Bankrupt pharmacy chain Rite Aid was banned from using facial recognition software for five years to settle Federal Trade Commission charges that the technology falsely flagged thousands of customers as potential shoplifters, federal agency said.
Rite Aid, which filed for Chapter 11 bankruptcy protection in October, deployed artificial intelligence-based facial recognition technology from 2012 to 2020.
The company said Tuesday’s agreement with the FTC is subject to approval by the bankruptcy court overseeing its insolvency case.
“The allegations relate to a facial recognition technology pilot program the company deployed in a limited number of stores,” the company said.
“Rite Aid stopped using the technology in this small group of stores more than three years ago, before the FTC’s investigation regarding the Company’s use of the technology began.”
The FTC filed a complaint against Rite Aid three years ago after a Reuters investigation found that the company was deploying the software in some 200 locations — most of which were in low-income, non-white neighborhoods.
After Reuters sent its findings to Rite Aid in July 2020, the chain said it quit using its facial recognition software.
The retailer defended the technology’s use, saying it had nothing to do with race and was intended to deter theft and protect staff and customers from violence.
While Rite Aid declined to disclose which locations used the technology, Reuters found facial recognition cameras at 33 of the 75 Rite Aid shops in Manhattan and the central Los Angeles metropolitan area during one or more visits from October 2020 through July 2020.
Rite Aid said the rollout was “data-driven,” based on stores’ theft histories, local and national crime data and site infrastructure.
Cathy Langley, Rite Aid’s vice president of asset protection, said in 2020 that facial recognition — which she referred to as “feature matching” — resulted in less violence and organized crime in the company’s stores.
Just before Reuters published its findings in the summer of 2020, however, Rite Aid said its leadership team was reviewing practices across the company, and “this was one of a number of programs that was terminated.”
Rite Aid was found to have deployed a facial recognition system from DeepCam LLC, which worked with a firm in China whose largest outside investor is a Chinese government fund.
Some security experts said any program with connections to China was troubling because it could open the door to aggressive surveillance in the United States more typical of an autocratic state.
Asked for comment, China’s Ministry of Foreign Affairs told Reuters: “These are unfounded smears and rumors.”
Last year, Rite Aid executives said that widespread shoplifting in New York City prompted the company to reduce its footprint in the Big Apple.
The company said recently that it will close as many as 500 of its underperforming stores — a significant portion of its more than 2,100 drugstores across the nation.
With Post Wires
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