Whole Foods (NASDAQ:WFM) Being Investigated For Overcharging Customers

Whole Foods (NASDAQ:WFM) Being Investigated For Overcharging Customers

Whole Foods Market Inc. (NASDAQ:WFM) says it has not seen any evidence that it overcharged customers at its New York stores and is vigorously defending itself against accusations from the city’s US Department of Consumer Affairs.

Whole Foods had been working with DCA since December, but it abandoned the talks after the agency made “grossly excessive monetary” demands to settle the investigation, according to company spokesman Michael Sinatra.

“We disagreed with the amount and a short time later the investigation became public,” Sinatra said. “They have not provided evidence to back up their demands and instead have taken this to the media to coerce us.”

Abby Lootens, a spokeswoman for New York’s DCA, declined to comment on Whole Foods’ allegations, saying it does not discuss details of negotiations.

The agency announced an ongoing investigation into Whole Foods last Wednesday after finding “thousands” of potential overcharging violations in a survey of 80 different types of prepackaged products like vegetable platters and chicken tenders. DCA reviewed other grocery chains as well, determining that more than three-quarters of 120 supermarkets had overcharged customers.

DCA’s investigation points to “a systematic problem with how products packaged for sale at Whole Foods are weighed and labeled,” the agency said. It found that consumers who purchased chicken tenders priced at $9.99 lb were overcharged an average of $4.13 per package. In all, the overcharges ranged from 80 cents for pecan panko to $14.84 for a package of coconut shrimp, the agency said.

For years, Whole Foods has sought to fight its “Whole Paycheck” image, a nickname spurred by the perception that its products are overpriced. The Austin, TX based chain said it would launch a separate chain of stores called 365 by Whole Foods Market that will target millennials with lower priced offerings.

The DCA investigation could hamper the grocery chain’s efforts to shed the pricey image, said analyst Jennifer Bartashus.

“Competition in the natural and organic food space also is growing, giving consumers more alternatives on where to shop for these products,” she said. “This could make it difficult to regain customer trust if the investigation tarnishes Whole Foods’ overall reputation.”

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