Evan Schuman's StorefrontBacktalk

This problem isn’t small potatoes, either. Example: In December 2010, $200,000 in online coupons for Tide detergent were redeemed by consumers over a three-week period. Just one problem: Procter & Gamble has never issued any online print-at-home coupons for Tide or any other product.

That’s according to an FBI affidavit in the case of a 22-year-old college-student coupon forger named Lucas Henderson, who was arrested in May after he allegedly posted faked online coupons for PowerBars, Campbell’s Soup at Hand, SmartOnes TV Dinners, Bagel Bites, bags of Hershey’s Kisses and Budweiser beer. Henderson, a one-time Wal-Mart cashier, also wrote a tutorial on creating counterfeit coupons and gave online advice on cashing the coupons (“At Wal-Mart self checkouts, the watcher person will still need to come over and check your ID. But as long as you don’t use more than $20 worth of coupons, they won’t have to check the coupons”).

According to the affidavit, those using the forged coupons reported that even when checkout clerks noticed the coupons gave unusually large discounts, they didn’t reject them as long as the POS accepted them.

That’s what DataBar was intended to stop. But at this point, counterfeiters have already surpassed the DataBar technology. They can crack coding by trial and error—and the more forgiving POS systems are for errors in the DataBar coding, the more quickly the counterfeiters will be able to create their forgeries.

As such, retailers may find it necessary to add whitelists and blacklists to POS coupon-processing systems—codes for known good coupons to accept and known forgeries to reject. Coupon-industry groups Coupons.com and Coupon Information Corp. are putting together the lists, but it’s up to retailers to get the databases into their POS systems. And if that’s necessary, it pretty well demonstrates that for fighting coupon fraud, DataBar by itself is a lost cause.

Unfortunately, coupon fraud isn’t the end of the problems that those overly flexible DataBar standards could bring in. “A cashier often doesn’t even see the barcodes when they’re printed on the bottom of a product. They can easily be tricked into scanning a customer-applied sticker,” said the retail IT exec. “If a retailer created automatic markdowns based on a product’s shelf life and built those rules on the expiration date embedded in the DataBar, a shrewd forger could slap on a replacement barcode sticker claiming this particular product’s expiration date is tomorrow and obtain the maximum discount.”

With all the flexibility of the GS1 DataBar spec, label fraud could be even more lucrative than coupon fraud. “Is it possible that a GS1 DataBar could be constructed such that a product barcode also contains its own coupon for 50 percent off?” the exec asked. “We don’t know yet what the forgers will try. We know only that they will try things nobody has expected.”