Report fake coupons

Not yet. But marketers, manufacturers and retailers are grappling with costly and growing coupon crime. In addition to fake coupons printed on home computers, the Web makes it easy to advertise, sell and distribute quantities of forged or altered coupons, of both the offline and home-printed types.

And it has enabled the spread of coupon crime techniques and tips through online message boards. But that includes old-fashioned deceits, such as clipping and redeeming coupons in bulk under phony retailer names. While traditional coupon fraud often involves large-scale conspiracies by a network of people, the Web makes the production and trafficking of phony coupons accessible to the masses.

The response so far has been a hodgepodge of civil suits, proposed legislation, changes in retailers practices, new fraud-busting technology and revised policies for auction Web sites. A number of trade associations are beginning work on finding a more comprehensive solution — or combination of solutions.

In battling Internet coupon fraud, there are some obvious targets.

This works better than trying to go after those who post the items for sale, says Ederer, because the Web enables them to hide behind phony names and addresses. Pressured by retailers and manufacturers, two major auction sites have changed their coupon policies. In October, Yahoo banned coupon sales.

Lays: Potato Chip Coupons

In January, eBay bowed part way with a new policy banning the sale of expired or electronically delivered coupons. Its new rules also limit bulk sales and sales of free product and home-printed coupons.

The GMA and other industry groups are working to make sure the policy results in real reform. The groups now scour the site for offending offerings and notify eBay when they find one.

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Having won a partial victory with eBay, the Joint Industry Coupon Committee, of which GMA is a member, is addressing electronic coupon fraud and related legal and governmental issues. But Yahoo and eBay are only the best-known names in Internet auctions. Coupons are still auctioned off or sold in bulk at a flat rate on countless smaller sites, Miller says. Counterfeiters use e-mail to distribute electronic coupon files, which can mutate and spread like a virus.

Legitimate Internet coupons, which manufacturers intend for consumers to print out at home directly from their PCs, are vulnerable. Still, some see it as a chance worth taking. While only 0. These sites insist that Internet coupons are at least as secure as other types because of technical safeguards built into their systems and because they can track what members you have to sign up for free membership to get coupons are doing. SmartSource wants to become as pervasive online as it is offline, where it supplies FSI coupons to 68 million households and store coupons in 33, locations, says Heather Harde, senior VP-SmartSource iGroup.

This year she expects consumers to print out 20 million coupons from SmartSource. Harde touts security measures that include limits on how many times a coupon can be printed from the same machine typically twice , never letting a coupon appear on the screen and a third barcode meant to foil counterfeiters.

The company is also cautious about the types of coupons it carries, avoiding any for free products and carefully scrutinizing those that give a large discount. The more generous the offer, the greater the incentive for abuse. There are also safeguards that electronically detect excessive redemptions of the same coupon.

This way, retailers can catch a coupon photocopied and redeemed more than once, says Brian Bombei, Valpak. He acknowledges that photocopied coupons do sometimes slip through. While the CIC preaches abstinence, the Association of Coupon Professionals urges members who use Internet coupons to do so as safely as possible. However, it is currently reviewing its two-year-old guidelines for Internet coupons, which advise manufacturers to limit the number of times a coupon can be printed and encrypt serialized bar codes.

Such standard precautions have been repeatedly circumvented by forgers. Worries about fraud have led technology companies to introduce new services they say will thwart the bad guys. In October, E-centives announced a combination of additional fraud-deterrence services, including a point-of-sale handheld decoder that reads a special watermark and encrypted coding on coupons, and a telephone verification system that store personnel can use to determine the validity of a coupon.

In our view, properly executed programs on the Internet are safer. In August, rival company Coupons, Inc. Its coupons also carry a watermark and encrypted coding designed to foil forgers. Bart Casabona, a spokesperson for Pepsi-Cola North America, says the soft drink giant has no connections to the coupons and plans to take appropriate action.

Perpetrators have found their way around safeguards to prevent counterfeiting by diverting coupons from home printers to the disc drives on home computers where they can be easily passed around. The method has been posted on the Internet on underground bulletin boards for others to follow, Miller said. Victims include retailers and manufacturers as well as innocent consumers purchasing counterfeit coupons.

One eBay auctioneer has already been the subject of litigation for hawking fake coupons. That case was settled out of court, but others are under investigation and likely to be prosecuted, Miller said. He said the extent of the financial losses are only beginning to emerge but will likely prove substantial.

In some cases, individuals are redeeming hundreds of dollars worth of free products. Circulating counterfeit coupons is a criminal offense that can be prosecuted by federal, state or local law enforcement, according to the CIC. Brands include:. Counterfeit e-coupons are appearing with increased frequency The number of fraudulent types of coupons increased more than four-fold just during the month of June, from 12 to more than 50, according to Bud Miller, executive director of The Coupon Information Center CIC in Alexandria, VA.

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