Rite Aid has been banned from using facial recognition technology for five years over allegations that its surveillance system was used incorrectly to identify potential shoplifters, especially Black, Latino, Asian or female shoppers.
The settlement with the Federal Trade Commission addresses charges that the drugstore chain didn't do enough to prevent harm to its customers and implement "reasonable procedures," the government agency said.
Rite Aid said late Tuesday that it disagrees with the allegations, but that it's glad it reached an agreement to resolve the issue.
The Federal Trade Commission said in a federal court complaint that technology used by Rite Aid for several years led to thousands of incorrect matches, including an incident where Rite Aid store employees stopped and searched an 11-year-old girl.
Rite Aid used facial recognition technology in hundreds of stores from October 2012 to July 2020 to identify shoppers "it had previously deemed likely to engage in shoplifting or other criminal behavior," the Federal Trade Commission said.
The complaint noted that many images it used for its database were low-quality, coming from security cameras, employee phone cameras and news stories in some cases.
The technology sent alerts to Rite Aid employees either by email or phone when it identified people entering the store on its watchlist.
The commission said in its complaint that store employees would then follow those people, order them to leave or call police. Federal officials also said employees would accuse people in front of friends, family and other customers of previously committing crimes.
The federal complaint said Rite Aid failed to test the accuracy of its technology before using it.
Rite Aid says the allegations center on a pilot program it used in a limited number of stores, and it stopped using this technology more than three years ago.
"We respect the FTC's inquiry and are aligned with the agency's mission to protect consumer privacy," the company said in a statement posted on its website. "However, we fundamentally disagree with the facial recognition allegations in the agency's complaint."
Facial recognition technology has a checkered history. Supporters say it has been vital in helping to catch drug dealers or resolve missing persons cases when used by law enforcement. But critics say it leads to a higher rate of misidentification for people of color.
Rite Aid also noted in a prepared statement that any agreement will have to be approved in U.S. Bankruptcy Court.
Rite Aid announced last fall that it was closing more than 150 stores as it makes its way through a voluntary Chapter 11 bankruptcy process.
Rite Aid Corp., based in Philadelphia, has more than 2,000 locations. The company has struggled financially for years and also faces financial risk from lawsuits over opioid prescriptions like its bigger rivals, CVS and Walgreens.