Safeway to repay
shorted customers

A computer error caused
over-taxing of some using
a special discount coupon

By Ian Lind
Star-Bulletin

Safeway has corrected a computer error that caused some frequent shoppers to be shortchanged when using special "5 percent discount" coupons issued by the grocery chain as part of a popular promotion.

The company is offering refunds to customers with receipts, and will make a special charitable contribution in Hawaii to compensate the community.

Safeway learned of the problem several weeks ago when questioned by the Star-Bulletin, according to Debra Lambert, Safeway spokeswoman in the company's Pleasanton, Ca., headquarters.

The errors occurred only when a Safeway Club card was used to buy sale-priced beer, wine or liquor at the same time a 5 percent coupon was redeemed.

In those cases, customers received smaller discounts than they were entitled to because the computer system incorrectly calculated the amounts eligible for the coupon discounts, which by law cannot be applied to alcoholic beverages.

"When coupons were redeemed, the calculation was incorrect," Lambert said.

Lambert said an investigating team traced the problem to a computer program that processes transactions as cashiers ring up each sale.

"There is an issue involving the IBM code that is in place at the point of sale, and how it works," she said.

"We've had discussions with IBM, which provides these systems for us and for other retailers as well. It's been corrected, and all new versions of that code, going forward, will be able to address this type of situation."

In three cases examined by the Star-Bulletin, customers were shortchanged between $1 and $2.

For example, one receipt showed total eligible purchases of $71, which should have resulted in a discount of $3.55, but the customer received just $1.85.

Lambert said the problem affected Safeway stores in Northern California, Nevada and Hawaii. "Only a very small number, only a few percent" of all transactions were involved, she said.

However, Lambert said she could not estimate the total amount lost by consumers.

She declined to disclose the number of discount awards issued or the dollar amount of such sales, citing competitive considerations.

"I can tell you that, of all Safeway transactions, less than 10 percent include alcohol, and the number using a club card and an award coupon would be much smaller."

Safeway operates about 1,650 stores across the mainland and Canada, and 19 stores in Hawaii, with total revenues in 1998 of $24.4 billion.

Safeway is taking several steps to reimburse consumers and communities hit by the problem.

"If you have a receipt, we definitely want to refund that amount," Lambert said, but privacy concerns and technological hurdles prevent the company from using its computer records to compile a list of individuals who were shortchanged.

Safeway also plans to make a contribution of about $5,000 to a Hawaii charity "as a gesture of good will."

"We stand behind the community, and we would like to make it up to them," Lambert said.

Stephen H. Levins, acting executive director of the Office of Consumer Protection, said Safeway appears to have been responsive, but the matter remains under investigation.

Lambert said Safeway's frequent customers benefited despite the computer errors.

The 5 percent discount promotion, which has been offered several times a year, awards a coupon each time a Safeway Club member spends $250.

The coupons are good for a 5 percent discount off the total bill on a later shopping trip.

"When we are doing this type of promotion -- where you accumulate awards based on how much you spend -- we give the customer all of the benefit in the world by using the total of the regular retail prices, not what you really pay," Lambert said.

Because of this, consumers earned savings awards faster than if only the actual amount paid had been recognized.

"If you got an extra certificate, you were dollars ahead," Lambert said.