New Grocery Item Pricing Statute Provides Relief to Retailers

Most retailers — whether they sell books, shoes, athletic equipment, or any other non-food item — also stock some food items in the store, typically a rack of snacks or a cooler of beverages near the cash registers. Until recently, if they offered for sale just 10 food items, the Massachusetts grocery pricing statute, Mass. Gen. Laws c. 94, §§ 184B-184E, considered them to have a “food department,” which in turn required them to individually price all food and grocery items in the store. The non-food items sold by these retailers, however, need not be individually priced; retailers instead have the option of employing an electronic scanner system under the state’s item pricing regulation, 940 CMR 3.13.

On July 3, 2012, Massachusetts Gov. Deval Patrick signed a bill that changes all of that: effective Jan. 1, 2013, the grocery pricing statute, as amended, not only fully exempts retailers who sell less than 100 food items in the store, but also allows retailers who sell more than 100 items to utilize the scanners already available on the floor in most stores instead of individually pricing those items. The same amendments allow supermarkets and grocery stores to install and utilize scanner systems. The primary decision point faced by food stores and retailers with “food departments” under the new statute is whether they should undertake the additional costs associated with scanners to be used by consumers for food items, or whether they can comply with the listing requirements for keeping track of the many exemptions allowed by the statute should they opt out of the scanner regime. Opting for the scanner system gives stores the obvious convenience of utilizing a scanner instead of individually tagging items, but they must pay an annual fee for that privilege. Under the individual item pricing system, many items may be exempted from the tagging requirement, but stores must keep detailed, consumer-accessible lists of all exempted items.

The New Grocery Pricing Statute

Although supermarkets and grocery stores are clearly within the statute’s purview, the threshold question for others is whether a non-food retailer will be deemed to have a “food department” covered by the new statute at all. Previously, stores selling a mere 10 food “items” (i.e., stores selling 10 different food SKUs)¹ qualified as a “food department” subject to the grocery pricing statute requirements. Now, retailers selling less than 100 food items are not subject to the grocery pricing statute, although they are subject to the basic item pricing regulation, 940 CMR 3.13.

If the retailer is deemed to have a “food department,” it, like supermarkets and grocery stores, now has a choice about how it discloses the price of the food and grocery items located in the department. It can employ either (1) an individual item pricing system or (2) a consumer price scanner system.

A. Individual Pricing System

Food departments and stores opting for the individual pricing system are nominally required to continue to individually tag items with their price. The new statute, however, vastly broadens the classes of items exempted from the tagging requirement, so long as the store posts a “clear and conspicuous” display price (normally a shelf tag) at least one inch high and keeps the required lists of exempted items.

• Exempted Classes of Items: Certain classes of items will be exempted by statute from the individual item pricing system, including, (1) cigarettes and other tobacco products; (2) cakes, gum, candy, chips, nuts and other snack foods if offered for sale individually and located at the checkout area; (3) soft drink bottles and cans; (4) packaged self-service items that are small in size and are offered for sale located at the checkout area; (5) no more than 60 additional items accessible to the consumer in a free standing or end-aisle display that has at least 50 units of the same item.² If the food department or store chooses to exempt these items from the statute, it must maintain an itemized list of all exempted items, which is available at each checkout upon customer request.
• Additional Exemptions: Food departments are permitted to exempt up to 100 (depending on the number of cash registers they maintain) additional items of their own choosing.³ The exemption figure is 400 for food stores. Stores must maintain a dated, written price list of all items chosen for this exemption, which includes a description of the exempted item and a code number understood by the seller’s automated checkout system. Importantly, this list (1) is separate from the list of statutorily exempted items, and (2) can only undergo additions, substitutions or changes twice a year, in January and July.

B. Consumer Price Scanner System

Food departments and stores opting for the consumer price scanner system may place consumer-accessible scanners in their stores instead of individually tagging each food or grocery item. A food store or food department seeking to convert to a consumer price scanner system must seek a waiver from the Division of Standards prior to doing so. Importantly, the grocery scanner requirements largely mimic those under the item pricing regulation, and scanners already installed to comply with the item pricing regulation count toward the scanners needed to comply with the new statute.

• General Requirements: As with the item pricing regulation, a retailer must (1) affix a scanner-readable code to each individual item, and (2) disclose each item’s code, unabbreviated description, and price in a clear and conspicuous manner on a display price not less than one inch high.⁴ Customers must also be provided with an itemized sales receipt reflecting all items purchased and any amounts saved due to discount or sale.⁵
• Scanner Requirements: Except as noted below, the scanner requirements under the grocery pricing statute are in large part identical to those under the item pricing regulation. Each food store or food department with more than 5,000 square feet of retail space must have at least one fully operational consumer price scanner for every 5,000 square feet of retail space. The scanners must be equally spaced throughout the store in fixed locations. The location of each scanner must be disclosed by one eye-level sign and one sign above eye-level. Scanners must be 98 percent accurate and comply with the Americans with Disabilities Act Accessibility Guidelines, 28 CFR Part 36, Appendix A and the Massachusetts architectural access board regulations 521 CMR 1.00, et. seq.

The grocery statute, however, contains a few notable departures from the scanner requirements under the item pricing regulation:

• Within three months of converting to a consumer price scanner system, stores with more than 5,000 square feet of total space must maintain at least two employees whose responsibilities “shall include” maintenance of the scanners.
• Food departments and stores with more than 5,000 square feet must have “at least one” scanner capable of producing an individual item pricing tag and must provide customers with a means by which to affix a tag to the item; under the regulation, all consumer scanners must be so capable.
• The new statute requires that consumer scanners display both the loyalty-card price and the non-card price for an item if the prices differ; the regulation does not.
• The signage accompanying each scanner must contain contact information for the Division of Standards so that consumers may report broken scanners.
• Upon request by inspectors, stores must produce a map outlining scanner locations and the food store or department’s square footage.

“No Job Loss” Affidavit

The store must also provide a “no job loss” affidavit including, (1) the number of people employed at the time of the application, and (2) the establishment of a complaint process so full- and part-time employees will not suffer any wage or benefit loss.⁶

Annual Fee

Stores must pay an annual fee of $250 per store if the retail space is less than 15,000 square feet, $500 if the space is 15,000 to 30,000 square feet, or $1,000 if the retail space is 30,000 square feet or more.

Differences from the Item Pricing Regulation (940 CMR 3.13)

The new statute is modeled after and is generally consistent with the item pricing regulation applicable to non-food retailers, but differs from it in some respects:

• For items that cannot easily be carried to a scanner because of their size or weight, the regulation requires the seller to provide a scannable card or other device at the item’s point of display that allows the consumer to take the card or device to the scanner to obtain the price and a tag. There is no such requirement under the grocery statute.
• The grocery statute exempts more items from the tagging requirement, under an individual pricing system, than are exempted under the regulation. Additionally, whereas the new statute provides additional exemptions based on the number of cash registers, the regulation allows stores to exempt an additional 5 percent of non-food SKUs from its requirements. Although the regulation does require that stores keep a list of additional exempted items in a “reasonable manner,” the new statute is far more explicit about the details of the list and how frequently it can be altered.
• Under the regulation, stores must establish a “reasonable process” to verify the accuracy of all sale prices in the scanner system and to ensure that all sale signs and shelf labels match sale prices. The new statute provides greater detail regarding the display of certain sale prices such as loyalty card prices.
• The new statute does not provide a compliance defense to a 93A action; the regulation does.

Conclusion

The new grocery pricing statute provides welcome relief to those retailers who sell a few food items in their store: many of those retailers will be completely exempt because they do not carry at least 100 food items while others will be able to take advantage of the many exemptions under the statute or the scanner alternative. In considering which option to take, retailers may use the consumer scanners already installed under the item pricing regulation for the grocery pricing statute as well. The scanner requirements under the grocery statute, however, are not exactly the same as under the item pricing regulation, especially as it pertains to displaying the loyalty-card price and the non-card price for an item. Presumably, most retailers will elect to modify their scanners and signage so that they comply with both the grocery pricing statute and the item pricing regulation before the effective date of Jan. 1, 2013.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

1. The new statute defines “food” as “anything edible,” and it defines “item” as “a specific and distinct product, good or commodity available for sale having a different universal product code or SKU for other items so coded and, for items not so coded, an item having any distinguishing characteristics compared to another item.” Mass. Gen. Laws c. 94, § 184B. Notably, once the store meets the definition of a “food department,” the grocery pricing statute applies to not only the food items located in section of the store in which the department is located, but also the grocery items as well. These grocery items include, e.g., household cleaners and soaps of any type, laundry products, light bulbs, and disposable paper or plastic products. Id.
2. A complete list of the items that are exempted from a food store or food department’s individual item pricing system can be found at Mass. Gen. Laws c. 94, §§ 184C(d).
3. In no case can the number of additional exemptions exceed 4.5 percent of the number of packaged grocery items carried by the seller. And a seller may not exempt more than 200 items in any one department except in the grocery department. To qualify for these exemptions, the store must maintain an automated checkout system that has been determined to be at least 95 per cent accurate by the Office of Consumer Affairs and Business Regulation’s Division of Standards (the “Division of Standards”).
4. Note that the item pricing regulation does not specifically require that a product’s description be “unabbreviated;” thus, when implementing a scanner system under the new statute, it is important to ensure that the descriptions of all food and grocery items appear unabbreviated when scanned.
5. The following items may be exempted from the consumer price scanner system provided that (a) a clear and conspicuous sign disclosing the item’s code, description and correct price is posted where the items are displayed, and (b) the cashier and readily discern the item’s correct price: (1) unpackaged and uncoded items to which a price sticker cannot be reasonably affixed; and (2) loose produce with SKU numbers. A list of all items so exempted must be available at each checkout upon customer request.
6. After filing the affidavit, if there is any resulting job loss due to the implementation of the waiver, not attributed to seasonal employment or verifiable economic pressures, the store will be required to use an individual item pricing system for one year and will be subject to a fine of not more than $5,000.