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Hacking Groceries: Internet Coupon Fraud

Over the weekend, my wife and I were shopping at Magruder's, a local grocery chain to which we're fiercely loyal, and we noticed a handwritten sign attached to the credit-card reader in the checkout line:

"Attn customers: Due to coupon fraud, we are unable to take Internet coupons."

A store manager, who asked me to kindly leave his name out of this post, said the store-wide policy went into effect last year, after it became apparent that there was "a lot of cheating going on. People were gang-printing these things by the reamfuls."

I've written about teenage hackers creating wholesale counterfeit coupons to get free pizza and other stuff at popular fast food joints, but the type of coupon fraud that's going on these days makes that type of activity seem like amateur hour.

Curious as to just how bad the coupon fraud problem really is, I checked out the Web site for the Coupon Information Center, a non-profit group based here in Alexandria, Va., which represents the manufacturers that issue 70 percent of the coupons in the United States today. Turns out that the Internet is helping to facilitate coupon fraud on a unprecedented scale.

Consider the ongoing case against International Outsourcing Services, a coupon clearinghouse where a dozen employees were indicted for allegedly submitting more than $250 million in fraudulent coupons over a 10-year period.

A quarter of a billion dollars lost to coupons. And that's just one incident. Bud Miller, executive director of the Coupon Information Center, said federal law enforcement officials are investigating many other cases of small- and big-time coupon fraud.

"You've heard about organized crime, but most of this is really more like disorganized crime," Miller said.

Consider the case of Cynthia Madej, a Missouri woman arrested earlier this year for allegedly creating counterfeit coupons for free products and then selling the items on eBay and at garage sales. Her trial begins this fall.

By Brian Krebs  |  August 27, 2007; 12:15 PM ET
Categories:  Fraud , From the Bunker , Safety Tips  
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Comments

I think the internet as a whole is a very good thing. I think the way some choose to use the internet is a very bad thing. You would think with unique patterns of dots on the back of everything you print, IP logging by servers, and other security procedures, this type of thing would not be as prevalent as it appears. I've always wondered, why do people do these things? To see if they can get away with it? For some kind of thrill? It is sad that there are those who will drive up the cost even more by fraud, making it even harder for those of us who pay for what we have.

Posted by: Carl | August 27, 2007 3:23 PM | Report abuse

What are "internet coupons" and why is it considered fraud to duplicate and use them?

Posted by: Jesse Ruderman | August 27, 2007 5:58 PM | Report abuse

This story is actually quite aged - The store manager said the order came down a year ago. Our Internet coupons are accepted at over 97% of the grocery retailers in the United States as measured by ACV (the measurement of grocery products sold). The IOS fraud story is about offline fraud and nothing at all to do with the Internet. While fraud exists in nearly any currency like marketplace, with specific regard to Internet Coupons delivered from our platform (95%+ all Internet coupon volume) fraud is nearly non-existing.

We have several white papers and case studies if anyone is interested. I am also happy to answer any specific questions directly at sboal@coupons.com.

Steven

Posted by: Steven Boal, CEO, Coupons, Inc. | August 27, 2007 10:27 PM | Report abuse

Uh-oh. Somebody's livelyhood was being threatened there :-)

Posted by: G Mahoney | August 28, 2007 4:19 AM | Report abuse

Safeway, or at least the Safeway on 17th St. NW in the District, does not except coupons that are printed out from the Internet or email either.

Posted by: Dublin Traveler | August 28, 2007 9:15 AM | Report abuse

The Coupon Information Center is not aware of any connection between Internet Print-at-Home Coupons or counterfeit coupons and the ongoing Federal Investigation of allegations of coupon fraud associated with the leadership of International Outsourcing Services, LLC (IOS) or its software vender. I did not suggest or imply any such connection during a brief interview by the Brian Krebs on August 27, 2007.

To suggest any connection as implied by the story is unfair to the companies that produce Internet Print-at-Home coupons. Most of these companies take counterfeit coupons very seriously. Coupons, Inc., in particular, has been very proactive in this area.

I contacted Brian Krebs via phone mail and e-mail the morning I read the story and requested a correction.

Bud Miller, CPP
Executive Director
Coupon Information Center
www.cents-off.com

Posted by: Bud Miller, CPP | August 28, 2007 10:39 AM | Report abuse

The local Walgreens refused to accept coupons printed from the Walgreens website.

Posted by: Michael Sackett | August 28, 2007 11:23 AM | Report abuse

I don't like coupons or rebates anyway, suggest that companies just lower the price and quit trying to dupe the public into compassion for their stupidity. What company would accept 250 mil dollars in coupons without proof of product delivery or sales to the companies in question.

Posted by: CG | August 28, 2007 9:20 PM | Report abuse

The issue seems to be the trechnological level of the coupon. While my grocery store does not accept computer printed coupons, I find clothing and other stores have coupons that include unique numbering and bar codes that are scanned at the checkout.

The last time I used one, storte security was taking away a customer who had printed off nyumerous copies and was trying to use the coupon more than once. Not the brightest!

Posted by: em prentiss | August 29, 2007 9:52 AM | Report abuse

$4.00 Counterfeit Pepsi Coupon in circulation.

Click here for details:

http://www.cents-off.com/doc/Pepsi_August282007.pdf

Posted by: Bud Miller, CPP | August 29, 2007 10:13 AM | Report abuse

Thanks for the info on Internet coupons. I have never tried to use them as I, too, have seen signs in some stores that they will not accept them. Somehow, using Internet coupons seems like cheating to me since presumably one could print as many as one wanted.

Posted by: cewatkins | August 29, 2007 11:20 AM | Report abuse

I've found that many coupons are for new products, which upon examination of the list of ingredients brings me to the realization that the new product is really a counterfeit food.

Sooo . . .counterfeit coupons for counterfeit food.

SHOPPERS UNITE. . . You have nothing to loose but your fat.

Posted by: Martin Bernstein | August 29, 2007 12:27 PM | Report abuse

None of the grocery stores in my area accept internet coupons. It is quite frustrating because many corporations have stopped mailing out coupons and have begun offering downloadable coupons instead.

Posted by: Tirade | August 29, 2007 9:55 PM | Report abuse

cewatkins said:
"Thanks for the info on Internet coupons. I have never tried to use them as I, too, have seen signs in some stores that they will not accept them. Somehow, using Internet coupons seems like cheating to me since presumably one could print as many as one wanted."

You're right that one can print as many as they desire to. I'm one who does that from a local supermarket's ad ( http://www.marsfood.com/html/save.html )and I distribute them to my neighbors in a senior citizen apartment building. I spoke to a store assistant manager about it and he encouraged me saying maybe those neighbors will be first-time customers who will become regulars. The stores can afford promos or they wouldn't do it so I don't feel at all like I'm stealing anything or cheating the store.

Posted by: mcgillicuddy | August 30, 2007 11:58 PM | Report abuse

I still don't get what the fraud is. Is it printing multiple copies of the same coupon? 'Cause that seems like it would be perfectly fine. Or is it somehow coming up with clever fakes? And if you have a good printer, how would they know it's an internet coupon? Ok...yeah, I'm confused.

Posted by: h3 | September 6, 2007 9:49 AM | Report abuse

Thanks for the $4 coupon, gonna pick some up later

Posted by: Miss Coupon Queen | September 6, 2007 12:55 PM | Report abuse

guess waht it's very similar to the way that affiliate merchant networks -- COMMISSION JUNCTION BEING THE MOST EGREGIOUS OFFENDER -- AND THE MERCHANTS WHO USE THEM TO ADVERTISE -- rip off their publishers/affiliates and also customers -- by offering special incentives, or limited time 'links' or 'offers' or whatever -- then refusing to honor them by creating them, then almost immediately discontinuing them -- buyers end up buying, publishers and affiliates get zero credit for the sale, buyers may or may not get to use a coupon (online or off).

Posted by: COMMISSION JUNCTION SUCKS! | September 9, 2007 5:48 PM | Report abuse

It seems more likely to me that the reason for refusing to take "internet coupons" is that they were printed by the individual rather than cut out of a magazine or newspaper and could very well have been created using graphics software and hence have no value to the store owner. Rather than posting a sign saying "we refuse to take coupons you printed yourself because you might be trying to put one over on us" they refuse to take "internet coupons" to avoid alienating their customers.

Posted by: Z | September 26, 2007 11:26 AM | Report abuse

I just tried to use some internet coupons in Walmart and Marcs and got refused! Very disappointed that even Walmart rejected it. If internet coupon is no good, why the manufacturers still put it on their websites? Why the retailer and manufacturer can't work together to solve this issue?

Posted by: Jessica | October 15, 2007 10:07 PM | Report abuse

The comments to this entry are closed.

 
 
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