Best Buy Pricing Glitch Raises Reasonableness Issue
When a California county judge hit Best Buy (NYSE:BBY) on February 22 with an $875,370 fine for having the wrong price on an item, it re-raised an old debate: What is fair, reasonable and practical when it comes to precisely updating every price in every store in a major chain? With municipalities starving for budget, and given the fact that no one ever lost votes by squeezing fines from chains accused of posting the wrong price, does it make sense to set up any type of practical test?
The bigger the chain, the better the target, as Walmart (NYSE:WMT) knows only too well. Just last month, another judge in this same California county hit grocery chain Fresh & Easy with a bill for $833,136 for similar price-tag problems. How about drawing legal distinctions between intent to defraud and unintentional human error or computer glitch? Frustratingly, these weights-and-measures cases are usually painful enough to sting but not financially worth fighting. That cost-of-doing-business reality is something cash-strapped agencies rely on.
In the Best Buy case, Riverside County Superior Court Judge Daniel Ottolia also ordered the chain to pay California consumers $3 if a shopper in that state proves an overcharge. Some of the overcharges in the case dated back to 2008.
Best Buy issued a statement that said: "During this period of time more than 99.8 percent of prices on the specific products reviewed were accurate. Unfortunately there were also a small number of mistakes among the hundreds of price changes that occur in stores on a weekly basis." Best Buy makes a fair point. On the other hand, 99.8 percent suggests that one out of every 500 SKUs is priced incorrectly. For a chain with as many products as Best Buy, that's a lot of skewed SKUs.