Laws governing liquidation sales

December 2, 2008 6:33:02 PM PST
Laws covering sales (including liquidation) in California:

In California, there is no general statewide law applicable to all going out of business sales. Some cities and counties have ordinances on the subject, but I don't have any comprehensive information on which cities or counties and what they provide. Generally, they include such things as a time limit for how long a sale can run, restrictions on brining in other merchandise and advertising of sales. That is more a question for the individual DA's or City Attys.

There are some regulations re going out of business sales that apply statewide, but only to particular kinds of merchandise, most notably being furniture sale regulations.

See, e.g., Cal. Code Regs, title 4, section 1305:

No advertisement shall represent that because of an unusual business event in the course of business or unusual manner of doing business or for any other reason an article is offered for sale at a savings in price unless such advertisement is in all respects true and not misleading. If an advertisement represents that the sale is being held for reasons relating to transactions which have already occurred or orders which have already been placed, the articles offered at sale prices are restricted to those articles on the premises, in the warehouse or in process from previous orders the date the sale is announced. Sales of this type include, but are not limited to, liquidation sales, inventory sales and overstock sales.

And section 1312:

No advertisement shall represent or imply, by means of the term "Going Out of Business," "Selling Out," "Closing Out," "Liquidating," or any term of similar import, that the advertiser is going out of business, or is disposing of all or a portion of a stock of merchandise, unless such representation is true and is not in any respect misleading as to the advertiser's discontinuing business or as to the types and quantity of merchandise intended to be included, and unless the articles offered for sale, and to be sold, during the sale are restricted to those articles on the premises or in transit from previous orders the date the sale is announced. A mere change of business location, business name or type of business entity does not constitute going out of business within the meaning of this section.

Other more general consumer laws also apply to advertising of sales generally, not limited to GOB sales, e.g, Bus & Prof. 17501 says:

No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price as above defined within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.

In other words, if it the supposed price off of which the sale is being offered wasn't really the price on the product generally during the prior 3 months, it can't be advertised as the former price.

Similarly, general misleading advertising laws also prohibit deception, etc. in any sales. E.g., if you advertise a going out of business sale, at some point, the length of time for it becomes deceptive, e.g., a going out of business sales that continues for, e.g., a year or more (or perhaps less, depending on the advertising that accompanies it.)

Information from the California attorney general.


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