Walgreens has agreed to pay $1.4 million in penalties and legal costs to settle a lawsuit accusing the retailer of charging prices higher than marked on store shelves, a prosecutor said.

Also, Walgreens must offer discounts for the next three years to customers who discover they were charged more than the lowest advertised price, Santa Clara County Deputy District Attorney Martha J. Donohoe said.

The settlement, reached in Santa Clara County Superior Court in San Jose on Wednesday, settles a lawsuit filed jointly by prosecutors in Santa Clara, San Mateo, Contra Costa and Santa Cruz counties.

Walgreens did not admit wrongdoing and cooperated with prosecutors in the case, Donohoe said. Vivika Panagiotakakos, a spokeswoman for Walgreens at its headquarters in Deerfield, Ill., said that the company does not yet have a response prepared about the case.

Donohoe said that Walgreens probably does not do it deliberately (charging prices higher than marked on store shelves). "My impression of Walgreens is they don't like to have these actions against them," she said. "Many scanner cases are brought and result in bad publicity."

"A lot of the times it is not intentional, they failed to take down sales prices, they didn't take shelf tags down, or prices were set by the corporation and they didn't know," Donohoe said. "It can be human error."

"Scanning cases are not uncommon," she said. "It is not a perfect technology."

The prosecutors also accused Walgreens of telling consumers they were eligible for discounted prices through "Register Reward" coupons without informing them they had to buy another item to get the discount, she said.

The settlement, to affect 625 Walgreens stores in California, took place three years after a store customer in Santa Clara County told county officials that products at a Walgreens outlet cost more after they were scanned at cash registers, Donohoe said. "There was definitely a consumer complaint that got the ball rolling," Donohoe said.

Under the settlement, Walgreens will be assessed $200,000 to cover investigation costs and $1.25 million in civil charges, Donohoe said.

In addition, all Walgreens stores in California will have to give either a $5 deduction or a $5 merchandise card each time a customer finds out she or he was charged more than the lowest advertised price, Donohoe said. If the product cost less than $5, Walgreens must let the patron have it for free, Donohoe said.

Walgreens will have 60 days to post notices about the offer, called the Scanner Price Guarantee, in all of its stores in the state and the guarantee must continue for the next three years.

Santa Clara County previously sued Walgreens for price scanning violations in 2007, Donohoe said.

The district attorney's office has no estimate on how much money consumers may have lost due to the overcharging, Donohoe said.

Jeff Burbank, Bay City News Service

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