Advertising Law Blog

On September 14, 2006 the New York Attorney General reached a series of settlements with companies that failed to obtain licenses for "going-out-of-business" sales.

As part of the settlement, Hilco Trading Company, the company that managed the sales for Media Play and Chase Pitkin, paid $200,000 in civil penalties and costs, and agreed to make refunds to certain consumers.

Hilco falsely advertised all items as "20 - 40% off" when, in fact, certain items were only 10 percent off. Furthermore, some items were excluded from the sale which was not disclosed in the ad that stated all items were on sale.

The New York Attorney General Elliot Spitzer stated, "Going out of business sales are regulated by state law to protect the public from misrepresentation and fraud. These settlements send a message to merchants that my office is working with municipalities to ensure that this consumer protection law is complied with fully."

New York state law requires a merchant to do the following before conducting a going out of business sale:
- The merchant to obtain a license from the local clerk's office at least 15 days prior to a going out of business sale and provide a complete inventory of the goods to be offered for sale;
- A copy of the license and inventory to be conspicuously posted in the stores; and
- Any advertisements or announcements to conspicuously show the license number and the date of its expiration.

This settlement serves as important reminder that an advertisement must clearly disclose all material terms of the offer, including but not limited to exclusions or limitations. It also highlights the necessity that a business obtain a proper license before it conducts a "going-out-of-business" sale.