NEW YORK – Attorney General Eric T. Schneiderman today announced that his office has obtained a settlement with the national drugstore chain Walgreen, Co. and its subsidiary Duane Reade (collectively, “Walgreens”) for overcharging New York consumers and using misleading advertisements. Walgreens has also agreed to reform its advertising practices.
“Businesses are required to ensure that their advertisements are truthful and not misleading,” said Attorney General Schneiderman. “When consumers purchase products at retail stores in New York, they should be able to rely on the prices displayed in advertisements and on shelf tags and not have to worry about being overcharged when they get to the register.”
“Walgreens has failed to provide the staffing and systems needed to accurately price its products,” said Michael Zucker, Director of Change to Win Research Initiatives. “We’ve seen these deceptive practices in a number of other states, costing consumers and violating the public trust. We applaud Attorney General Schneiderman for taking strong action and standing up for New York consumers.”
Walgreens operates approximately 251 Walgreens and 214 Duane Reade stores across New York State. The Attorney General’s undercover investigation found that Walgreens deceptively induced New York consumers to purchase products by:
- Representing to consumers that they will receive the price published in print advertisements and on store shelf tags, but charging consumers a different price at the register (including shelf tags that remained up after the advertised price had already “expired”);
- Representing to consumers that a product is a “Smart Buy” or “Great Buy” when the advertised price is the same as the original retail price Walgreens regularly charges for that product;
- Representing to consumers that a product is a “Last Chance” or “Clearance” item, thus implying that the product is available at a reduced price only for a limited time when such product may actually be available at the reduced price for a significant period of time (in some cases as long as 8-10 months);
- Implying that consumers will receive an immediate cash discount, when the discount would only be received on a future purchase. For example, representing that consumers’ purchases are “like paying . . .” or “like buying . . .” a product for a certain price when the item could not be presently purchased for that price.
The Attorney General’s investigation also found that Walgreens failed to provide consumers with clear and consistent information concerning its Balance Rewards Points program, a loyalty incentive program that allows consumers to redeem points toward a discount on future purchases. For example, Walgreens’ website contained two different charts regarding point redemption. One chart showed that consumers could redeem points starting at 1,000 points, which is equivalent to a $1.00 discount. Another chart, however, showed point redemption starting at 5,000 points, which is equivalent to a $5.00 discount. Furthermore, Walgreens employees did not routinely ask consumers whether they want to redeem their accumulated points toward their current purchases during the check-out process.
In addition to paying $500,000 in penalties, fees, and costs, Walgreens has agreed to several important reforms of its current advertising and business practices in New York. These include, among others:
- removing expired shelf tags within 36 hours;
- restricting the manner in which Walgreens can use “Smart Buy” or “Great Buy” shelf tags;
- no longer promoting items as a “Last Chance” or a “Clearance” item if the product will remain available for sale for an extended period of time;
- restricting the manner in which Walgreens can use “like paying” or “like buying" shelf tags;
- conducting internal and external price check audits in its stores;
- each store that fails two consecutive external audits will pay an additional $2500 penalty;
- updating PIN pads in its stores to display consumers’ Balance Rewards Points and, on every fifth purchase, ask consumers if they want to redeem their points.
This matter was handled by Assistant Attorneys General Melissa O’Neill and Stephanie Sheehan, Deputy Bureau Chief Laura J. Levine, and Bureau Chief Jane M. Azia, all of the Consumer Frauds and Protection Bureau.