Wal-Mart Stores Inc.. confirmed that it has suspended its relationship with two companies offering controversial programs for shoplifters, a move that came not long after a California court ruled that one of the company's methods ran afoul of state extortion laws.
Responding to a Dec. 21 report in The Wall Street Journal, Wal-Mart spokesman Ragan Dickens confirmed to S&P Global Market Intelligence that the big-box retailer suspended its partnerships "a couple of weeks ago" with Corrective Education Company as well as with Turning Point Justice, two non-profit companies based in Utah that provide programs for people who are caught shoplifting.
The Journal reported that Wal-Mart, reportedly one of the biggest clients of the companies, suspended the programs in December in the wake of questioning from local officials about the legality of programs that require money from people facing criminal sanctions.
Shoplifting suspects at stores that use Corrective Education are required to pay $400 up front or $500 later to take a six-to-eight-hour online course that talks about the pitfalls of bad decisions and teaches life skills, according to the Journal. If the suspects take the course then they do not face criminal prosecution.
Dickens declined to comment about the controversy surrounding the programs or the California court's ruling but said that Wal-Mart ended the relationship after appointing a new head of Wal-Mart's asset protection program and putting the programs under review.
"There has been a bit of lack of clarity about how it [the program] was received across the U.S.," he said in an interview.
The contracts with both of the Utah-based loss prevention companies gave first-time shoplifters with no prior record the opportunity to enroll in an online, paid course hosted by the third-party company in lieu of criminal prosecution.
"It went into effect a couple of weeks ago," Dickens said of the suspension. "New leadership ... is evaluating programs heading into the new calendar year. This suspension was part of his [the new asset manager's] evaluation."
The Corrective Education program has encountered criticism and is the subject of a lawsuit and judicial ruling in California.
In August, a San Francisco Superior Court judge found that Orem, Utah-based Corrective Education Company's program violated the state's extortion and false imprisonment laws, according to court documents.
San Francisco City Attorney Dennis Herrera, whose office brought the suit against Corrective Education, said that roughly 90% of suspects chose to enroll in the program, according to a statement on Aug. 15. Those who did not pay the fees and complete it would be subject to local prosecution.
"We should all be concerned about privatizing our justice system, especially when a business like Corrective Education Company uses the threat of criminal prosecution to intimidate and extort people," Herrera said. "This ruling goes to the heart of their predatory business model."
Wal-Mart first piloted the program in 2013 at two stores before rolling out the program in 2015, according to Dickens.
Corrective Education Company, which could not be reached for comment on Dec. 21, said on its website that its efforts help reduce retail shrink while giving time to loss-prevention employees, and rehabilitating behavioral and shoplifting issues with offenders.
"It was a totally voluntary program," Dickens said.
Dickens said that stops for shoplifting have been on the decline for the past two years. In 2016, Wal-Mart saw a 30% reduction in apprehensions and stops, as well as an additional 15% reduction in 2017, he said.