In a settlement reached in Santa Clara County Superior Court in San Jose Wednesday, Walgreens must pay more than $1.4 million in penalties for overcharging patrons and offer discounts when overcharges occur in its stores statewide for three years, a prosecutor said.

The penalty settles a lawsuit filed jointly by prosecutors in Santa Clara and three nearby counties saying the retailer charged prices higher than marked on store shelves over a three-year period, Deputy District Attorney Martha J. Donohoe said.

The prosecutors also faulted Walgreens for telling consumers they were eligible for discounted prices through "Register Reward" coupons without informing them they had to buy another item to get the discount, Donohoe said.

The settlement, to affect 625 Walgreens stores in California, took place three years after a store customer in Santa Clara County told county officials that products at a Walgreens outlet cost more after they were scanned at cash registers, Donohoe said. "There was definitely a consumer complaint that got the ball rolling," Donohoe said.

Under the settlement, which was brought by several counties including prosecutors from San Mateo, Contra Costa and Santa Cruz counties, Walgreens will be assessed $200,000 to cover investigation costs and $1.25 million in civil charges, Donohoe said.

In addition, all Walgreens stores in California will have to give either a $5 deduction or a $5 merchandise card each time a customer finds out they were charged more than the lowest advertised price, Donohoe said.

If the product cost less than $5, Walgreens must let the patron have it for free, Donohoe said.

Walgreens will have 60 days to post notices about the offer, called the Scanner Price Guarantee, in all of its stores in the state and the guarantee must continue for the next three years.

Vivika Panagiotakakos, spokeswoman for Walgreens at its headquarters in Deerfield, Ill., said that the company does not yet have a response prepared about the case.

The court injunction obtained today by the district attorney's office applies to weights and measures departments in 27 counties throughout the state that monitor price scanners used at registers in Walgreens stores as well as other businesses, Donohoe said.

The investigation included the state Department of Measurement Standards, which also regulates price scanners in retail businesses, Donohoe said.

Walgreens did not admit wrongdoing and cooperated with prosecutors in the case, Donohoe said.

Santa Clara County previously sued Walgreens for price scanning violations in 2007, Donohoe said.

Other major brand retail stores have been penalized in California for charging customers more than the posted price after scanning items at checkout counters, Donohoe said.

"A lot of the times it is not intentional, they failed to take down sales prices, they didn't take shelf tags down, or prices were set by the corporation and they didn't know," Donohoe said. "It can be human error."

"Scanning cases are not uncommon," Donohoe said. "It is not a perfect technology."

The district attorney's office has no estimate on how much money consumers may have lost due to the overcharging, Donohoe said.

Walgreens, however, probably does not do it deliberately, Donohoe said.

"My impression of Walgreens is they don't like to have these actions against them," Donohoe said. "Many scanner cases are brought and result in bad publicity."