A failed furniture store and the liquidator the store hired to run its "going out of business" sale have paid the state $80,000 to settle charges they illegally ordered extra merchandise to keep the lucrative sale going.
While they did not admit that they violated the state's Distress Sales Act, Koren Furniture, of Catonsville, and Retail Furniture Liquidator Associates, of Towson, conceded that they did order and sell extra furniture to raise additional cash during a liquidation sale that ran from June 8 to July 25.
In the settlement, the liquidator also promised not to violate the state law in the future. The furniture store is now closed.
Robert Millman, attorney for the liquidators, said yesterday no consumers were hurt by the sale, because the companies simply ordered more of Koren's regular furniture to sell to customers.
"There were no consumer complaints," Mr. Millman said. The only ones who may have a beef, he said, are competitors who lost sales to Koren.
Steven Sakamoto-Wengel, the assistant attorney general who handled the case, said that while he received no complaints from consumers, he prosecuted the company because some businesses try to take advantage of consumers when claiming to hold liquidation sales.
And competitors did discuss the case with him, he said.
"Consumers tend to expect that at a 'going out of business sale' they are going to be receiving big savings, and that they are going to be buying the same type of merchandise they are used to getting from retailers," Mr. Sakamoto-Wengel said.
"But in too many cases in the past, liquidators have brought in extra goods that were not of the same quality" to take advantage of a buying frenzy, he said. The state did not allege that Koren ordered or sold inferior merchandise, he noted.
To prevent abuses, state law requires companies holding liquidation sales to sell off only their existing inventory, and to limit the sale to 60 days, he said.
Mal Hellman, executive director of the Maryland Home Furnishing Association, said half a dozen of his trade group's members "are within a stone's throw" of the Koren store, and were concerned about the sale.
"There is always a question in a distress sale about whether somebody is bringing in merchandise," he said. "The other stores want a level playing field."
But even distant furniture stores could be hurt by liquidators who don't play by the rules, he said.
"If consumers feels cheated, they won't have a good taste in their mouths for the whole industry," he said.
While the Maryland Better Business Bureau office said it hadn't received any consumer complaints about the two companies, one BBB investigator said such abuses are common.
John Flotron, who reviews advertisements for the BBB in Missouri and Illinois, said he has had several cases of questionable liquidation sales recently, involving rug, piano and furniture merchants.
"Some companies go into business just to to go out of business," he said. Liquidation sales "bring in a lot of customers because of the sense of urgency that it will be ending soon."
Some companies, he said, jack up so-called "original" prices and then advertise big discounts.
While not as common a complaint as unscrupulous car salespeople or home repair contractors, improper "going out of business" sales "are a big problem," Mr. Flotron said. "They reduce the credibility of all advertising."