Overall Accuracy is High; However, 1 in 28 "Sale" Items Are Priced Incorrectly
A survey conducted by the Federal Trade Commission, the Department of Commerce's National Institute of Standards and Technology (NIST), and weights and measures offices in 37 jurisdictions concluded that pricing accuracy has improved since the first study in 1996. The wrong price, however, was charged for approximately one in 30 items checked in the survey of more than 100,000 consumer products in all types of retail stores.
Price Check II, the report released today, is a follow-up to the 1996 report about the accuracy of prices in stores with electronic checkout scanners. The 1998 study is a larger, more comprehensive review that compares scanned prices with the lowest posted or advertised price of a randomized sample of items in food, department, mass merchandise, drug, hardware and other stores. Unlike the 1996 report, the 1998 study separately compared the accuracy of pricing for sale and non-sale items. According to the survey, the pricing errors for sale and non-sale items were about equal in number; however, overcharges accounted for two-thirds of the pricing errors on sale items.
"There's good news for consumers who depend on retailers to provide accurate prices. Price Check II shows that retailers have achieved a higher accuracy rate than the 1996 report. But there is still room for improvement," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "And consumers can protect themselves by paying close attention to the prices they are charged -- particularly, when buying sale items -- because our survey showed that almost two-thirds of the scanner errors in this category were overcharges."
"This report highlights the importance of weights and measures in commerce and the need for careful attention to these matters by consumers, businesses and officials charged with assuring accuracy in measurements and commerce," said Robert E. Hebner, NIST Acting Deputy Director.
"The National Conference on Weights and Measures, a voluntary association of state weights and measures officials, believes in the value of studies such as Price Check II. The Conference and NIST jointly developed price verification procedures through a series of conference-sponsored meetings during formal sessions of the NCWM," said Aves Thompson, chief of the Alaska Division of Measurement Standards and chairman of NCWM. "The Conference adopted the verification procedure and is encouraging all our members to implement it for the double benefit of fair competition in the marketplace and consumer confidence in electronic price scanners."
Based on this price verification procedure, which has been adopted by 42 states and was used in the Price Check II inspections, a pricing error occurs when the price charged for an item at checkout does not agree with the lowest advertised, quoted, posted or marked price. Based on the assumption that some pricing errors are inevitable due to human and other errors, the procedure provides that a store "passes" an inspection if 98 percent or more of the items sampled are priced accurately, rather than requiring 100 percent accuracy. The total error rate -- both undercharges and overcharges -- is used to determine whether a store should be inspected more often. Higher levels of enforcement, such as state or local fines or penalties, are based only on overcharges.
The Price Check II inspections, which were carried out in 1,033 retail stores by weights and measures officials in 36 states and the U.S. Virgin Islands, found:
- One of every 30 items checked (3.35 percent) was mispriced. Half of these errors were undercharges and half were overcharges. A total of 107,096 items were checked. In the 1996 study, one of every 21 items checked (4.82 percent) was mispriced. Slightly more than half of these errors were undercharges and the remainder were overcharges. A total of 17,928 items were checked.
- Each undercharge averaged $5.28, and each overcharge averaged $3.20. In the 1996 study, each undercharge averaged $2.96, and each overcharge averaged $3.02.
- For sale items, pricing errors were found in 1 of every 28 items checked. Almost two-thirds of the errors found were overcharges; the remainder were undercharges.
- For non-sale items, pricing errors were found in 1 of every 32 items checked. Slightly more than one-third of the errors found were overcharges; the remainder were undercharges.
- Some stores have achieved outstanding pricing accuracy. In 43 percent, or 720 of the 1,669 inspections, no price errors were found.
- Most stores have acceptable pricing accuracy. 71 percent of the inspections, or 1,188 out of 1,669, "passed;" that is, at least 98 percent of the items checked were correctly priced. In the 1996 study, only 45 percent of the inspections "passed."
- Some stores have pricing accuracy problems. 29 percent of the inspections did not pass; that is, less than 98 percent of the items checked were correctly priced. In these inspections, an average of 91 percent of the items checked were correctly priced.
- Wide variations were found in pricing accuracy from chain to chain and store to store. Among the types of stores inspected, food stores as a group had the highest pricing accuracy, while hardware stores as a group had the lowest pricing accuracy.
Electronic checkout scanners are in retail stores everywhere. Most everyday items bear a Universal Product Code (UPC). This symbol -- a series of numbers and vertical bars of varying thicknesses -- is a unique shorthand for product information in the store's computer. When a cashier passes the UPC symbol over an electronic scanner, a computer decodes the symbol, sending the product's name and price to the register. At the same time, the price is shown on a display screen, which may or may not be visible to customers, and a receipt is printed for the consumer.
For retailers, scanner technology has increased checkout productivity and improved sales and inventory records, creating greater efficiencies in reordering and shelf space allocation. The use of checkout scanners also has resulted in lower labor costs because stores no longer have to mark prices on individual items, unless required to do so by state or local law. Consumers have benefited from faster checkout times and detailed receipts that provide both product and price information.
The study notes that pricing errors can occur for a number of reasons. As they conducted the survey, inspectors tried to identify the causes of the pricing errors found during the inspections. Inspectors found that pricing errors on sale items resulted from numerous problems, including incorrect shelf and item prices, incorrect sign prices, out-of-date signs and incorrect prices in the computer. For errors on non-sale items, incorrect shelf and item prices were largely responsible.
According to the report, whatever the cause, scanner pricing errors adversely affect retailers and consumers. For example, a failure to comply with pricing accuracy laws can result in substantial fines and administrative or judicial orders against the retailer. Further, retailers lose profits on undercharges and consumers lose money on overcharges. In addition, pricing errors can reduce consumer satisfaction with a retailer. Taking the time to bring the error to the store's attention is often inconvenient or not worth the consumer's time, especially when the error is detected after the item has been purchased or the amount at issue is small. Finally, inaccurate posted or advertised prices frustrate consumers' efforts to compare prices.
Because overcharges can occur in all stores and on all kinds of items, the report recommends that consumers carefully compare advertised or posted prices to scanned prices at checkout. Ultimately, however, responsibility for accurate pricing rests with the individual store and its employees. The organizations participating in the study urge retailers to continue to examine and, if necessary, change their pricing practices voluntarily.
The Price Check II inspections were carried out by weights and measures officials in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Iowa, Idaho, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, North Carolina, New Hampshire, New Jersey, Nevada, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, U.S. Virgin Islands, Utah, Vermont, Washington and West Virginia.
The Commission vote to release the report was 4-0.
Copies of the 1998 and 1996 "Price Check" studies, as well as consumer and business education materials, are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
A list of local weights and measures media contacts is attached.
(FTC File No. P944206)
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