Amid a morning of frenzied shopping near her home in suburban Columbus, OH, recently, Renee, 51, spotted the perfect gift for her dentist-husband at a local department store: a brushed-leather bomber jacket that was the bargain of the season. Not only had the price been slashed from $330 to $135, but there was a storewide 33 percent-off sale and Renee had a coupon in hand for 20 percent off any store purchase.

It seemed too good to be true, and it very nearly was.

After the salesclerk passed a scanner over the bar codes on the jacket’s price tag and the coupon, the computerized cash register flashed a $90 total. Renee thought that sounded steep considering all the discounts, but she hadn’t actually done the math, so she paid without questioning the price. “There were people behind me, and I didn’t want to hold up the line.” Between the cash register and the parking lot, though, an inner voice of doubt continued to nag.

Renee returned to the store and asked the clerk to double-check the price. Sure enough, when the numbers were all keyed in by hand, Renee discovered she’d been overcharged nearly $20.

In our brave new computerized world, we often assume that checkout-line scanners, now found in nearly every major discount, department, drug, and grocery store, are finely tuned models of accuracy–or, at the very worst, that occasional pricing errors are strictly nickel-and-dime stuff. But scanner errors are much more common than you might imagine–and retail overcharges may be costing consumers as much as billions of dollars every year.

“Going through a checkout line with a scanner is like rolling the dice,” says Bill Stephans, deputy agricultural commissioner and sealer of weights and measures in San Diego County, whose department inspects scanners. Last Christmas, Stephans’s inspectors bought 375 items from 32 discount and department stores. They discovered that 11.5 percent were mispriced–and of those items, twice as many were overpriced as were underpriced. Stephans says that after projecting such losses over an entire year’s worth of shopping, he puts the annual net loss to San Diego County consumers at $33.5 million. Statewide, the Department of Agriculture has estimated that scanner overcharges cost Californians as much as $250 million a year.

Across the country, nearly 5 percent of all retail transactions are scanned with an incorrect price, according to a 1996 Federal Trade Commission study. And the percentage is quite a bit higher for the chief offenders: department stores, drugstores, hardware stores, and discounters. (For example, in 1996, before it agreed to correct its error rate in a settlement with Boston’s Inspectional Services Department, the Osco Drugs chain in Boston had an average error rate of 77 percent; overcharges were three times as common as undercharges.)Factor in promotional sales, peak shopping seasons (Christmas, Memorial Day), and today’s downsized, overworked sales forces, and you have a recipe for chaos.

Few are accusing stores of being out-and-out scam artists. It seems clear that plain old human error is the culprit. But some observers wonder whether retailers are doing their best to clean up the mess. “If you catch the wrong price, the store will give you the right price,” says Stephans. “If you don’t catch it, well, the store made a little money. That may not be the retailers’ attitude, but it can be looked at that way.” Mary Bach, a former Pittsburgh-area teacher turned consumer advocate who has battled retailers like Wal-Mart, Kmart, and Ames over scanner errors, also harbors suspicions. “If I were to change the price tags on an item in a store to get a lower price, I would be prosecuted,” she fumes. “But when stores do it to a customer, they throw up their hands and say it’s human error. I’ve heard that one too many times.”

It was a dash into a store to buy a new T-shirt that put John Eade, Boston’s commissioner of inspectional services, on the trail of scanner error. The shirt’s price tag read $11.99; a sale sign advertised everything on the rack for $5.99; the cash-register scanner charged him $6.99. In 1996, the first year that inspectors surveyed Boston’s scanners, 22.5 percent of products were mispriced; of that, almost twice as many mistakes were overcharges. It’s been estimated that Bostonians are overpaying nearly $16 million a year because of scanner errors.

Results were similar in Michigan. “When we began inspecting a few years ago, mistakes ran as high as twenty percent, and sometimes more. I was convinced that the scanners were scamming you unless you were careful,” says Frank J. Kelley, Michigan’s attorney general. “Negligence pays, so there’s no incentive to fix it.”

How Mistakes Are Made

So what exactly has to be fixed? Experts say the technology is not to blame. The bar-code system was created, in fact, to eliminate errors by removing the human element from the equation. Bar-code scanners misread just one in every 80,000 labels, according to David Collins, president of the Data Capture Institute, a research and consulting company for the bar-code industry in Plymouth, MA. “If products scan wrong for very long, it’s not the technology,” says Collins. “It’s bad store management.”

Developed some 30 years ago, bar codes and scanners were first installed in a store–Marsh Supermarket in Troy, OH–in 1974. Within years, scanners were ubiquitous in grocery stores–and so were pricing errors. While the grocery industry has spent millions of dollars to hire price-verification managers to ensure accuracy, the rest of the retail world–where scanners have become commonplace over the last five years–has yet to catch up in terms of goof-proofing their systems.

Here’s how bar codes and scanners work: Every item is assigned a unique product code made up of two strings of numbers representing details right down to size and color. The numbers in a bar code are known as a stock keeping unit (SKU). Each SKU is assigned a price, which is then entered into a computer. When a cashier passes a scanner over a bar code, a laser light reads it and, voila, the computerized SKU price appears on the cash-register terminal.

The first place gremlins can creep into the system is the headquarters of the national retail chains, where prices are set and then shipped to each store on a computer disk or transmitted via the Internet. A mistake made at headquarters is passed along to every store like a computer virus.

More often, mispricing errors seem to be part and parcel of today’s ultracompetitive retail climate. “Whenever we or one of our competitors runs an ad with a sale item, the other stores change their prices to match it,” says Dave Ritzman, director of customer service and education for Mercantile Stores West. But in the stores themselves, employees aren’t altering bar codes to keep up with all the pricing fluctuations–often because of understanding.

“The biggest complaint I get from store managers is that mistakes happen over and over because of a lack of manpower and a lack of commitment from the top,” says Ken Butcher, a weights and measures coordinator with the National Institute of Standards and Technology (NIST), an agency of the U.S. Department of Commerce.

In San Diego, retailers have blamed widespread errors on Christmas-shopping mayhem, when battalions of untrained temporary workers arrive just as special sale days send prices haywire. So, last February, after the holiday madness had subsided, Bill Stephans sent his inspectors back into the field. The result: Things were even worse, During the holidays, errors had been detected at roughly one third of the surveyed stores; now they were found at two thirds. And, once again, there were twice as many overcharges as undercharges. Even Stephans was shocked.

Making Shopping Safe

In an effort to get retailers to shape up, the Department of Commerce has set an industry goal of a 2 percent error rate–meaning that just two out of every 100 products purchased would scan incorrectly, including overpriced and underpriced items. But, in a business rife with pricing blunders, this is an ambitious goal. Even if it were met, a typical superchain would still incorrectly scan about 46,000 items each year.

Government officials have find that one way to motivate retailers to do a better job is by shining a light into the dark corner of overcharging. Michigan inspects stores every Christmas and then releases the results to the press. “We found the only way was to embarrass them publicly,” says attorney general Kelley. Since 1994, when the Yuletide reports began, the state’s scanner-error rote, which includes underpricing, has dropped from 20 percent to 13 percent. Michigan has also passed a consumer rebate law that awards overcharged customers between $1 and $5 (in addition to reimbursement of the amount overpaid).

Other states, among them Texas and Kansas, and some cities, such as Seattle, have started taking a tougher look at store scanners. Thanks to all this inspection, errant stores are being socked with steep fines. In 1994, Kmart, under California’s unfair business practices law, was hit with nearly $1 million in penalties and fines for persistent scanner violations. In recent years, Montgomery Ward has paid more than $150,000 in fines in Kansas alone, including a $90,000 settlement this past March.

Some retailers are voluntarily working hard to make changes. After several poor inspections, Mercantile Stores West shut down the scanners in its Jones department stores in Kansas for nearly 14 months so additional trained personnel could be put into place. “We didn’t want the consumer thinking we’re trying to manipulate the prices, and it’s up to them to catch us,” says Dave Ritzman. “We wanted the stores to take this seriously.”

Both Kmart and Wal-Mart now have rebate policies similar to the Michigan law, awarding $3 to overcharged consumers. Wal-Mart has also installed text scanners in its stores so customers can verify whether the on-the-shelf price matches the scanned price before they get to the checkout line. And Kmart has sent price-verification managers to high-volume stores with a tendency toward pricing problems. “We take the trust of the franchise that we have with our customers seriously,” says Mary Lorencz, Kmart’s director of media relations.

The combination of bad publicity, tougher regulation, anti stiff fines is starting to pay off. In communities that police their retailers, not only have error rates come down, but underpricing mistakes have begun to exceed overpricing ones. In 1997, a year after Boston’s first public survey, the 22.5 percent error rate sank to 4.7 percent; only 40 percent of the errors were overcharges.

Still, relatively few communities can afford to hire scanner inspectors. That’s why many states are watching to see what happens to a bill introduced by State Senator Quentin L. Kopp (I-CA). Under Kopp’s plan, retailers would pay a nominal annual fee to the county for their scanners, just as gasoline stations pay a fee for each pump. That money would then pay for additional government inspectors. Not surprisingly, California retailers are hotly contesting the bill. “They don’t want us to have the money to uncover just how much of a problem there is,” says San Diego County’s Stephans.

Meanwhile, customers must keep a sharp eye on the cash register and always check receipts against on-the-shelf prices and tags. While it might sound tiresome to hunt down scanner error at every turn, it’s the only way to make sure that what you sec on the shelf is what you pay at the cash register.