American TV & Appliance, a fixture on the Madison retail scene for over 40 years, announced in mid-February that it is going out of business. In the days since, customers have flocked to American’s stores for its “Going Out Of Business” sale.

Everyone loves a bargain. Promotions described as a “close out”, “selling out” or “going out of business” sale (typically accompanied by the tagline “everything must go”) can generate significant customer traffic for the retailer conducting the sale, and going-out-of-business promotions are frequently very successful.

State law, however, recognizes that the everything-must-go phenomenon can be abused. Unless the business is truly in a liquidation mode (like American), the use of the terms described above may be treated as “deceptive advertising” under section 100.18 of the Wisconsin Statutes. Violations of that section can be prosecuted by the state Department of Agriculture, Trade and Consumer Protection, and consumers harmed by such advertising have private remedies (including the potential recovery of attorneys’ fees) as well.

One significant exception: sales of seasonal merchandise, or of merchandise having a designated model year, may be described as “closing-out” sales of such specific merchandise, even if the business is continuing to operate.

Just as it’s buyer beware for those pursuing bargains at a “going out of business” sale, there are risks to retailers who makemisstatements when promoting “close-outs” and sales of their ilk.

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