShopRite Foods, Inc., 90 F.T.C. 500 (1977); and SafewayStores, Inc., 91 F.T.C. 975 (1978). 

10. See, e.g., *Dateline*(NBC television broadcast, Dec. 12, 1995); *PrimeTime Live*(ABC television broadcast, Apr. 8, 1993); Kristin Grimsley,"At the Register, Getting Rung Up ... and Riled," ***TheWashington Post***, June 8, 1994, at A1; VanessaO'Connell, "Don't Get Cheated by Supermarket Scanners,"***Money***, Apr. 1993, at 132; and DougBartholomew, "The Price is Wrong," ***InformationWeek***,Sept. 14, 1992, at 26. 

11. NCWM Price Verification Working Group,"Report of First Meeting, Recommendations for Regulations,and Examination Procedure for Price Verification" (FirstDraft), at 5 (Oct. 1, 1993). 

12. NCWM Publication 19 (Aug. 1995). 

13. The inspections generally followed theprocedures outlined in the fourth draft of the NCWM Procedure.The procedures used in the study did not differ in material waysfrom the procedures set forth in the final NCWM Procedure. 

14. Stores with a history of pricingproblems were not singled out for this study. Some may have beenincluded as part of the random selection process. 

15. The FTC, in authorizing the release ofthis Report, does not intend to endorse any particular level ofretail pricing errors as warrranting enforcement. 

16. A detailed list of the distribution ofstores by percentage of pricing accuracy is provided in AppendixA. 

17. In Appendix B, retailers are groupedby category, e.g., food, drug, etc., and are given anumber designation. 

18. The accuracy rate is actually higherif only overcharges and undercharges are counted. Unlike the NCWMinspection protocol, PFMA's inspections include missing prices atthe shelf as an error. Excluding these "no tag" errorswould raise the 1995 accuracy rates to 98.71 percent. PFMA,Scanning Certification Program, ***Annual Report: FiscalYear 1994-1995***, at 6-7 (1995). 

19. For more information, write to:Scanning Certification Program, P.O. Box 870, Camp Hill, PA17001-0870. 

20. For more information, write to:"Certified Accurate Pricing," Associated Grocers, Inc.,P.O. Box 3763, Seattle, WA 98124. 

21. In response to a telephone surveyconducted by NIST in September 1996, state offices of weights andmeasures in the following eight states reported that they did nothave a price verification program in place: Indiana, Nevada, NewYork, North Dakota, Oregon, Pennsylvania, Rhode Island, Wyoming.In several of these states, such as New York and Pennsylvania,city and county weights and measures officials may conduct priceverification inspections. 

22. City of Seattle, Department ofFinance, Consumer Affairs Unit, ***Price ScanningInspection Report Card, 1994-1996***, at 3 (June 10,1996). 

23. A multi-state analysis of pricingaccuracy is currently being undertaken by Professors JimOverstreet and Richard Clodfelter at the University of SouthCarolina. A number of state offices that conduct pricinginspections of retail stores are providing copies of thesereports to Professors Overstreet and Clodfelter so that theresults can be tabulated and analyzed. States participating inthe study will have access to aggregate information by retailcategories and types of pricing errors and will be able tocompare retailers in one state to retailers in other states. Formore information, contact: Department of Retailing, College ofApplied Professional Sciences, University of South Carolina,Columbia, SC 29208. 

24. The law also provides that, if abounty is not offered to the consumer, the consumer can sue thestore for the amount of the overcharge or $250, whichever islarger, and $300 in attorney's fees. Mich. Comp. Laws Ann.� 445.360-360a (West 1996). This law has been in effectsince March 25, 1985. 

25. Mich. Comp. Laws Ann. �445.353 (West 1996). 

26. Conn. Gen. Stat. Ann.� 21a-79 (West 1996). 

27. Mass. Gen. Laws Ann. ch. 94,�� 184C and 184D (West 1996); and Cal. Civil Code� 7100 (West 1996). 

28. Philadelphia, PA, Code� 9-1702 (1996). 

29. Mass. Gen. Laws Ann. ch 98,� 56C (West 1996). 

30. See, e.g., Ronald C. Goodstein,"UPC Scanner Pricing Systems: Are They Accurate," ***Journalof Marketing***, Apr. 1994, at 20, 22 and 27. 

31. For example, in 1995, the PFMAconducted 438 inspections and found 1,313 errors of which 807were undercharges, 355 were overcharges, and 151 were items withno price. PFMA, Scanning Certification Program, ***AnnualReport: Fiscal Year 1994-1995***, at 7 (1995). In1994, weights and measures inspectors in Minnesota conductedinspections of 159 stores and found more undercharges (2.3percent of items sampled) than overcharges (1.5 percent of itemssampled). Minnesota Department of Public Service, News Releasedated May 11, 1994. 

32. PFMA, Scanning Certification Program, ***ProgramNotes***, May-July 1995, at 1-2. PFMA explains itsanalysis as follows. According to the Food Marketing Institute,the average weekly sales in a grocery store total $250,000. Theaverage retail price of each item sold is $1.53, meaning that anaverage store sells about 163,398 items per week. Assuming a 98percent pricing accuracy rate and assuming that all items in thestore are sold in equal numbers, the average grocery storecharges 3,268 wrong prices every week. PFMA data show thatundercharges comprise roughly 70 percent of a store's errors,which means that of the 3,268 weekly errors, 2,287 areundercharges and 980 are overcharges. PFMA data also show thatundercharges average 39 cents and overcharges average 30 cents.Thus, an average food store undercharges customers by $892 perweek and overcharges them by $294 per week. Over a year, thistotals $46,384 in undercharges and $15,288 in overcharges, with anet cost to the store of $31,096. 

33. Another industry consultant hasestimated that, for every one percent of pricing error, a storeloses $2,500 a year for every $100,000 in sales. Richard Shulman,"Savings on the Shelves," ***SupermarketBusiness***, Apr. 1996, at 29, 29. 

34. Michael Garry, "Scanners: ErrorControl," ***Progressive Grocer***, June1993, at 105, 105. 

35. The FTC has published "Facts forBusiness" on scanner pricing practices. For copies, contact:Public Reference, Federal Trade Commission, Washington, D.C.20580; (202)326-2222 or TDD (202)326-2502. You may also accessthis pamphlet electronically at: http://www.ftc.gov. 

36. See Richard Shulman, "GetReady Now to Meet Coming Price Accuracy Laws," ***SupermarketBusiness***, Apr. 1994, at 21, and "How Weights& Measures Will Test Your Prices, and How to Get Ready,"***Supermarket Business***, May 1994, at 21. 

37. For example, PFMA has provided adviceon pricing practices. See Michael Garry, "Is YourScanning Accurate?," ***Progressive Grocer***,Aug. 1995, at 55, 56-57. 

38. For copies of the Food MarketingInstitute's manual, ***Price Verification: EnsuringAccuracy at Store Level***, contact: Food MarketingInstitute, Publications and Video Sales, 800 Connecticut Avenue,N.W., Washington, D.C. 20006. For copies of the National RetailInstitute's manual, ***Effective Practices for PricingAccuracy: Ensuring Accuracy at Store Level***,contact: National Retail Institute, Inc., Liberty Place, 325Seventh Street, N.W., Suite 1000, Washington, D.C. 20004. 

39. Direct Store Delivery items are thoseitems delivered to a store, and usually priced, by routesalespeople. Such items frequently include hosiery, milk, beer,soda, bread and snack foods such as potato chips. Pricing errorscan occur when a route salesperson changes prices withoutinforming a store employee. 

40. See Richard Shulman, "HowWeights & Measures Will Test Your Prices, and How to GetReady," ***Supermarket Business***, May1994, at 21. These devices either retain a "batch" fileof entered prices and item identities for later comparison to thepoint-of-sale database, or operate "on-line" via FMradio to the point-of sale database, which is also hooked up tothe checkout scanner. 

41. See Richard Shulman, "GetReady Now to Meet Coming Price Accuracy Laws," ***SupermarketBusiness***, Apr. 1994, at 21. 

42. A study of pricing accuracy in 15 foodstores in California found significantly lower error rates whenelectronic shelf tags were employed in conjunction with scannersthan when scanners were employed alone. Ronald C. Goodstein andJennifer E. Escaleas, "Improving Pricing Accuracy at theSupermarket: Electronic Shelving Systems and Public Policy,"***Journal of Public Policy and Marketing***,Vol. 14 (Fall 1995), at 216. 

43. Michael Garry, "Scanners: ErrorControl," ***Progressive Grocer***, June1993, at 105, 106. 

44. For copies, contact: Public Reference,Federal Trade Commission, Washington, D.C. 20580; (202)326-2222or TDD (202)326-2502. You can also access this pamphletelectronically at: http://www.ftc.gov.