Internet scam leads to coupon crackdown
October 25, 2003

HOUSTON- An Internet coupon scam has prompted some Houston-area grocery stores to stop accepting computer-generated or photocopied coupons, forcing customers to go back to clip-and-save coupons.

The decision comes after a rash of phony coupons distributed via the Web showed up at checkout lines nationwide.

The fake coupons typically offer free items ranging from Pepsi to Tide, and they look identical to legitimate coupons.

Some unwitting customers have used the coupons that pass through scanners undetected, costing retailers between $500 million to $800 million each year, according to industry officials.

Industry officials say the scam started last fall, and spread rapidly this summer, particularly in the southeastern United States.

We have had reports from every corner of the country about fraudulent coupons - down to small towns in the heartland, said Michael Sansolo, senior vice president of the Food Marketing Institute.

Houston-area grocers say they have had few problems, but they are protecting themselves.

Kroger has posted signs telling customers it will not accept coupons that appear to be photocopied or printed off a home computer, and Randalls reserves the right to do so as well.

A spokesman for Fiesta Mart said the chain will stop honoring all online coupons in the next few weeks.

H-E-B stores said it will review its policy, while continuing to accept coupons.

We're looking at what other retailers are doing because we have the same concerns that those other retailers do about the high incidence of fraud, H-E-B spokeswoman Holly Montalbano said in Saturday's edition of the Houston Chronicle.

Sansolo said the fraudulent coupons are generated through online auctions and e-mails.

Coupon expiration dates and discounts are altered electronically, then auctioned or sold in bundles for prices starting below $1.

They also can be photocopied using traditional print coupons from newspapers and direct mail, then distributed on the Internet.

Most coupons state that they are void if reproduced, purchased, traded or sold.

The grocery industry is doing what it can to eliminate counterfeit coupons. This summer, Sansolo's group and the Grocery Manufacturers of America asked eBay, an Internet auction site, to discontinue sales and auctions of grocery coupons.

The groups claim the auctions violate manufacturers' terms and conditions prohibiting the transfer of legitimate coupons.

EBay said it is working to stop fraudulent coupons from being sold on its site, but it does not plan to end other sales.

We see no legal reason to ban them altogether, eBay spokesman Chris Donlay said.

The Coupon Information Center is working with law enforcement agencies to stop the fraud.

Penalties for those convicted of coupon fraud vary by each case, and consumers who attempt to use counterfeit coupons also could be prosecuted, the group said.

Industry officials also say they are working on new technology to prevent fraud.

Information from: Houston Chronicle
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