PRACTICES MIXED ON INTERNET COUPONS

Michael Garry

In the wake of the coupon fraud incidents stemming from the Internet that struck the Atlanta market and elsewhere last month, retailers are taking a variety of stances on whether to accept any or all coupons sourced from the Internet.

Price Chopper Supermarkets, Schenectady, N.Y., which banned Internet coupons at its stores last month after an "influx of fraudulent coupons," is sticking with this policy "until we can figure out which Internet coupons are fraudulent vs. which are legitimate," said Mona Golub, Price Chopper spokeswoman.

Other chains that as of last week continued to impose a blanket policy against accepting Web coupons included Kroger (in Atlanta), Harris Teeter and Wegmans.

On the other hand, Food Lion, Salisbury, N.C., which has continued to accept all coupons, has "done some things to help our cashiers and store managers better recognize legitimate and illegitimate coupons," said Jeff Lowrance, spokesman for the chain. He declined to provide details because "we don't want to tip our hand to the counterfeiters." Overall, he added, "counterfeit coupons have not been a huge problem for us thus far."

Companies that provide the technology for disseminating coupons over the Internet -- including Chicago-based CoolSavings and Belmont, Calif.-based Coupons Inc. -- have been urging retailers to continue accepting their legitimate coupons and rejecting only coupons for free products, which those companies don't support.

As of last week, Publix Super Markets, Lakeland, Fla., which had initially banned acceptance of the Internet coupons in Atlanta, was also applying the policy of rejecting only free-product coupons, at least in some Florida stores. Though a corporate spokesman told SN that Publix continues to refuse acceptance of all Internet or computer-generated coupons, a Publix store at the Pine Ridge Crossing Shopping Center in Naples, Fla., posted signs at all checkouts announcing that the store will no longer accept coupons for free items.

The Naples store sign read, "Due to heavy activity on counterfeit Internet manufacturers coupons, we will no longer accept coupons for FREE items if they appear to have been photocopied or printed off of a home computer and DO NOT have a recognized .com address on them."

An employee at the Naples Publix who responded to a call from SN initially said that the store does not accept Internet coupons. Asked about the sign's reference to not accepting free coupons, the employee replied that "it depends on how much the discount is. It's at our discretion or our manager's discretion." Would the store accept a 50-cent discount coupon? "Most likely, but we'd run it by the manager," said the employee, who said the policy had been adopted companywide.

Late last month, the Food Marketing Institute and the Grocery Manufacturers of America entered the fray when they jointly sent a letter to Meg Whitman, president and chief executive officer, eBay, asking her to add grocery coupons to the list of items the online auction site prohibits. Some fraudulent coupons were said to have been sold via eBay auctions and then e-mailed to recipients. Mathew Moog, president and CEO, CoolSavings, said he is "in daily communication with eBay and we do expect progress."

Moog insists that "the vast majority of the fraudulent coupons are for getting free products. That's why we don't allow our manufacturer clients to distribute a printable coupon for a free product." The simple solution, he said, is for retailers to not accept any free coupons. The Web site of the Coupon Information Center, www.cents-off.com, provides a list of coupons with counterfeit versions in circulation; on a recent list, most of the coupons were for free products, though some were for discounts ranging from 75 cents to $10.

Moog said that CoolSavings now requires its manufacturers to print the name of the coupon user on the Web coupon. Consumers who download coupons from the Internet need to register, thereby providing some identification. "Before we strongly recommended it but now we require it," he said. "That makes the coupons less transferable and more secure than traditional coupons," which traditionally have a much higher rate of mis-redemption than Web coupons, he added. Moog said he is working with Steve Boal, CEO of Coupons Inc., to establish printing of a consumer's name on coupons as a standard practice.

Moog said that CoolSavings also prints a unique serial number on each coupon as well as its company logo, but "we don't expect everybody to adopt these."

Boal told SN that his Coupon Inc.'s manufacturers are able to print names of users but his company has not required it because in some cases, notably for lifestyle and hygiene products, manufacturers do not require consumers to register to receive coupons. Still, many of his clients do print names and "we're under discussion with some clients."

Boal, who also discourages retailers from accepting coupons for free products, said he has only one client left who distributes them and after the contract expires, Coupons Inc. will no longer permit any company to do so.

Coupons Inc. has also launched a few Web sites dedicated to the issue. One, www.veri-fi.com, enables retailers to enter a code from a Coupons Inc. coupon to confirm that it's legitimate. Boal said that just about all coupons checked on the site have proved valid. Coupons Inc. also set up a clearinghouse for information about fraudulent coupons, http://news.coupons.com.

Boal said he is receiving complaints from consumers who are unable to use Internet coupons at some stores.

Dadi Akhavan, president of E-centives, Bethesda, Md., said his company encourages manufacturers to use the company's tracking mechanisms to "go after the culprits." E-centives' manufacturers are also able to disseminate information about their coupons to retailers via Web sites. He warns against making it too hard for consumers to use coupons in the name of fraud prevention.

Barry Kotek, managing partner, Retail Systems Consulting, Naples, Fla., noted that one way to resolve the issue is to make all Internet coupons electronic. For example, using the U-pons program from Chicago-based Transora, Giant Eagle's site lets loyalty card consumers access coupons by simply clicking on them and redeeming them at the store.