Coupon fraud is on the rise and some major manufacturers and retailers are crying foul.

From 1986 to 2001, the Coupon Information Corp., a nonprofit watchdog for the coupon industry, reported only two cases of investigated or prosecuted coupon fraud. In 2007, there were only nine. However, in the last year and a half, there have been 93 such cases and the numbers are expected to continue to rise as the recession drags on and the Internet offers new tools for coupon fraud.

CIC says the cost of these counterfeits has easily been in the tens of millions of dollars, according to a survey of 24 major consumer-products manufacturers. One consumer-product manufacturer estimates its losses to counterfeit coupons now exceed $3 million a year.

"People are desperate to steal now," said CIC Executive Director Bud Miller. "And it's going to get worse before it gets better."

Manufacturers and CIC held a meeting in Washington, D.C., last week to update their joint efforts to fight coupon fraud. Techniques used in coupon fraud include reprinting in-store coupons and even smudging bar codes to extend expiration dates.

According to Inmar Inc., a coupon processing agent, coupon redemption in the fourth quarter of 2008 rose nearly 10% from the year before, the first jump in redemption since the early 1990s.

"Consumer response remained strong for the year with 2.6 billion coupons redeemed, the third year in a row at that level," Inmar said in a press release on its Web site. "The weak economy was a major factor in stopping the steady decline that coupon redemption had seen in the years prior to 2006. The peak year for coupon redemption was 1992, at the end of the last major recession, when 7.9 billion coupons were redeemed."

Inmar director of marketing, Matthew Tilley, said coupon redemption has surged nearly 17% in the first quarter of 2009 compared with a year ago, and Inmar expects double-digit growth for the second quarter.

Larry Joseloff, vice president of National Retail Federation, said retailers have few options to control coupon usage. They can either set a certain number of times a customer can use a coupon or make each code unique and never issue randomly generated, transferable coupons.

In January 2008, Nestle Purina Petcare Co. issued 250 coupons for a free bag of its adult dry dog food. As of May 5, the company said, 2,754 coupons for the product have been redeemed, but declined to comment further on coupon fraud.

This month, Coca-Cola Co. (KO) had to withdraw a free 12-pack coupon from its "My Coke Rewards" program due to "widespread counterfeiting," warning consumers in a statement that "attempts to submit counterfeit coupons may result in civil action or criminal prosecution."

"Coca-Cola recognizes the potential for coupon fraud and we continually work to increase the security and integrity of our coupons," said Coke spokeswoman Susan Stribling, adding that it's an industrywide issue and that Coke works with other manufacturers and retailers to address the problem.

Drugstore chains have also been targeted, with Web sites specifically created to trade or discuss coupon use from the chains.

CVS Caremark Corp. (CVS) said the Web sites infringe on it intellectual copyrights and said any "links to any printable in-store redeemable CVS coupons are unlawful."

CVS spokesman Michael DeAngelis says the company's ExtraCare program, which gives loyal customers exclusive savings from the retailer and its manufacturing partners, such as Unilever PLC (UL) and Coke, helps thwart some coupon misuse and online coupon abuse by linking the coupons with customer loyalty cards.

However, Walgreen Co. (WAG) spokeswoman Tiffani Washington notes the use of "Internet coupons is difficult to control."

-By Kate Zhao, Dow Jones Newswire; 212-416-2665; ying.zhao@dowjones.com