BP BHEAD INT H

AN ACT Relating to going out of business sales; adding a new section to chapter 35.21 RCW; adding a new section to chapter 36.32 RCW; adding a new chapter to Title 19 RCW; creating a new section; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that the practice of conducting unfair or deceptive going out of business sales is a matter vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. These acts of unfairness or deception are not reasonable in relation to the development and preservation of business and are injurious to the public interest.

The purpose of this chapter is to regulate the conduct of going out of business sales in order to prevent unfair and deceptive acts or practices in trade and commerce, and to prevent unfair methods of competition.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Affiliated business" means a business or business location that is directly or indirectly controlled by, or is under common control with the business location or business locations listed on the license application, or that has a common ownership interest with the business location or business locations listed on the license application in the goods to be sold.

(2) "Going out of business sale" means a sale or auction advertised or held out to the public as the disposal of stock of goods in anticipation of cessation of business. This includes but is not limited to a sale or auction advertised or held out to the public as a "going out of business sale," a "closing out sale," a "quitting business sale," a "loss of lease sale," a "must vacate sale," a "liquidation sale," an "inventory clearance sale," a "bankruptcy sale," a sale "to prevent bankruptcy," or another description suggesting price reduction due to the imminent closure of the business.

(3) "Merchandise" means goods, wares, or other property or services capable of being the object of a sale regulated under this chapter.

(4) "Person" means, where applicable, natural persons, corporations, trusts, unincorporated associations, partnerships, or another legal entity.

NEW SECTION. Sec. 3. (1) It is unlawful for a person to sell, offer for sale, or advertise for sale merchandise at a going out of business sale without having first obtained a license in accordance with the provisions of this chapter.

(2) The license must be displayed in a prominent place on the premises where a going out of business sale is being conducted, and must clearly show the name of the applicant and the beginning and ending dates of the sale.

(3) Where a going out of business sale is part of a bankruptcy, receivership, or other court-ordered action, a copy of a petition, motion, proposed order, or other pleading requesting court approval of the sale shall be served on the attorney general no less than seven days prior to the date on which an action may be taken related to the conduct of the sale by a court.

NEW SECTION. Sec. 4. (1) The provisions of this chapter shall not apply to persons acting in accordance with their powers and duties as public officers, such a county sheriffs.

(2) Going out of business sales or perishable merchandise or merchandise damaged by fire, smoke, or water are exempt from the requirement that application for a license be made at least fourteen days prior to the beginning of the proposed sale.

NEW SECTION. Sec. 5. (1) An applicant for a license under this chapter shall file an application in writing and under oath at least fourteen days prior to the beginning date of the proposed going out of business sale with the municipal or county official designated by the local legislative authority.

(2) The applicant shall set forth the following facts and information regarding the proposed sale:

(a) The name, address, telephone number, and Washington state business identification number of the applicant for the license, who must be the owner of the goods to be sold. If the applicant is a corporation, trust, unincorporated association, partnership, or other legal entity, the applicant must be an officer of the entity and must identify his or her title;

(b) The name, address, and telephone number of the person who will be in charge and responsible for the conduct of the sale;

(d) A complete itemized list of current inventory, containing a description of each item to be offered for sale at the proposed sale;

(e) A separate list of all merchandise ordered or received by the applicant during the ninety days preceding the filing of the application; and

(f) A statement that:

(i) The merchandise ordered during the ninety days preceding the filing of the application consists only of bona fide orders made in the usual course of business and does not contain merchandise taken on consignment or otherwise;

(ii) No merchandise transferred from an affiliated business was transferred in contemplation of the proposed sale;

(iii) No merchandise will be ordered, taken on consignment, or transferred from an affiliated business after the application is made or during the sale;

(iv) Neither the applicant nor a person who has an ownership interest in the business or in the goods to be sold has established the business or acquired an interest in the business or goods to be sold solely or principally for the purpose of conducting a going out of business sale;

(v) Neither the applicant nor a person who has an ownership interest in the business or the goods to be sold has conducted a going out of business sale within one year prior to the date of filing the application;

(vi) Neither the applicant nor a person who has an ownership interest in the business or the goods to be sold has had a license issued under this chapter revoked within five years of the filing of the present application or is subject to a court order resulting from a civil enforcement action under the consumer protection act for a violation of this chapter or the type of conduct prohibited by this chapter;

(vii) The business will be discontinued upon termination of the sale and no goods held out for sale will be subsequently offered for sale to the public by anyone who had an ownership interest in the business or in the goods offered for sale; and

(viii) Other information as requested by the municipal or local authority.

(3) If the county or municipal official responsible for the licensing is satisfied from the application that the proposed sale is of the character of a bona fide going out of business sale, the official will issue a license, upon the payment of a license fee by the applicant.

NEW SECTION. Sec. 6. (1) No license for a going out of business sale will be issued except to a merchant with a valid Washington state business identification number.

(2) No license will be granted to an applicant if it is found that:

(a) The applicant or a person with whom the applicant is or has been associated in the business has established the business or acquired an interest in the business or in the goods to be sold solely or principally for the purpose of conducting a going out of business sale. An applicant or a person with whom the applicant is or has been associated in the business who has conducted a going out of business sale within one year of application for a license under this chapter, and a business that has been established or an interest that has been acquired for less than six months are presumed to have been established or acquired for the purpose of going out of business; and

(b) The applicant or a person with whom the applicant is or has been associated in the business has had a license issued pursuant to this chapter revoked within five years of the filing of the present application is subject to a court order resulting from a violation of a local ordinance regulating going out of business sales, or is subject to a court order resulting from a civil enforcement action under the consumer protection act for a violation of this chapter or the type of conduct prohibited by this chapter.

NEW SECTION. Sec. 7. (1) A license issued under this chapter is valid for the going out of business sale described in the application for a period of sixty days from the beginning date of the sale.

(2) A license issued under this chapter may be revoked upon the determination by the official issuing the license that the licensee made false statements on the application or that the sale is being conducted in violation of a provision of this chapter.

NEW SECTION. Sec. 8. (1) No person shall sell consigned merchandise or other merchandise not owned by the person going out of business at a going out of business sale. Merchandise ordered within the ninety days preceding the application for the proposed sale shall consist only of bona fide orders made in the usual course of business and shall contain no merchandise taken on consignment or otherwise.

(2) No person in contemplation of a going out of business sale shall transfer merchandise from an affiliated business or business location to the location or locations of the proposed sale.

(3) No person, after an application for a going out of business sale license has been filed, shall buy or order merchandise, take merchandise on consignment, or receive a transfer of merchandise from an affiliated business or business location for the purpose of selling the same at the sale or sell the merchandise in a going out of business sale.

NEW SECTION. Sec. 9. (1) No person shall continue to conduct a going out of business sale beyond the termination date listed on the license. An auction, as defined in RCW 18.11.050(2), in which the same inventory listed on the licensee's application is auctioned to the consumer public, is part of the going out of business sale for purposes of this section and must be conducted before the termination date listed on the license. A bulk transfer, as defined in RCW 62A.6-102, is not part of the going out of business sale for purposes of this section.

(2) No person conducting a going out of business sale licensed under the provisions of this chapter shall, upon conclusion of the sale, continue to remain in business under any of the same ownership, or under the same or substantially the same trade name, or continue to offer for sale the same type of merchandise for a period of one year.

(3) For the purposes of this section, if a business entity that is prohibited from continuing a business under this section reformulates itself as a new entity or as an individual, whether by sale, merger, acquisition, bankruptcy, dissolution, or other transaction, for the purpose of continuing the business or profiting from the business, the successor entity or individual shall be considered the same person as the original entity. If an individual who is prohibited from continuing a business under this section forms a new business entity to continue the business, participate in the business, or profit from the business, that entity is considered the same person as the individual.

NEW SECTION. Sec. 10. No person shall apply for a license or conduct a going out of business sale if any means have been established by the owner for continuation of the business, or sale to the public of the same goods that were held out for sale in the going out of business sale, by the same owner directly or indirectly, by corporation, trust, unincorporated association, partnership, other legal entity, or otherwise under the same name or under a different name, at the same location or elsewhere within the state.

NEW SECTION. Sec. 11. (1) No person shall advertise a going out of business sale earlier than fourteen days prior to the date on which the sale is licensed to begin. All advertising of the sales shall state the number of the license issued under this chapter, the date when the sale is to begin, and shall clearly and prominently state the termination date of the sale. All advertising shall be confined to or refer to the address or addresses and place or places of business specified on the application as going out of business and may not state that other locations or affiliated businesses are cooperating with or participating in the sale unless the other locations or affiliated businesses are included on the license application.

(2) No advertising shall contain false, misleading, or deceptive statements regarding the nature, duration, merchandise, or other terms of a going out of business sale.

(3) Representations in advertising regarding price savings or discounts on sale merchandise must be bona fide and substantiated.

NEW SECTION. Sec. 12. The legislature finds that the practices covered by this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. Violations of this chapter are not reasonable in relation to the development and preservation of business. A violation of this chapter is an unfair or deceptive act in trade or commerce and an unfair method of competition for the purpose of applying the consumer protection act, chapter 19.86 RCW.

NEW SECTION. Sec. 13. A person who knowingly violates a section of this chapter or who knowingly gives false or incorrect information on a license application required by this chapter is guilty of a gross misdemeanor and shall incur the penalties set forth under chapter 9A.20 RCW.

NEW SECTION. Sec. 14. An official designated by a local legislative authority to issue going out of business sale licenses may refer available evidence concerning violations of this chapter to the attorney general or to the proper prosecuting attorney who may in their discretion, with or without reference to the available evidence, institute proceedings under this chapter.

NEW SECTION. Sec. 15. Nothing in this chapter is deemed to prohibit a local governing authority of a county or municipality from enacting, amending, repealing, or enforcing local ordinances regulating going out of business sales that do not conflict with the requirements of sections 2 through 14 of this act.

NEW SECTION. Sec. 16. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 17. Sections 2 through 15 of this act shall constitute a new chapter in Title 19 RCW.

NEW SECTION. Sec. 18. A new section is added to chapter 35.21 RCW to read as follows:

The municipal legislative authority shall direct the appropriate municipal official to consider applications and issue licenses for going out of business sales designated in this chapter for a sum as may be fixed under the authority of RCW 35.21.710.

NEW SECTION. Sec. 19. A new section is added to chapter 36.32 RCW to read as follows:

The county legislative authority shall direct the appropriate county official to consider applications and issue licenses for going out of business sales designated in this chapter for a sum as may be fixed under the authority of RCW 36.32.120(3).