Discount store giant Family Dollar will pay $63m to settle claims by state and federal authorities that it frequently overcharged its customers for milk, diapers, batteries, toilet paper and other household goods.

The enforcement action announced Thursday by the Federal Trade Commission and 17 states followed a Guardian investigation that revealed Family Dollar and its larger rival, Dollar General, frequently charge more at checkout than the prices listed on their shelves. Family Dollar failed at least 2,100 price inspections in 20 states from 2022 to late 2025, the Guardian found.

In a lawsuit publicly released for the first time as part of Thursday’s settlement, the FTC and the states allege that “Family Dollar knows that it harms consumers by persistently charging prices at the register that are higher than those it advertises”.

Despite widespread consumer complaints and increasing government scrutiny, the suit says, the dollar-store chain has failed to put in place adequate safeguards to prevent continued overcharging.

“Even now,” the suit asserts, “Family Dollar continues to overcharge customers.”

The suit says that it was not until the fall of 2025 – after the company learned of the coming publication of the Guardian’s investigation – that “employees at Family Dollar’s corporate offices devoted more attention and resources to addressing state pricing inspections”.

Family Dollar, which says it offers “affordable products and trusted values to families across America”, has roughly 7,000 stores.

The company did not deny or admit to the state and federal authorities’ allegations. It previously told the Guardian that “we take customer trust seriously and are committed to ensuring pricing accuracy across our stores … We continue to be focused on providing a consistent and transparent shopping experience.”

The Guardian has sent questions to Family Dollar about the settlement and lawsuit.

The FTC made undercover visits to Family Dollar and Dollar General stores after the December 2025 publication of the Guardian’s story about the two chains. In January, the agency said, an FTC investigator was overcharged on 15 of the 50 items she purchased at a Family Dollar in Euclid, Ohio.

The agency also sifted through large numbers of customer complaints to the company itself as well as to the FTC, state regulators and consumer groups.

The lawsuits says that customers from at least seven states reported in January 2025 that Family Dollar refused to honor a “2 for $20” offer for diapers advertised on shelf tags, its weekly flyer and its mobile app. A consumer in Michigan, for example, said they took a photo of the discount price displayed on the shelf for diapers but that the manager “told me that the price was wrong and he would not sell to me at that price”.

A customer in South Dakota, meanwhile, complained they had been charged $25.50 for three packs of Dr Pepper that were listed as “3 for $12”. When they complained, the consumer said, an employee “freaked out on me” and screamed “in front of 20 people” – saying the higher price was correct and the customer was no longer welcome at the store.

Under the settlement, Family Dollar will be required to set up a $40m consumer redress fund, provide $20m in discounts to customers and pay more than $3m to state authorities. It also must create a program to ensure that it regularly monitors and verifies prices, trains employees to identify pricing problems and promptly corrects overcharges.

The settlement comes at a time of growing attention on overcharges at dollar store and convenience store chains. The Family Dollar lawsuit says the consequences of overcharges “fall most heavily on shoppers living on razor-thin margins – families who carefully budget every dollar and rely on accurate, transparent pricing simply to meet their day-to-day needs”.

In October, the FTC and 20 states sued Dollar General, the largest dollar-store chain, accusing it of a “staggering” level of “pricing misconduct”.

In response, Dollar General said it would “defend this litigation vigorously”. It added that, in the retail market, “occasional price discrepancies can occur. When that happens, our store teams are instructed, empowered and expected to make things right for the customer.”