Retailers Should Follow Costco's Loyalty Card-Based Recall Example, Says Consumer Group

Image-conscious food retailers might be squeamish about using loyalty card information to telephone customers who bought recalled products, but a consumer advocacy lawyer argues that public safety should trump brand protection.

Retailers have an obligation to follow the lead of Costco and use loyalty card information to alert their customers about salmonella-tainted peanut products, and anything else they sell that turns out to be dangerous, said Center for Science in the Public Interest (CSPI) staff attorney Sarah Klein.

Earlier this month, CSPI published an "Open Letter to Food Retailers" in which it praises retailers such as Costco and Wegman's that mined their loyalty card data to find out, and make phone calls to, customers who bought recalled peanut-based products.

Retailers didn't exactly jump on that bandwagon, Klein said. "Safeway said they were going to take a hard look at doing it now," she said. "That's a step in the right direction. We don't necessarily have to get into why they hadn't thought of it before." PriceChopper is another food seller that does loyalty card-based alerting.

That said, Klein did suggest a reason or two behind retailer reluctance about using loyalty card databases to determine the names of customers who buy recalled products. "The problem is, most retailers don't want to be associated with a recall in any way," Klein said. "Their concern is that when you get a call, it is going to cast a bad light on them. But this peanut situation shows that's incorrect. This kind of contamination gets into everything. There are over 1,000 products implicated. The likelihood you didn't purchase one is pretty slim."

Other Implications

Aside from a fear of looking bad, food retailers might be fretting the legal implications. If it becomes a food store's job to warn people about tainted products, should those stores be expected to contact every customer, including the shoppers who do not have loyalty cards? Costco doesn't have this concern because anybody who shops at one of the chain's warehouse stores must be a card-carrying member.

Or, what happens if the customers who purposely avoid signing up for the cards contend they're being coerced -- through fear of being left in the dark about potentially deadly purchases -- into becoming cardholders? Los Angeles-based blogger T. J. Sullivan told the L.A. Times he appreciated the peanut-related call he received from Costco. However, Sullivan still worries about the long-term risks of loyalty card information dissemination, pointing to a not-so-unrealistic scenario in which Costco is acquired by a health insurance company that bases policy premiums on the type of food its customers eat.

In lieu of taking the loyalty card-based phone call route, some food retailers are printing recall notices on receipts. Klein said she finds this reaction to be underwhelming at best. "We don't think that's sufficient," she said. "Most consumers don't look at that gobbledegook at the bottom of a receipt. Nobody's scanning all that."

Others, such as Kroger, have empowered their POS systems to flash alerts to cashiers when a recalled item that somehow missed being removed from the store shelves is scanned at the checkout. That system, while great for preventing new cases of disease and/or death, does nothing to help people who bought the potentially poisonous food prior to the discovery of its toxicity. Kroger has also experimented with loyalty card-based phone calls and with store receipt notifications.

Although loyalty cards seem to be an ideal method of dealing with widespread recalls, Klein said it is unlikely the federal Food and Drug Administration (FDA) can require retailers to follow Costco's lead. "The thing that's hard is that most customer loyalty programs fall within state contract law," she said. "It's hard for the federal government to say retailers should be doing this. They're governed by the states. However, we are looking at legislation that would modernize the FDA and would work on these kinds of issues from the inception point, not the reaction point."