DON'T GET CHEATED BY SUPERMARKET SCANNERS Last year alone, supermarket scanner errors cost shoppers more than $1 billion. Here's what you can do to stop getting gouged at the checkout counter.

(MONEY Magazine) – Like most smart shoppers, you probably scout supermarket specials and compare prices. Yet you have a one-in-10 chance of losing some savings when you hit the checkout counter. Consumer rights attorney Eugene DeSantis, 39, pictured at right, noticed mistakes in his grocery bills so often he decided to fight back. Last December, a small-claims court judge ruled DeSantis had been overcharged five times in three months at a Grand Union supermarket in East Greenbush, N.Y. That suit was his second against Grand Union for the year and his third against a major grocery chain within the past three years. ''I'm incensed,'' says DeSantis. ''The same errors happen over and over. It's worth my time to take a stand.'' The culprit? Your friendly neighborhood supermarket scanner, that laser- shooting, laborsaving electronic device first installed in stores back in 1973 and found in 81% of the country's 30,400 or so grocery markets today. Scanners err more often than most shoppers realize. And usually the errors are in the store's favor. The disturbing conclusion: In many cases, overcharges may be deliberate. ''Consumer deception appears to be occurring at an alarming rate at some stores,'' says marketing professor Harold Kassarjian at UCLA's Anderson School of Business Management. ''Such overcharges are more than just sloppiness.'' MONEY's reporting, plus an exclusive, two-month survey, has discovered: -- Scanners may overcharge at 30% of stores. At stores that overcharge, you may overpay for one out of every 10 items, on average. -- While scanner abuse may represent only nickels and dimes for any one customer, those errors add up. Based on MONEY's sample, we estimate annual losses to consumers of $1 billion owing to scanner overcharges. InformationWeek, a trade publication for computer system managers, estimates those losses at $2.5 billion. -- Scanner errors account for more than half of supermarket profits. The industry argues that scanner error cuts both ways. ''A store could be undercharging a customer as easily as it could be overcharging one,'' says James Morford, president of the New Jersey Food Council. But the MONEY sampling of 27 major supermarket chain stores in 23 states, as well as two other studies in the past two years, shows that scanner errors hurt shoppers more. In the stores that MONEY surveyed, our correspondents purchased 10 randomly selected items, and in 30% of the stores, they were overcharged on at least one item. Our reporters found undercharges in only 7% of stores. And 63% of stores were accurate on all charges. Overcharges occurred on both regular- and sale-priced products, although more often on sale items. In Ann Arbor, for example, one Kroger store charged us $1.49 for mushrooms on special for 99 cents. A Miami Winn-Dixie more than doubled the sale price of a pound of brussels sprouts, automatically ringing up $1.97 instead of 89 cents. And in Portland, Ore., an Albertson's scanner rang up $2.99 for a can of clam chowder listed for $2.69 on the shelf tag. A UCLA test produced similar results. Kassarjian and his colleagues purchased 1,245 items at five discount stores and 10 supermarkets (three chains in all). At one chain, they were overcharged five times more often than they were undercharged. ''If these were truly random errors,'' says Kassarjian, ''then about half of them should have been in our favor -- they shouldn't have been overwhelmingly against us.'' And a 1991 study of 21 local markets by New York City's Department of Consumer Affairs also found the odds stacked. Reports Commissioner Mark Green: ''When it is 10 times more likely that shoppers were overcharged rather than undercharged, it appears that the problem is intentional error.'' How do scanners cheat? When a cashier whisks your groceries over the glass- enclosed electronic eye, the scanner reads the bar code, called the Universal Product Code (UPC), on each item and calls up the price from the store's computer. Many supermarket chains, especially the larger ones, have a central data base that electronically sends as many as 1,000 to 3,000 weekly price changes to each store. But store personnel may neglect to correctly or immediately update either the shelf tags or the store's own computer listings. Industry managers contend that stores work hard to ensure accurate scanners, often hiring at least one full-time employee exclusively to check prices in the computer against those on shelves. ''The push to make sure that shelf price matches scanner price is a high priority,'' says Edie Meleski at the Food Marketing Institute, an international trade group that represents 1,500 food companies. ''Whenever there's an overcharge,'' continues Meleski, ''supermarkets generally give the item to the customer for free. So considering profit margins of less than a penny on the dollar at most stores, any loss like that would prove a strong incentive to get prices right.''

You would think so. Yet four times in our survey, MONEY reporters who spotted scanner mistakes identified themselves to store managers or other personnel and informed them about the mistakes. Then -- as a test -- MONEY shopped the same stores the following day. Two were still overcharging customers. Moreover, three months after we conducted our survey, our correspondents tried again, shopping every store where we had found overcharges. Two out of the eight were still overcharging. In fact, scanner errors pay off for stores, especially on sale-priced items. If profits are, on average, close to 1% of store sales -- roughly $280 billion at markets that use scanners -- total consumer losses to scanner overcharges could make up 50% of profits. ''Managers sometimes have bonuses that are tied to their ability to achieve profitability,'' says Leo Harty, director of retail marketing for NCR, one of the largest manufacturers of computerized scanners. ''In some cases, a dishonest person could either change prices or not enter sale prices so consumers pay higher prices.'' Sale items and limited-offer promotions are particularly prone to error, because they depend on someone entering changes in the computer. And again, the ''errors'' overwhelmingly favor the industry. In the New York City survey, for example, supermarkets wrongly charged regular prices on 10% of their sale items, undercharging consumers on only 1% of such purchases. Consider Ralphs Grocery, the oldest chain in the West, where, last spring, inspectors from the Los Angeles County Department of Weights and Measures were overcharged on almost 19% of sale items at seven supermarkets in the San Fernando Valley. The Los Angeles city attorney's office filed criminal charges last June against the 159-store, $2.8-billion-revenue chain, and Ralphs admitted to overcharges when the case was settled in November. But the company claimed that the errors had been unintentional. In one instance, the scanner registered $12.99 for a bottle of wine on sale for $9.99. In another, an inspector was charged 13% more than the sale price for a box of doughnuts ($1.35 instead of $1.19). The store agreed to pay $9,450 in fines and penalties and to provide employees with training in shelf-tag and computer accuracy. Maybe this time it'll work. Almost six years ago, however, district attorneys in Los Angeles and San Diego found an 18% overpricing error rate in the Ralphs stores -- close to the 19% rate reported at the stores last year. Similarly, without admitting wrongdoing, Ralphs settled the September 1987 cases by paying fees and penalties of $70,784. Responds attorney Jan Charles Gray, senior vice president at Ralphs: ''In both cases, the inspections didn't take undercharges into account. Besides, in the last case, the selection wasn't really random -- they chose items with expired sale dates.'' The solution, of course, is tougher and better consumer protection. While a handful of states and cities still have laws requiring stores to mark prices on each grocery item, the overwhelming majority now require only shelf tags, those hard-to-read labels now found on supermarket shelving. As a result, when shoppers reach the checkout line with unmarked items, they cannot easily catch errors as prices flash on the cash register, assuming shelf tags were right in the first place. ''There is nothing to check prices with -- except memory,'' says Margaret A. Charters, director of the consumer studies program at Syracuse University. ''You can't even challenge a price without holding up yourself and the entire checkout line while someone goes to check the shelf.'' Around the country, frustrated consumer groups are lobbying to get local governments to bring back item pricing, which would require stores to mark prices on all or most groceries. The New York Public Interest Research Group, for instance, is currently rallying support to pass an item-pricing law next year. In Philadelphia, the Action Alliance of Senior Citizens is compiling evidence of overcharges, the proof it needs to get item pricing on the books. Supermarket companies oppose item pricing mainly because it would force them to double the weekly $2,000 or so they now spend on shelf tags for each store. According to Margaret Charters, however, retailers could easily afford item pricing. In states that already have item-pricing laws, consumers still face an uphill fight. ''Item pricing is a difficult battle,'' concedes Martin Sloane, executive officer of the National Alliance of Supermarket Shoppers. ''The supermarket lobby is powerful.'' In Arizona, for example, the Consumers Council and the Center for Law in the Public Interest are preparing to sue the attorney general's office, claiming that a five-member industry review panel has a clear bias against consumers. ''Astonishingly,'' says Phyllis Rowe, executive director of the Arizona Consumers Council, ''last December they took only minutes to reject our proposal for accuracy checks on scanners despite clear evidence that stores were not changing scanners even after learning of errors -- a criminal practice that should be subject to severe penalties.'' What can be done to prevent scamming scanners? You can lobby your supermarket company as well as local and state government to adopt the following measures. (And in the meantime, when you shop, guard your pocket by following our advice in ''How to Beat the System,'' the box on page 134.) -- New laws. Last summer, for example, Philadelphia enacted a law that requires stores to pay scanner licensing fees to support an undercover inspection program by city officials. -- Increased enforcement of existing laws. In California, for instance, where consumer protection officials are aggressive, state and local prosecutors have successfully brought suit against at least four major chains in the past four years -- adding up to individual fines as high as $100,000 for overcharges at Safeway, Vons, Lucky and Ralphs. -- More industry policing. The Pennsylvania Food Merchants Association, representing 1,900 food companies, for instance, runs a new statewide accuracy program that incorporates many of the pricing standards required by Philadelphia law, including on-site inspections. -- Improved technology. Last fall, the Connecticut legislature exempted stores from its universal product coding law if the markets installed computerized shelf tags -- one of the latest high-tech products available to the industry. ''With electronic unit-price shelf tags,'' says Joseph Lembo, legal director at the state's consumer protection department, ''errors should be eliminated.'' Until such consumer protections are in force, however, shoppers are advised to watch that little red beam very carefully. Says Charters at Syracuse: ''Without a constant check of scanners, the potential for error and the temptation to use them dishonestly remains.''