Fake Internet Coupons May Cost Frito-Lay Millions

June 21, 2010— -- The company that brought us the Frito Bandito is battling real-life bandits who are circulating fake Doritos coupons on the Internet, likely costing Frito-Lay millions of dollars.

The phony coupons, which offer consumers a free bag of Doritos tortilla chips without buying anything, first showed up on Web sites in 2009, but were quickly removed after Frito-Lay notified site owners, according to company spokeswoman Aurora Gonzalez. Similar coupons have surfaced in the last two months and have spread through e-mail.

Now the coupons are turning up by the thousands at retailers across the country. "It's exponentially larger than any other fraudulent redemption we've seen before," Gonzalez said.

Frito-Lay has dealt with counterfeit coupons in the past, but this case is different.

The coupons have been distributed as an attachment to e-mail messages, which people forward to their friends to pass on what appears to be a good deal. Eventually, the coupons get forwarded so many times that the scam becomes so widespread it's difficult to stop and nearly impossible to trace.

Bud Miller, executive director of the non-profit Coupon Information Corporation, said most coupon scams get stopped before they have a chance to do much damage, but they can be very costly.

"A single counterfeit, if it goes viral, can easily cost a million dollars," Miller said.

Both Frito-Lay and retailers are sharing the costs of the fraudulent coupons as Frito-Lay tries to educate retailers and consumers about the fakes, Gonzalez said. Making sure retailers know about the coupons and can accurately identify them is a daunting task.

"When you think about how many stores there are and how many people there are working in the stores, you have to reach a lot of people," said Gonzalez, who declined to say how much money the company has lost to the scam.

Since the coupons have been circulating online and in e-mail, Gonzalez said Frito-Lay is trying to leverage the same technologies to stop the scam. They have posted an image of the counterfeit coupon next to a legitimate one on the homepage of the company's website. It shows elements of the coupons that could be used to identify them as fakes, such as not including specific ounce weights for the product, and not requiring any purchase to get the free bag of chips.

The Coupon Information Corporation, which fights coupon fraud, issued a public service announcement alerting people to the fake Doritos coupons in May. They offered a $2,500 reward for any information about the people behind the scam that leads to successful prosecution. Miller's organization regularly issues these public service announcements for coupon fraud on their website, cents-off.com.

According to Miller, coupon fraud is common. The CIC has dealt with over 200 cases of coupon fraud since the beginning of the year. Energy drinks such as Amp, Red Bull and Monster have been the most frequent targets of fake coupons, but counterfeiters have also targeted Listerine mouthwash, Ben and Jerry's ice cream, and Friskies cat food, to name a few.

Nothing is unique about the Doritos case, Miller said, other than the volume of coupons used and number of retailers affected. These issues have Frito-Lay especially concerned.

"We're concerned about its scale," Gonzalez said. "We see this as a potential trend and new direction in fraudulent coupons."

Gonzalez noted that if scams like this one become more common, manufacturers will have to rethink their coupon strategies.

"Ultimately, this could have an impact on consumers," Gonzalez said.

Here are some tips from Miller on how to avoid fraudulent coupons:

Never pay for coupons. Counterfeit coupons are often for sale on eBay or other websites. "Coupons are free," he said.

Never use "free product" coupons from the Internet because they are frequently fakes. Manufacturers almost always require consumers to buy something to get an item free.

Never use a coupon that you can see the entirety of on your computer screen. Legitimate coupons are partially obscured on the screen to prevent multiple copies form being made.