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Post date: April 8 2011

A.G. Schneiderman Puts An End To Deceptive, Never-Ending "Going Out Of Business" Sale In Syracuse

Syracuse Oriental Rug Company Used Misleading "Going Out Of Business" Sale to Lure Consumers to the Warehouse Under False Pretenses

Schneiderman: This Should Serve As a Warning to Businesses Who Deceive & Manipulate the Public

SYRACUSE - Attorney General Eric T. Schneiderman today announced a settlement with a Syracuse-based oriental rug company and liquidation company for engaging in deceptive and misleading advertising -- specifically, deceiving consumers into falsely thinking they were holding a "going out of business" sale -- in violation of New York State law.  As a result of Attorney General Schneiderman's actions, Jacobsen Oriental Rugs and Overstock Liquidation have agreed to pay $65,000 in civil penalties and have agreed to stop the deceptive practices.

"This should serve as a warning to businesses out there who attempt to deceive and manipulate the public," said Attorney General Schneiderman. "On behalf of consumers, we are watching you and will use all of our enforcement power to penalize dishonest practices."

In October 2010, Jacobsen Oriental Rugs obtained a license from the City of Syracuse to conduct a 30-day going-out-of-business sale as required by New York State’s General Business Law.  Jacobsen Oriental Rugs then renewed the license for an additional 30 days. After the 60 days, Jacobsen partnered with Overstock Liquidation Company, LLC to continue the sale at its Syracuse showroom. Overstock specializes in the acquisition and re-sale of bulk Oriental and other rugs from businesses that have conducted going out of business sales. Under the direction of Overstock, the out-of-business sale continued through mid-March 2011 despite the fact that their license had maxed out. Under state law a business may only receive one 30 day license and one 30 day extension. 

During all sale periods, Jacobsen Oriental Rugs advertised percentage savings off of its already reduced prices. Thereafter, Overstock promoted a liquidation of Jacobsen inventory, with a purported savings of 50% or more on the rug value. The sale was effectively a continuation of the going-out-of-business sale which violates New York State's restriction on the duration of the sale.

The Attorney General's investigation found that Jacobsen Oriental Rugs and Overstock Liquidation Company engaged in deceptive acts and practices as well as false advertising by promoting a “liquidation sale” that was neither court-ordered or a forced liquidation of assets. Additionally, the sale was a veiled attempt to continue a "going out of business" sale beyond the 60 days permitted by New York State law.  Very often the prices for oriental rugs are not set in stone and therefore it is routine for consumers to negotiate a price. Jacobsen's advertising of savings as much as 50 percent off was misleading.

The agreement, known as an Assurance of Discontinuance, was signed by Brent Goodsell, President of Jacobsen Oriental Rugs, Inc. and Faramarz Asef, President of Overstock Liquidation Company, LLC, a division of Asef Corporation. Overstock Liquidation Company acquires for re-sale bulk Oriental and other rugs, furniture and home furnishings, as well as miscellaneous office equipment, furnishings and inventory from businesses that have conducted going out of business sales. 

This case was handled by Assistant Attorney Judith Malkin of the Syracuse Regional Office under the supervision of Assistant Attorney General In Charge Ed Thompson.  Senior  Investigator Andrea Burnham assisted in the investigation.