COUNTERFEIT COUPONS FLOOD ATLANTA MARKET

David Ghitelman

ATLANTA -- Awash in a sea of fraudulent coupons apparently distributed over the Internet, several chains in the Southeast last week stopped honoring all downloaded coupons.

Atlanta was the center of the storm, according to Kathy Kuwaza, president, the Georgia Food Industry Association, Smyrna, Ga.

Kuwaza told SN that Atlanta-area supermarkets have in the last two weeks been inundated with fraudulent coupons downloaded from the Internet.

She said manufacturers' coupons, complete with UPC codes, are being received by shoppers as e-mail attachments. "In many cases, the customers don't know the coupons are counterfeit," she observed. "And the retailers are at a total loss of how to cope."

The two supermarket chains that dominate the Atlanta market -- Publix Super Markets, Lakeland, Fla.; and Kroger Co., Cincinnati -- tried to cope last week by refusing to honor downloaded coupons, an effort in which they were joined by Harris Teeter, Charlotte, N.C.

Harris Teeter said it was not honoring Internet coupons at any of its stores.

Industry sources said Publix had adopted the same policy, although the company declined to comment, and published reports said it was continuing to honor the coupons at its Florida stores.

Kroger said it was not accepting the coupons at stores in its Atlanta division.

The Grocery Manufacturers of America, Washington, urged retailers not to follow their lead. Dan Bushey, GMA's senior coordinator of industry affairs, told SN, "This is not a trend we would like to see continue."

Bushey said GMA advocates education on the issue for manufacturers, so they can develop coupons that are more difficult to counterfeit, and for retailers, so their clerks can more readily recognize counterfeit coupons.

Internet coupon companies told SN the ban on downloaded coupons by some supermarket companies was based on a misunderstanding of what had happened in Atlanta.

Matt Moog, president and chief executive officer, Cool Savings Inc., Chicago, an Internet coupon organization, explained, "Some criminal took a bunch of traditionally printed coupons, scanned them into his computer, and used the Internet to sell those coupons."

Moog noted that the last time he counted, there were more than 6,000 auctions for more than 100,000 coupons in progress on a popular Internet auction site. "Ninety-nine percent of these are not Internet coupons," he said. "These are coupons that people got from newspaper advertisements or direct mail."

His advice to retailers is to refuse to accept manufacturers' coupons for free product that look like they have been photocopied. Supermarket clerks, he noted, would not accept a $100 bill that was black and white with printing on only one side.

Moog's advice to manufacturers: Don't distribute coupons for free product, or coupons that are good for more than a $2 discount.

Steven Boal, CEO, Coupons Inc., Belmont, Calif., another Internet coupon organization, told SN that his company was rolling out last week a free, Internet-based automated fraud-detection system, available at www.veri-fi.com. (The timing of the system's release, he said, was coincidental.)

Boal said the system makes consumer-printed coupons downloaded from the Internet more secure than traditional coupons.

Internet-related coupon fraud, he noted, "is a problem that's already been solved, but the solution hasn't quite caught up with the problem yet."