Retail promotions & pricing: legal essentials for retailers | Part 3 – Liquidation sales: when and how to legally conduct them

Promotions and price reductions are powerful tools in the retail sector, and are subject to legal regulations. From sales and liquidation sales to special offers, coupons, contests and price comparisons, retailers must strike a balance between effective marketing and legal compliance. In this blog series, we explore key legal principles to help navigate promotional strategies as well as the main pitfalls. It is not an exhaustive overview of the rules but rather a guide to the main points to keep in mind.

This series will cover:

1. Price reduction announcements: the legal framework and best practices
2. Sales periods: rules, restrictions, and compliance
3. Liquidation sales: when and how to legally conduct them
4. “Buy One, Get One Free? ” The legal do’s and don’ts of joint offers
5. Promotional contests: how to organise them without legal risks
6. Coupons and vouchers: don’t forget the required information
7. Gift cards: legal considerations and recommendations

Professional legal support is highly recommended when running promotional actions, whether for examining envisaged  promotional actions, validating advertising material or drafting the applicable general terms and conditions. Indeed the Economic Inspection keeps a close watch and can impose heavy penalties on retailers failing to comply with the rules.

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Part 3 – Liquidation sales: when and how to legally conduct them

This third part of our “Retail promotions & pricing: legal essentials for businesses” series outlines when a retailer can sell in liquidation and the rules that it must follow.

Belgian law regulates the use of the words “Liquidation”, “Uitverkoop” or “Ausverkauf” or any other equivalent word for the offer for sale or sale of goods, which is only permitted in the following 9 cases:

1. When a sale takes place to implement a court ruling;
2. When the heirs or legal successors of a deceased person who has operated a company offer the acquired company’s stock partly or totally for sale;
3. When a company takes over the business of another company and offers for sale all or part of the transferred stock;
4. When a company discontinues its activity and offers its entire stock for sale and has not liquidated similar goods, for the same reason, over the previous three years;
5. When a company carries out transformations or refurbishment work lasting more than 20 working days to the premises where the goods are normally offered for sale to the consumer, provided that this work makes the sale impossible and that the company has not sold similar goods for the same reason in the previous three years;
6. When a company transfers the establishment, where it usually offers goods for sale to consumers, to another place or closes the establishment, provided that the company has operated the establishment for at least one year before the beginning of the liquidation sale;
7. Where a loss has caused serious damage to all or a substantial part of the company’s goods;
8. When, as a result of a force majeure cause, there is a significant impediment to the company’s activity;
9. When a physical person running a company ceases all his/her professional activities on account of taking retirement, provided, however, that he or she has not carried out a liquidation sale during the preceding year for the reasons referred to in case number 4 or due to the establishment’s closure (referred to in case number 6).

An announcement such as “closure due to lease ending – everything must go” is likely to be regarded as a designation similar to liquidation.

If the retailer is in one of the 9 cases provided for by law, then announcing a liquidation sale not only attracts customers looking for bargains, but also allows the retailer to:

• sell at a loss, which is normally forbidden under Belgian law; and
• announce price reductions during the pre-sales period, during which price reduction announcements are normally forbidden.

There is no notification or communication to the FPS Economy prior to liquidation sales but the retailer must always be able to prove that it is in one of the 9 cases that justifies a liquidation and that it complies with the following rules:

• Only goods that are part of the retailer’s stock before the liquidation commencement may be offered for sale or sold in liquidation.
• The liquidation sale’s duration must be limited to five consecutive months (twelve months if the liquidation takes place under case number 9).
• Any advertisement or other publicity concerning a liquidation (such as by newspaper, television, radio, shop window, etc.) must specify the sale’s start date.
• Any liquidation sale takes place at points of sale where, or according to the sales techniques with which, identical goods were usually offered for sale by the retailer, except in case numbers 1 and 7.
• To transfer goods from a location or physical establishment to the place where the liquidation is taking place, the authorisation must be sought by registered letter to the Minister or responsible official stating the circumstances that justify the application.

Under current legislation on liquidation sales, there is no obligation to apply price reductions, and therefore no obligation to apply these price reductions to all stock and/or for the entire duration of the liquidation period.

However, this does not mean that all practices relating to the advertising of liquidation sales or price reductions are authorised. Misleading information about the price, the method of price calculation, or the existence of a specific price advantage are prohibited and can play a crucial role in the context of a liquidation. A liquidation sale that does not offer any actual price advantage to consumers could be quickly considered misleading regarding the existence of such an advantage.

Retailers must comply with price reduction announcement rules (see part one) during the liquidation period.

Retailers who find themselves in situations where they can hold liquidation sales must comply with certain rules concerning the goods offered for sale and price reduction announcements. Even though a liquidation may mean the end of its activity for the retailer, this does not prevent the Economic Inspection making inspections and issuing penalties or competitors taking legal action.

Written by

• Mathieu Maniet

  Managing Associate