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November 21, 2011

Filene’s Basement Going Out of Business Sale Shenanigans

Filed under: Retail — Edgar (aka MrConsumer) @ 6:36 am

It is with a note of sadness that we say goodbye to Filene’s Basement — a Boston bargain institution since 1909. It was most famous for its automatic markdown policy whereby prices were reduced by 25%, then 50%, then 75% for each week the goods remained on the floor after the first couple. Eventually, any leftovers were given to charity.

Syms bought the chain after it filed for bankruptcy in 2009, and now Syms itself, along with Filene’s Basement are in bankruptcy again. This time, it will be a total liquidation of the two chains. And that means a huge going out of business sale, just in time for Black Friday and the Christmas selling season.

Here is their first going out of business ad:

What you can’t see too well is that fine print line at the bottom of the ad that says:

*MOUSE PRINT:

“Additional non-Filene’s Basement merchandise, of like kind and quality, has been procured and added to the sale.”

Historically, when stores go out of business, a liquidator comes in and conducts the sale. Amongst the anti-consumer practices of some liquidators is the adding of “outside goods” to the stock of merchandise that belonged to the company going under. In essence, the liquidator was using the lure of the magic words “going out of business” to sell goods OTHER THAN THOSE that were in distress. Some states, like Massachusetts, forbid the adding of outside goods to such sales because of the inherent deceptive nature of so doing. (Most consumers would not be able to tell which goods came from the bankrupt seller, and which had been added. Often the quality of the added goods might be different from what the store was known for, and those goods were affixed with price tags showing regular prices that were never charged.)

Several states’ Attorneys General (bless you) objected to the liquidators’ plan to bring in outside goods and to their request to have state going out of business laws set aside, and explained it to the court this way:

“The States have a general concern that GOB Sales have increasingly become a means by which liquidators rent the façades of distressed companies to sell their own goods, rather than merely serving as agents to liquidate the debtors’ goods. Bankruptcy is about distributing the debtor’s estate, not facilitating an ordinary course of selling liquidators’ merchandise peddled from sale to sale.”

To make a long story short, all the parties came to an agreement, and the judge ordered that all advertising contain a disclaimer like the one above, and that the outside goods be identified as not really from Filene’s Basement.

None of this complies with some of the states’ going out of business laws, and the judge approved loosey goosey language that leaves in question whether those tougher laws will prevail.

So, the closing of Filene’s Basement really is a lose, lose, lose situation for consumers, employees, and competitors, but not for the liquidators.

• • •

9 Comments

  1. Another scam to be wary of is liquidators who raise prices on the “discounted” goods in the store, so you might pay more than if you had purchased before the GOB sale! This was well publicized when Circuit City went out of the retail business.

    Edgar replies: You are absolutely correct. (Sorry for the error before). That is another nasty practice of some liquidators.

    Comment by Derlin — November 21, 2011 @ 12:18 pm
  2. If the practice of adding merchandise is illegal, why doesn’t the Attorney General or District Attorney file suit to stop the sale of said items? Wouldn’t this be considered a breach of their duties to the State? A small print disclaimer that “additional merchandise has been added” does NOT meet the spirit of the law. It, according to your article, is illegal. Should be punishable.

    If the AG or DA doesn’t decide to prosecute, then some consumer watchdog agency should file suit to impeach the state officials who are not doing their job. What about the new federal consumer agency that this administration started? Could they do something?

    Edgar replies: Bob, the federal bankruptcy court kind of takes the position that it can negate state going out of business laws, so all the AGs can do is complain to the bankruptcy court (that was written into the judge’s order). Unlike the bankruptcy court in Mass., the one in Delaware is seemingly more pro-business.

    Comment by Bob — November 22, 2011 @ 11:26 am
  3. More items on sale then the store originally had. I have no problem with this and it helps the liquidator get rid of more items. If they are all on sale and get more discounted towards the end of the sale then what is the problem. I think this is the first Mouseprint that I had no problem with. It is a win for the liquidator and the consumer as you get more sale choices.

    Edgar replies: You can disagree with Mouse Print* all you want, but the LAW prohibits liquidators from bringing in outside goods in many states. Remember, the liquidator is NOT Filene’s Basement or Syms, so there is no reason to “help” them at the expense of consumers who could be misled about the goods.

    Comment by Martin — November 22, 2011 @ 1:09 pm
  4. Martin, I think it becomes more of a problem when the quality of merchandise that was added is inferior to that merchandise originally sold by the retailer going out of business. Some consumers are expecting to get the good quality that some stores are known for selling, not some cheap trash made in china.

    Comment by Peter — November 22, 2011 @ 1:37 pm
  5. Thanks Peter, I had not thought of that and if the quality is below standard then there is a problem. Not knowing what store the extra is from would make it deceptive and I would retract my earlier statement and say that this is a valid complaint.

    Comment by Martin — November 22, 2011 @ 4:34 pm
  6. I’m not sure I understand Edgar’s reply to Derlin’s comment. Isn’t Derlin saying that liquidators sometimes raise prices of goods in the going out of business sale to higher than they were priced before the liquidation took place? Derlin doesn’t mention “outside goods” at all, and I didn’t think he meant those, just the ones that are supposed to be “discounted,” but in reality, aren’t. I think Derlin is just looking at another side of a similar kind of scam than the one this article focuses on. I don’t think he’s disagreeing with Mouse Print at all.

    Edgar replies: Jamie… you are absolutely right. That comment was supposed to follow a different poster’s comment. Thanks for pointing out the mistake.

    Comment by Jamie — November 23, 2011 @ 1:44 am
  7. everybody knows the best selection is in the begining of the sale, the best prices are at the end of the sale. If u see it and you have to have it buy early, the price will go down so keep track of it or it might be gone before your price comes up (actually down). Professional GOB shoppers always ask when is your last day – we’ll look at what you have left and buy if what you have left interests us and if the price is right. The liquidators stuff is usually priced to sell when the bigger discounting starts – take an extra 20% 40% etc. REMEMBER an educated consumer…

    Comment by Daniel — December 18, 2011 @ 12:17 pm
  8. I consider myself an informed shopper, and I have never heard of this practice before! I have shopped many, many GOB sales and I have not noticed any suspicious merch. I do, however, tend to shop the last days of GOB sales, and I pay close attention to the markdown schedules. I shopped Filene’s GOB sale just yesterday and got some great deals (edited) but I am definitely planning on going back for the final day. This definitely makes me think…am I getting a deal on Filene’s merch…or a “deal” from a liquidator…

    Comment by CAS — December 23, 2011 @ 4:57 pm
  9. I have long regarded a GOB sale sign as “Welcome Sucker” sign.

    Comment by Vennyo — January 23, 2012 @ 12:16 pm

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