The Federal Trade Commission recently sent out an alert to consumers to use extra care when taking advantage of "going out of business sales." If the FTC is warning consumers about this issue, then there's a good chance that the FTC is looking at what marketers are doing as well -- particularly as we head into the holiday season.
When can a store advertise a "going out of business sale"? Well, not surprisingly, according to the FTC, this kind of sale is only appropriate "when a store is going out of business."
What is the FTC concerned about? The FTC warned consumers that "going out of business sales" may not be the great deal that they appear to be because "Liquidators may base discounts on the manufacturer’s suggested retail price, which often is higher than what stores typically charge. That means items can end up costing more than they did before the sale began." The FTC also warned consumers about the availability of return policies and whether gift cards will be honored.
If you are planning some special sales this holiday season -- though hopefully not a "going out of business sale" -- this is a good time to check out FTC guidance on sales and pricing -- such as the FTC's "Guide Concerning Use of the Word 'Free" and Similar Representations," "Guides Against Bait Advertising," and "Guides Against Deceptive Pricing" -- as well as vary state law requirements.
"It’s against the law to advertise a going out of business sale when a store isn’t, well, going out of business" -- Colleen Tressler, FTC Consumer Education Specialist