Safeway Inks Settlement and Merger on Same Day

SAN RAFAEL, Calif. (CN) - On the same day it merged with Alberton's, Safeway spent $2.25 million settling claims that it overcharges customers through misleading advertising.

Marin County will split the money equally with eight other districts that joined the lawsuit against Safeway.

"The complaint alleges that within at least the past four years, Safeway unlawfully charged consumers prices higher than the company's lowest-advertised price, misrepresented the weight of Safeway-branded products and made false statements on in-store signage that conveyed the impression certain Safeway foreign-grown produce was locally grown," the Marin County District Attorney's Office said Thursday.

Though a 2008 injunction required Safeway to eliminate price discrepancies, the grocer allegedly failed to create such a program.

Under the injunction, Safeway was obligated to give consumers a free item if they were overcharged for an item $5 or less and to issue a $5 gift card if they were overcharged for an item over $5, according to the complaint.

"The complaint alleged Safeway failed to consistently honor the requirement and adequately notify consumers of the requirement with signage at every checkstand," Marin officials said.

A permanent injunction in the March 6 settlement prohibits Safeway from publishing false or misleading statements, charging an amount greater than the lowest price posted on a commodity or on a shelf tag, failing to honor "valid Safeway coupons, discounts or offers," and failing to "disclose any inclusions, exceptions or limitations to any Safeway offers, coupons or discounts."

In addition, the grocer has agreed to increase signage visibility in stores, train employees to comply with the price-accuracy policy and to hire an independent third-party auditor to monitor Safeway's compliance with the injunction's provisions.

Marin County worked on the lawsuit with district attorneys from Alameda, Fresno, Napa, Sacramento, Santa Cruz, Solano, Sonoma and Ventura counties.

Marin County Deputy District Attorney Andres Perez prosecuted the case. Judge Roy Chernus gave the settlement final approval in Marin County Superior Court.

"The Marin County District Attorney's Office remains committed to prosecuting pricing accuracy violations and ensuring consumers pay no more for items than advertised," District Attorney Ed Berberian said in a statement.

Also on Thursday, Safeway announced a $9 billion merger with Albertson's Inc. The next day, investors filed suit over the $40 per-share offer, which includes $32.50 in cash.

"The merger will create a diversified network that includes over 2,400 stores, 27 distribution facilities and 20 manufacturing plants with over 250,000 dedicated and loyal employees," Safeway said in a statement. "No store closures are expected as a result of this transaction."

Safeway and Albertson's combined forces will make them the second largest grocery chain in the United States after Kroger, which has 2,600 stores.

"Working together will enable us to create cost savings that translate into price reductions for our customers," Albertson's CEO Bob Miller said in a statement.

The merger does not affect the injunction against Safeway, District Attorney Berberian said in an interview.

"Safeway will be obligated to honor the injunction and, as I understand, under the terms of the merger, it is going to keep its Safeway branding," Berberian said.

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