Question

Which of the following would cause a going-out-of-business sale to be considered false advertising?

O the company reduces product prices.
O the company keeps the location open.
O the company begins the sale on time.
O the company liquidates all inventory.

Answer 1

The Federal Trade Commission considers a going-out-of-business sale to be false advertising if the company keeps the location open after implying it would close. Other actions such as reducing prices, starting the sale on time, or liquidating inventory do not constitute false advertising.

Step-by-step explanation:

In the context of a going-out-of-business sale, the question is centered around what would be considered false advertising.

The scenario where a going-out-of-business sale would be deemed deceptive occurs if the company keeps the location open while advertising that they are closing down. This directly conflicts with the declared intent of a closing sale, which is to liquidate assets due to cessation of operations. According to the Federal Trade Commission (FTC), it is unlawful for businesses to make untrue factual claims about their operations, including the finality of going out of business.

While the FTC allows some leeway for exaggerated or ambiguous language that's not explicitly false, explicitly untrue facts, especially regarding the status of the business, are not permitted.

This adherence to honest advertising echoes the principle of Caveat emptor — "let the buyer beware." However, it is important to note that the other options listed such as reducing product prices, beginning the sale on time, or liquidating all inventory do not, on their own, constitute false advertising.