Skip navigation

STOP & SHOP SETTLES BILLBACK, TPR DISPUTE

QUINCY, Mass. -- Stop & Shop Cos. here said it has agreed to pay $700,000 to the U.S. Attorney for the District of Massachusetts to resolve disputed claims involving scan billbacks and temporary price reductions. the settlement agreement, Stop & Shop said it was not paying a penalty nor acknowledging any guilt. The company said the chain and the U.S. attorney had agreed to settle the claims "to avoid

QUINCY, Mass. -- Stop & Shop Cos. here said it has agreed to pay $700,000 to the U.S. Attorney for the District of Massachusetts to resolve disputed claims involving scan billbacks and temporary price reductions.

the settlement agreement, Stop & Shop said it was not paying a penalty nor acknowledging any guilt. The company said the chain and the U.S. attorney had agreed to settle the claims "to avoid the uncertainty and expense of further litigation."

According to Peter M. Phillipes, the chain's executive vice president of administration and general counsel, the dispute over scan billbacks involved Stop & Shop's practice of boosting by 20% the number of scanned items billed to vendors after a promotion to account for potentially erroneous scans just before and after promotional periods, "which the government said should be disclosed to suppliers.

"Our contention was that all suppliers knew about the practice, but we began disclosing it a year and a half ago, and we have not lost any suppliers since."

Phillipes said the dispute over temporary price reductions involved Stop & Shop's failure to lower prices in certain areas despite receiving vendor allowances to do so. He said in the instances questioned by the government the chain practiced zone pricing and had already lowered prices to compete against everyday-low-price operators.

"The government questioned why we didn't reduce prices in those areas where we were already operating with lower prices, when we got temporary price reductions from manufacturers -- something our suppliers already knew about anyway," Phillipes told SN. Phillipes said the claims against Stop & Shop stemmed indirectly from a federal investigation of several New England food brokers that began in 1993, which focused on the handling of incentive funds paid by manufacturers through brokers to retailers for use in in-store displays, couponing and other promotional activities.

That investigation led Stop & Shop to terminate four executives for allegedly accepting gifts or mishandling promotional funds, Phillipes said, "and it was one of those executives who pointed the finger at the company and suggested the government look at what we were doing on scan billbacks and temporary price reductions," he added.

Those accusations resulted in a raid by 60 agents of the Federal Bureau of Investigation at 7:30 a.m. Jan. 27, 1995 at Stop & Shop's headquarters here and a computer data center in Braintree, Mass.

The raid resulted in a six-hour search of the two facilities, during which more than 200 boxes of documents from the chain's accounting and pricing departments were removed.