Fake `Going Out of Business' Sales Prey on Naive Holiday Shoppers
Schemes are prevalent in New York City with its tourist traffic
WHEN Lloyd's Estates opened its doors here to sell opulent home furnishings, heirloom art, and other supposed household gems, it didn't intend to stay in business long.
In fact, within a few days of setting up shop, Lloyd's began advertising a massive ``Going Out of Business'' sale.
Such brazen schemes to pull in bargain-hungry shoppers multiply as Christmas approaches, consumer-protection officials say. While bogus going-out-of-business (GOB) sales occur nationwide, some experts say they are most common in New York, where a large pool of unsuspecting tourists roam.
``Some unscrupulous business owners get into the holiday season by running illegal and deceptive special sales, thereby exploiting shoppers'' during the heaviest retailing season of the year, says Fred Cerullo, commissioner of New York's Department of Consumer Affairs. ``[The sales] are the tool of Ebenezer Scrooge-type entrepreneurs.''
Often, electronics, furniture, and jewelry stores are prime contenders for GOBs. They post signs offering huge discounts; a recorded voice may bark to customers peering into windows. Some retailers even scatter bits of paper to suggest that the store is packing up.
In New York, tourists are most likely to fall for these schemes. ``I believed it,'' visiting Frenchman Jean-Christophe Klein says, while looking at a going-out-of-business sign along Fifth Avenue. ``The only thing I can do is compare with my country, and everything is cheaper here.''
Although tourists are the primary target in the Big Apple, it's often your ordinary ``Joe'' who falls for such scams elsewhere, consumer-protection officials say.
``It's really common nationwide,'' said Susan Grant, executive director of the National Association of Consumer Agency Administrators in Washington. ``We may be seeing more of it in the past several years than we were before because a lot of businesses are in tough shape.''
Recently, New York's Department of Consumer Affairs made its largest crackdown in years. It cited 12 midtown Manhattan stores for improperly advertising a renovation, loss-of-lease, or going-out-of-business sale. The department charged the stores with not having proper sale licenses and for deceiving the public.
Playtime Fashions, a clothier, was cited for advertising going-out-of-business sales at least three times since 1986, but never went out of business. Last week, the consumer-affairs department temporarily padlocked the store.
Several shops defend their practices. ``You try to create some business, you know what I mean,'' said one official at Savoy Galleries, a purveyor of antiques. ``If you've got a thousand pieces, you've got to get them out.''
Richard Bluestone, president of clothing store A Austin Ltd., conceded that his ad for a ``Cash-Raising Sale - 25 percent to 50 percent Off!'' was aggressive, but he maintained it was entirely fair. ``I'm really agitated,'' he said in response to the code citation that may cost him as much as $600 a day. ``They're going after the little business.''
EVEN if retailers complain, most states try to police stores that stage fraudulent sales.
``Most states have laws against it because it's a perennial problem,'' said Ed Mierzwinski, consumer-program director at the United States Public Interest Research Group. ``It's one of many unfair and deceptive acts that legitimate businesses have to deal with.''
Yet many businesses get away with it. Lloyd's Estates, for example, was never fined because it shut down within three months, as New York law requires.
``They could only secure a lease for a short duration,'' says company attorney Harold Hoffman. ``There was no breach of the law.''
Wilfredo Lopez, a consumer-affairs department official who tried to make a case against the store, countered: ``It was the most blatant and outrageous example of going into business to go out of business.''
Other businesses comply with the 90-day closing-down rule by reemerging under new owners, often relatives or friends who may also employ a ``going out of business'' strategy, officials say. The problem is encapsulated in a photo in the consumer-affairs department showing a store's ``Grand Opening'' flag topped by a ``Final Liquidation'' sign.