April 24, 2003, 12:00 AM

Online barcode scam threatens merchants with liberal return policies

While Re-Code.com, which showed consumers how to create barcodes to switch prices at Wal-Mart from higher brand prices to lower generic prices, is now defunct, its damage could continue on the returns front for some time, says a fraud consultant.

Wal-Mart Stores Inc. put a quick stop to Re-Code.com when the site started showing consumers how to generate Wal-Mart bar code labels that could be applied to merchandise so customers could get a lower price. But while the site is now defunct, its damage could continue for some time, says a fraud consultant.

The problem: If enough consumers downloaded the labels, they could apply them to merchandise they are returning to Wal-Mart to get a higher refund. Wal-Mart is particularly vulnerable because it, like many other retailers, operates a liberal return policy, says the consultant who specializes in fraud prevention but asked to remain anonymous. "Most retailers at least require you to have a receipt to return products, but Wal-Mart doesn`t, which makes them more sensitive to fraud," the consultant says.

Re-Code.com shut down earlier this week in response to a legal threat from Wal-Mart. "They were practicing theft by deception, where people switch prices by inserting their own barcodes," a Wal-Mart spokesman says. Operators of Re-Code.com have posted a message at their sites saying they never intended any harm, they were simply publishing information. Still, its former home page showed in image-enhanced steps how to search barcode prices and produce and print out actual barcodes of generic prices that could be placed on branded products.

A spokesman for Wal-Mart said the retailer has not taken any other actions regarding Re-Code or its returns policy.

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