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:
“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 faÃ§ades of distressed companies to sell their own goods, rather than merely serving as agents to liquidate the debtorsâ€™ goods. Bankruptcy is about distributing the debtorâ€™s estate, not facilitating an ordinary course of selling liquidatorsâ€™ 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.