Walgreens has agreed to pay $500,000 in penalties, fees, and costs related to misleading advertising practices that led to New York customers being overcharged for products.

“Businesses are required to ensure that their advertisements are truthful and not misleading,” stated New York Attorney General Eric T. Scheniderman in a press release announcing that a settlement with Walgreens and its subsidiary Duane Reade was reached on April 21, 2016. “When consumers purchase products at retail stores in New York, they should be able to rely on the prices displayed in advertisements and on shelf tags and not have to worry about being overcharged when they get to the register.”

Michael Zucker, director of Change to Win Research Initiatives, stated that Walgreens had failed to create adequate systems that ensured products were accurately priced. 

“We’ve seen these deceptive practices in a number of other states, costing consumers and violating the public trust,” Zucker said in the press release. “We applaud Attorney General Schneiderman for taking strong action and standing up for New York consumers.”

An undercover investigation found several types of “deception” in the 251 Walgreens stores and 214 Duane Reade stores in New York.

For example, customers saw products listed with a certain price in print ads and on store shelf tags, but in some cases, they were charged a different price at the register. This included shelf tags that remained up after the advertised price had expired.

Walgreens also used labels like “Smart Buy” and “Great Buy” even when the advertised price was the same as the typical price for the product. “Last Chance” and “Clearance” tags were also used to mislead customers into believing a reduced price was available for a limited time, but in some cases, the reduced price was available for almost a year.

Sometimes, Walgreens implied that customers would receive an immediate cash discount, when the discount would actually be redeemed on a future purchase.

The attorney general’s office also took issue with Walgreens’ Balance Rewards Points program, saying it lacked clear and consistent information.

For example, Walgreens has a chart on its website that says customers can redeem points starting at 1000 points, but it also has another chart saying customers can redeem points starting at 5000 points.

“Furthermore, Walgreens employees did not routinely ask consumers whether they want to redeem their accumulated points toward their current purchases during the checkout process,” the attorney general’s statement read.

In addition to paying the $500,000 fine, Walgreens has agreed to reform its advertising and business practices in New York.

It must remove expired shelf tags within 36 hours, restrict the use of “Smart Buy” or “Great Buy,” and refrain from using “Last Chance” or “Clearance” tags when the item is available at a reduced price for an extended period of time.

Walgreens will also conduct internal and external price check audits in stores. If a store fails 2 consecutive external audits, it will have to pay a $2500 penalty.

In addition, Walgreens will update its system to display a customer’s Balance Rewards Points, and customers will be asked if they want to redeem their points on every fifth purchase.