Net Coupon Industry Deals with Scam Fallout

A coupon fraud scheme perpetuated via the Internet has led one major grocery chain and numerous other supermarkets to stop accepting any computer-printed coupons.

The move by Lakeland, Fla.-based Publix came after a number of reports surfaced of fraudulent coupons circulating the Internet. The fake coupons, while not actually online coupons, were distributed via email, in chat rooms, and on online auction sites, according to the Coupon Information Center (CIC), an Alexandria, Va.-based watchdog group set up by consumer manufacturers against coupon fraud.

According to Publix spokeswoman Brenda Reid, the uncertainty surrounding computer-printed coupons was enough to put a halt to the redemption of all online coupons at all of Publix’s 768 supermarkets.

“The fraudulent ones look exactly like the legitimate ones,” she said.

Publix is not alone. Matthews, N.C.-based Harris Teeter said last week that it would stop accepting Internet coupons at its 141 stores. A number of other stores temporarily stopped accepting Internet coupons, as well.

The bogus coupons began turning up about two weeks ago in the Atlanta area. The coupons were copies of free product offers for a number of products, including Salon Selectives shampoo, Haagen Dazs ice cream, and Dove soap. The offers were scanned into a computer and then transmitted by the Internet.

While fake coupons have been part and parcel of the retail industry, common home technology like computer scanners and graphic design programs make reproducing coupons easy, and online auction sites offer wide distribution. For example, eBay has thousands of coupons for sale, although coupons’ terms of use generally state they are non-transferable.

The Food Marketing Institute and Grocery Manufacturers of America jointly wrote eBay last week asking it to shut down coupon sales. The auction site has yet to do so.

After CIC and other industry groups sent out an alert to stores to be aware of computer-printed free product coupons, some stores in the Southeast and other parts of the country banned all computer-printed coupons, including legitimate Internet coupons.

“The grocery retailers overreacted,” said Matthew Moog, CEO of CoolSavings, a leading Internet coupon company. “They made a quick and, it turns out, incorrect decision to stop accepting all Internet coupons.”

In fact, Moog pointed out, CoolSavings and other major online coupon companies do not distribute free product coupons, which are usually confined to mail-in offers or to placate disgruntled customers.

Kathy Lussier, a spokeswoman for Winn-Dixie, said it never instituted a ban on Internet coupons at its more than 1,000 supermarkets in the Southeast, although she allowed that some Winn-Dixie stores might have misinterpreted the counterfeit-coupon warning.

We never stopped accepting the coupons,” she said. “We have them ourselves on our Web site.”

Steven Boal, the chief executive of Coupons, Inc., another major online coupon company, said the confusion over the fraudulent coupons pointed out the need for better industry communication. To further this, the company set up the Coupon Industry Resource Center, a Web site that acts as a clearinghouse of industry news and updates on problems such as the fraudulent-coupon scare. One of the sections of the site is devoted to a fraud watch list that includes examples of the fraudulent coupons.

“Everything got lumped in,” he said of the stores that refused Internet coupons. “As the information disseminates properly, we’re finding retailers are taking very mature approaches.”