Mo. reaches unique settlement with Walgreens

Missouri Attorney General Chris Koster has reached a unique settlement agreement with Deerfield, Ill.-based Walgreen Co. (NYSE: WAG) for its alleged deceptive advertising and pricing schemes discovered last year.

Filed yesterday in Jackson County Circuit Court, the agreement requires Walgreens to pay for an independent auditor to audit at least 25 percent of its Missouri stores each quarter for the next three years. The auditor would need to be approved by Koster's office, he said during a news conference yesterday at his Park Central Square office in Springfield. Koster said his office chose to forego a typical cash settlement in an effort to punish the alleged actions at Walgreens stores.

After a two-month investigation last summer, Koster's office filed a civil lawsuit against Walgreen Co. claiming stores advertised lower prices on display tags but actually charged higher prices at checkout.

Koster said the settlement effectively establishes Missouri as a babysitter for Walgreens, which he said became profitable in its negligence.

“My attorney general’s office intends to loudly, clearly and publicly let Missourians know each time a Walgreens store fails to meet the expectations of this agreement.” Koster said. “My hope is that the combination of audits, financial penalties and public shaming will give Walgreens executives a strong incentive to clean up their act.”

Under the terms of the agreement, a consumer who is overcharged for items that cost $5 or less will receive the item for free, and for an item priced at more than $5, they would received a Walgreens gift card valued at $10, as well as the item at the lowest advertised price.

The auditing requirements include checking at least 100 items at each store surveyed to make sure shelf tags match prices paid at the register; a 98 percent accuracy rating to pass each audit; and penalties of $1,500 for each store that fails a first inspection, $3,000 for failing a second inspection and $5,000 for third and subsequent failures, according to documentation provided by Koster's office.