State v. American TV & Appliance of Madison, Inc.

Wisconsin, STATE of Plaintiff-Appellant,

v. MADISON, AMERICAN TV & APPLIANCE OF INC., Defendant-Respondent.† Appeals

Court 17, No. 85-2066. Submitted on November 1986.—Decided briefs 4, June 1987. 596.) (Also reported in 410 N.W.2d granted. to review Petition † For the plaintiff-appellant the cause was submit- Follette, ted on the briefs of Bronson C. La attorney general, James D. Jeffries, attorney general, assistant Nicks, J. Stephen assistant attorney general, and Tuerkheimer, Barbara W. attorney general. assistant For the defendant-respondent the cause was sub- Babler, Jr., E. Wayne mitted on the brief of C. Vernon Howard, Peterson, Nancy Stroud, Stroud, K. Willink, Howard, Thompson & of Madison. Gartzke, P.J., Eich,

Before JJ. Dykman GARTZKE, P.J. The appeals state from an order dismissing against American TV & Madison, Appliance Inc. The complaint alleges that an American TV radio advertisement contained un- true, fact, or misleading statements of 100.18(1), Stats., to contrary sec. and was a plan or scheme, purpose the of which was not to sell the advertised, ÍOO-IB^).1 merchandise contrary 100.18(1), Stats., provides pertinent part: 1 Section firm, person, corporation association, agent No or or or make, employee disseminate, circulate, publish, thereof ... shall place cause, public, directly indirectly, or before or or to be made, disseminated, published, circulated, placed or before the state, public, newspaper, magazine publica- in this in a or other tion, any station, any ... or over or radio television in. or other way foregoing, advertisement, or similar dissimilar to the an announcement, representation or any statement of kind to the public relating sale,... merchandise, to such ... use or lease of... advertisement, announcement, ... represen- which or statement assertion, any representation tation contains or statement fact of untrue, deceptive misleading. which is or 100.18(9)(a) provides part: Sec. deceptive advertising, meaning It is deemed within the this of

section, any person any agent employe make, for or or thereof to disseminate, publish, place public circulate or before the in this

355 injunc- complaint sought forfeitures and an civil complaint to dismiss American TV moved tion.2 802.06(2)(f), Sec. Stats. a claim. failure to state for granted the We conclude court motion. 1983. trial complaint and therefore a claim states reverse. question complaint is a a claim states

Whether independent v. review. Williams Securi law for of our ty Savings 480, 482-83, 355 Ass’n, 120 Wis. 2d Loan& (Ct. 1984). App. pleaded 370, "The facts N.W.2d pleadings from the are inferences and all reasonable purpose testing only true, but for to be admitted legal sufficiency purpose claim, not of the County, Scarpaci 663, 96 Wis. 2d v. Milwaukee trial.” 669, (1980). only 816, Our concern is 292 N.W.2d alleged, proved, the facts if state whether with plaintiff prove claim, can not with whether 483, 372. Williams, 120 2d at 355 N.W.2d at Wis. case. purpose complaint give is of a Because claim, the need not notice of the nature eventually proved. all must be state the facts which 675, Co., 85 Ins. Wis. 2d Anderson v. Continental any newspaper publication in a or or over radio or state other ... any way television or in similar or dissimilar to the station advertisement, announcement, foregoing, repre- statement an sale, hire, relating any public kind to to the ... sentation of merchandise, advertisement, of ... ... an- use lease nouncement, plan representation part of a statement or sell, hire, purchase, purpose is not scheme the or effect of which merchandise, ... as use or lease the ... advertised. 2 Acivil than nor more than $200 forfeiture not less 100.18(1), imposed may Sec. be for each sec. Stats. violation 100.18(9), Stats., person violating may A be Stats. $1,000, imprisoned than for fined not than nor more less 100.26(5). year or Sec. not more than one both. 356 (1978). 683-84, 368, 372-73 271 N.W.2d It must be read liberally plaintiff, Scarpaci, in favor of the 96 Wis. 2d 669, 292 only 819, at N.W.2d at and will be dismissed if appears certainty granted. to a that no relief can be Williams, 483, 120 Wis. 2d at 355 N.W.2d at 372.

COMPLAINT complaint alleges January that between following 12, 1985 American ran the advertise- ment 164 times on 22 radio stations: good

There are lots of quality dryers washers and on the market. you But when ask which ones [sic] the best automatic dryers, washers and well it’s simple. Speed Queen, There’s Maytag, and all the good rest. Sears dryers makes washers and there brands, good are lots But the best [sic] dryers washers and are by Maytag Speed made Queen. And at American we have both of them and they’re on sale for our January white sale. A clearance sale on the finest dryers washers and you can buy. Speed This Queen week washer and dryer set is reduced to This you buy $499. week can the finest for less than Speed Queen Both the $500. dryer washer and Speed Queen, set for $499. choice of more commercial laundra-mats than [sic] any other washer they Speed because last. Because Queen uses the same transmission in home wash- they ers use in commercial washers. When it comes to dryers, washers and Maytag, there’s Speed Queen during and all the rest. And Ameri- sale, can’s closeout January buy white you can Speed Queen best like a dryer pair washer and at Why pay $499 American. more at Sears. period January January 13, sale was 9 to 1985. The Queen washer and set adver- Eleven before days American for cost $520. tised $499 advertising twenty American ordered campaign, on sets, ten to be delivered were such 14, on January 4 and be delivered January ten were twenty American ordered the day 1985. The same expensive but more sets, it ordered 133 additional sets, and sets. Of those dryer washer Speed Queen features, more had step up,” had 65 were "next appearances twenty than sophisticated more $518.00, than the sets, cost American less and $2.00 68 of 133 sets remaining The items. advertised cost "higher step quality” of an even were as much as $604.00. American pays salesper- structure American’s commission for more selling an item for only a commission son salespersons cost. American’s than its wholesale sets, since made no commissions on $499 therefore than American’s cost. Ameri- sold less they $21 only four sold four of advertised $499 can’s stores during occurred during sets the sale. four sales two of the sale. American sold an days the last larger "much number” unadver- unspecified but price sets at a above cost. dryer tised washer alleges advertisement purports be a bona fide offer sale but persons induce inter- American’s aim was to primary sets to its stores buying ested washer visit to sell more sets expensive order them unadvertised discourage and to the sale of the advertised sets. According complaint, to the advertisement’s deception inherent and American’s intent and motiva- sets discourage purchase tion to of the advertised $499 (1) American lost by following are evinced facts: (2) set, on each of a American ordered money sale (3) sets, disproportionate number of unadvertised (4) only sets, American four of sold the advertised discrepancy appearance per- existed between the and quality represented formance of the sets and the $499 advertisement, in in that sets had an $499 appearance quality and below that advertised and plain were and lacked models, features found in other (5) salespersons paid selling American’s were not for (6) salespersons set, American’s were $499 trained and attempted to direct customers to unadvertised models or not whether customers asked models, to see those (7) purchasers buy and credit card not could set buy expensive dryers. but could the more washers and 100.18(1), FIRST CLAIM—SECTION STATS. argues The state the advertisement con- deceptive misleading untrue, tained statements of (1) respects: appearance perfor- fact in three and mance of the "finest,” set was not the "best” and (2) advertised; as no "clearance” or "closeout” sale was (3) purported held; and the advertisement to be a bona Speed fide offer to sell a Queen washer and set $499, for but American’s aim was not to sell "bait” price, persons buying at that but lure to in interested dryers washers and to stores sell them unadvertised higher prices. sets at

The trial court concluded that a reasonable read- ing of the advertisement is that it announced a general Maytag sale and Queen washers and dryers including $499, set one for and that the words "best,” "finest,” "clearance,” "closeout,” "January "hyper- sale,” the context of a white are puffery.” allege bole and Since the fails to buy that no sale occurred or that a customer not could $499, a set for the court held there was no basis for deceptive untrue, was the advertisement claim disagree. misleading. We descrip- and "finest” the "best first examine

We advertisement, court the trial in the tions puffing. Stats., condemns Section excused as misleading statements untrue, all express exception advertising. no It contains puffing. conclude, If, however, American’s as we puffing, qualify then we need fails to advertisement impliedly excludes whether the statute not decide puffing prohibition. from Advertising According Rosden, Law (1986), law, "a seller who at common at 10-26 10.06[1] guilty puffs merely not of actiona- his merchandise is misrepresentation.” that the trouble Rosden states ble many different rule is that too the common law with puffing interpretations describes exist. Rosden opin- "exaggerated generally puffing talk or as sales 18-108. 18.06[4] sec. at ion.” Id. at (1957), Living, al., Inc., 54 F.T.C. 648 et In Better puffing in Commission defined the Federal Trade greater product Holding advertising that detail. puffing, prices” was not sold at the "world’s lowest FTC said: it, frequently

Puffing, understand is a term as we exaggerations reasonably to be used to denote the degree quality of his expected of a seller as to the falsity truth of which cannot be product, thereto, In precisely determined. contrast price” representation "the world’s lowest is a as to actuality, the truth or objective of an statement ascer- falsity is not variable and can be of which representation precision. This tained with factual cannot, therefore, "puffing.” It properly be termed

360 accordingly, true, false;and, is either or it is such determination must be made. at F.T.C. 653. regulatory

The FTC’s definition was made in a context, Act, the Federal Trade Commission 15 U.S.C. seq. provides practical et The definition test puffing already applies many Wisconsin apply advertisers. We therefore to American’s advertisement. Speed

The advertisement focuses on a Queen $499 represent washer and set. It can be read to Speed set is the "best” or "finest” Queen set. representation though That was made even American had ordered an additional 133 Queen sets consisting superior of two models which were quality had more features than the sets. product single

If a merchant sells the line of a consisting having manufacturer of models different qualities, and one of those models is described as the falsity "finest,” "best” and the truth or of statement in most instances can be determined rela- tive to the models the same line. That sufficiently precise determination for the FTC products definition, since the class of is small and qualities easily can Indeed, be ranked. we infer from complaint already the that Queen ranked the purchased models American for the sale and that Consequently, American knew it. the statement in American’s advertisement that the sets were necessarily puffing. "best” or "finest” was not complaint respect states a claim in this under sec. 100.18(1), Stats.

361 complaint Having just a that the states concluded remaining ignore claim, the state’s bases for we could However, court’s order. reverse the trial the claim and appeal provide possible and to second to avoid a guidance court, we the trial address state’s to complaint claim in that the states a contentions respects. examine the "clearance” "close- We therefore in the advertisement. Section out” sale references 100.18(1), prohibit advertising Stats., does not sales, closeout unless the advertisement clearance or misleading. untrue, A common under- is standing or "closeout” sale is that is of "clearance” disposes a of all of the one merchant existing or all of one line merchant’s stock existing A of fact merchant’s stock.3 finder could complaint alleges, if, that as the American determine specifically purported ordered merchandise for its sale, its con- "clearance” or "closeout” advertisement 100.18(1). contrary assertions, tained untrue holding reject We court’s trial or "clearance” sale reference to "closeout” conjunction January with "our white sale” saved the from untruthfulness. The court not advertisement did explain ruling why this is the case. No reason for Perhaps ruling occurs to us. a factual basis for will Meanwhile, trial. be disclosed at we conclude that Stats., states a claim under sec. (1976) Dictionary Third Webster’s New defines "clearance (as usually prices sale” as a "sale at reduced of stock excess inventory) which it is from the A desired move store.” clearing by similarly "closeout” as "a out sale defined sale usually prices remaining at reduced of the whole stock whether of closing particular of a business or of a discontinued item.” descrip-

for an untrue statement based on American’s tion of its sale as a "closeout” or "clearance.” argues

American nevertheless that the allege is defective it fails because to that the words "clearance” or "closeout” an had effect conse- or quence. argues American if that "clear- words materially ance” and "closeout” do not induce a buy, consumer’s decision to deceptive those words are not they if even are false. American relies on Colgate-Palmolive v. Co., Federal Trade Com. 380 U.S. (1965), support proposition. 374, 386-87 to that How- Colgate-Palmolive ever, Court held if that an deceptive, reasonably is advertisement the FTC could deception infer that the would be a material factor in purchaser’s buy. reason, decision to For that Supreme Court that held the FTC need not conduct a survey public of the before it could determine that tendency certain advertisements had a to mislead. 380 U.S. at 391-92.

Similarly, reasonably a finder of fact could infer representation from American’s of the sale as a "clearance” or "closeout” advertisement purchaser’s would be a factor in material decision to buy, puts is, it, if that as American a critical issue. agree

We do not that the "material factor” issue prohib- unqualifiedly Stats., Section exists. any representation, assertion, statement fact deceptive, misleading. untrue, is If Ameri- false, is can’s advertisement whether misleading upon has effect no violation. The statute is to the on silent as effect consumers. reject theory

We Ameri- state’s because buyers intent induce can’s was to come to its stores profitable buy sets, sets more than which are of fact statements contains advertisement untrue, misleading, purposes deceptive, for the or 100.18(1), its face shows on The Stats. sec. the sets were and that was held the sale alleged respect, In this the facts sale. at that available 100.18(1). on sec. claim based not state a do 100.18(9), STATS. SECOND CLAIM—SECTION the advertise- that because The state contends purpose plan part scheme, or or of a ment "is ... ... merchandise sell... is not to effect which decep- advertised,” is "deemed advertisement 100.18(9)(a), contrary The state Stats. tive,” to sec. being to sell a bona fide offer that far from contends plan part of a or sets, was the advertisement the $499 and to "switch” sets as "bait” to use those scheme purchasers expensive Speed washer Queen more to sets. cases have been and switch” No Wisconsin "bait 100.18(9), agreed parties under sec. Stats. decided guides estab- court should consider that the trial by Commission, 16 C.F.R. Trade the Federal lished advertising” through 238.4.4Since the "bait 238.0 secs. through provides: 238.4 4 16 sec. 238.0 C.F.R. advertising defined. Sec. 238.0 Bait advertising alluring to sell a an but insincere offer Bait is intend or product in truth does not service which the advertiser buying purpose from is to switch consumers

want to sell. Its else, merchandise, something usually at to sell order advertised advantageous higher price to the advertiser. or on a basis more to primary to obtain leads as aim of a bait advertisement is type persons buying so adver- merchandise of the interested tised. Bait advertisement. Sec. 238.1 product containing should an offer to sell No advertisement published fide effort to sell the offer is not a bona be when the product. advertised described in 16 C.F.R. sec. 238.0 comes within the "plan by or scheme” condemned we agree guides may helpful. the FTC be 238.2 Initial Sec. otter. (a) any No statement or illustration used in should be impression grade, which advertisement creates false of the make, value, model, color, quality, size, currency usability, origin product offered, may misrepre- of the otherwise product later, sent the in such a manner that on disclosure of the facts, purchaser may

true be switched from advertised product another. (b) though subsequently Even the true facts are made buyer, known the law violated if the first contact or by deception. interview is secured Discouragement purchase 238.3 Sec. of of advertised merchandise. practice engaged by or No act should be in an advertiser to discourage purchase part the of the advertised merchandise as of practices Among a bait scheme to sell other or merchandise. acts determining which will be considered in if an advertisement is a bona are: fide offer (a) show, demonstrate, product The refusal to the or sell offer, in offered accordance with the terms of the (b) disparagement by acts or the words of advertised product disparagement terms, guarantee, of or credit service, repairs parts, respect, availability any of or or in in it, with connection (c) The failure to have at listed in available all outlets quantity product a advertisement sufficient of the advertised demands, reasonably anticipated meet unless the advertisement clearly adequately supply limited discloses is and/or the outlets, designated only at merchandise available (d) The refusal to take for the merchan- orders advertised time, period dise to delivered within be a reasonable (e) showing demonstrating product or of a which is defective, impractical represented purpose unusable or for the advertisement, implied (f) plan compensation of a Use sales or method of salesmen, penalizing designed prevent salesmen or or discour- age selling product. them from the advertised The trial court held that the complaint alleges no acts covered by guides the FTC in 16 C.F.R. sec. 238.3(a) (e) through and that to infer from the facts pleaded that such acts had occurred would be to (f) speculate. It concluded that although subparagraph not, could apply, does since the advertisement a covers sale on Maytag Queen washers a generally, sale which even includes set. The court concluded that no reasonable inference could be drawn that part advertisement was of a bait and scheme, plan switch and absent an allegation customer, bait and switch had in fact occurred to a failed to state a claim under sec. Stats. gave

The trial court weight too much to the FTC guides. adopted The FTC guides in connection Sec. 238.4 Switch after sale. practice pursued advertiser, by No should be an in the event product, "unselling” of sale of the advertised with the intent purpose selling Among other merchandise in its stead. acts practices determining which will be considered if the initial faith, good strategem sale was in and not a to sell other [sic] merchandise, are: (a) Accepting deposit product, for the advertised then switching purchaser higher-priced product, to a (b) delivery product Failure to make of the advertised refund, within a reasonable time or to make a (c) Disparagement by prod- acts or words of the advertised uct, disparagement guarantee, terms, or the of the credit avail- service, ability repairs, any respect, of or in in connection it, with (d) delivery product defective, The of the advertised which is impractical purpose represented implied unusable or for the in the advertisement. NOTE: Sales advertised merchandise. Sales of the advertised preclude

merchandise do not existence a bait and switch that, occasions, scheme. It has been determined on this is a mere byproduct plan incidental of the fundamental and is intended to provide legitimacy operation. an aura to the overall (Footnote omitted.)

366 Act, with Federal Trade Commission 15 U.S.C. sec. 45(a)(1), prohibits competi- which unfair methods of tion and unfair or acts commerce. The guides do not have the force and effect of law but are interpretive. merely Co., State v. Amoco Oil 97 Wis. 2d (1980). 226, 242, paragraph 487, 293 N.W.2d The lead advertising” guides to the "bait described 238.3(a)-(f) they in 16 C.F.R. sec. shows that are not exclusive indicia of Hence, a bait and switch. factfinder could determine on the basis of an act or practice guides plan not described in the FTC that a purpose existed, scheme or effect of which is not to contrary advertised, sell merchandise to sec. 100.18(9)(a), Stats. disagree

We with the trial court’s discussion of 238.3(f). guide in 16 described C.F.R. sec. Under guide, plan discourages the use of a sales personnel selling product sales may from an advertised determining be considered when whether a bona Although Maytag Speed offer fide was made. both sale, Queen sets were on the advertisement focused on guide Queen washer and set. $499 238.3(f) applies. described in 16 C.F.R. sec. comparatively low number of sets $499 purchased by anticipation sale, American in of the plan combined with a commission under which sales persons nothing by selling earned set and the give set, fact that credit was not available for the $499 purpose rise to a reasonable inference that American’s was not to sell the sets but to sell the more expensive enough sets. That is to establish a violation 100.18(9)(a), of sec. Stats. reject

We the conclusion the absence of allegations in the that a bait and switch particular customer, had in fact occurred ato complaint a failed to state claim under sec.

Stats. That conclusion would limit violation to a plan scheme, or the effect of which is not to the sell prohibits merchandise as advertised. The statute plan purpose or when or scheme either effect not to sell the merchandise. language

American contends that 100.18(9), Stats., indicates that a violation not does specific conduct, occur unless words or omissions discourage product. argues the sale of the advertised It "plan” "scheme,” the words assume acts just directed toward consumer and not a seller’s state It that if 100.18(1) (9)(a),

... as advertised.” Secs. and Stats. The majority agrees susceptible that the ad is to both charges. deceptive

If untrue, American’s ad is or mislead- ing, merchandising so are most advertisements and slogans my view, the 1980’s. In the ad does no more Maytag Speed than state that and Queen washers and dryers are "the best” finest,” and "the and that one buy Speed can Queen washer and set at American for I do not it $499. believe can be reason- ably represent Speed read to that the Queen is dryers everywhere the best or finest of all washers or Speed in the world—or even the best of the Queen agree Rather, line. I with the trial court that: reading reasonable of the ad is that the sale on Maytag Queen dryers washers generally, even includes one available set as low as Not suspicious $499.00. even the most competitor sophisticated least consumer could conclude that offering "best”, the defendant was "finest” or most Speed Queen functional set for In $499.00. context, clearly sale, $499.00 was the bottom of the top; not it was the lowest one pay could purportedly one of the two "best” and "finest” Therefore, lines of dryers. washers and "[w]hy pay more at Sears.” "hype,” yes; "puffery”;

A but is no more than puffing thought one’s wares has never been to be punishable deceptive practice. Indeed, were the prevail, Chicagoans state’s view to I assume no would longer Newspa- be able to read the "World’s Greatest per” city’s or Milwaukeeans drink that "Finest Beer.” possibilities long are endless. But the law has recognized puffery deception, is not and it is not a violation of the statute. majority’s do I share the

Nor belief the state adequately has stated a claim that use the terms January "clearance sale” and white "closeout sale” is misleading simply and untrue because American specifically ordered merchandise for the sale. Wheth- already er or all of the sale some merchandise was on hand, sale, some or whether all was ordered for the opinion, my not, does make the ad’s use of the words "clearance” "closeout” a lie.

Finally, majority agrees with the state that part the ad it is because "scheme ... not sell the merchandise as advertised” —a "bait designed and switch” scheme to lure the customer into promise set, and, the store with the of a once $499 pressure buying there, expensive to him or her into a more majority

model. The two offers basic rea- (1) only twenty sons for its conclusion: American had many expensive of the sets and more of the more $499 (2) on hand; models under the store’s sales plan, salespeople commission would not earn commis- sions on the sets. $499 parties

Both referred the trial court to the FTC guidelines as instructive on the "bait-and-switch” majority, issue. The however, state and the now assert guidelines quite that the are not as instructive as the agree court found them to be. I with the trial court giving complaint that, the state’s the benefit of all only inferences, reasonable one six FTC ele- implicated: plan ments compensation "Use of sales or method of salespersons] penalizing sa- lespersons], designed prevent discourage them selling product.” from the advertised allege guidelines does not violation of the other —that American refused to sell take orders for the sets, unavailable, were

advertised that the sets or that employees "disparaged” American them to customers. simply I do not believe that American’s sales by necessarily structure, itself, commission must every cause advertised sale of an item at or below cost 100.18(1) deceptive practice to be a in violation of secs. (9)(a), Stats. The additional fact that fewer $499 expensive sets were available more than models does persuade otherwise, not me nor do the other claims by offered the state "on information and belief’ in its complaint.1

Again, agree I with trial court that most contemporary marketing techniques will offend some- excep- sensibilities, one’s and that are no American’s Indeed, one think tion. would its scream-and- advertising keep style many people shout would as away Judge But, from store as it attracts in. noted, Jones fact should not be sufficient subject deception. it to a lawsuit for only on

1 When conclusions and matters stated information complaint, only and belief are cleansed from the state’s (1) following allegations twenty ordered factual remain: American (2) sale; higher-priced sets sets for the some $499 of the higher-priced actually sets American than the cost less (3) sets; plainer appearance many and sets and lack $499 are higher-priced on the features found models. charges also "on information belief’ that money

American lose sales of the sets and thus would on sales; salespeople would earn no commissions on such sets; higher-priced sets American sold more than that the higher-priced customers; sales staff was trained to show sets to purchases accepted only higher- credit cards were priced giving Even to these sets. credence "information belief’ allegations, correctly I continue to believe that the trial court decided the case.

I would affirm the trial court’s dismissal of the complaint for failure to state claim. of mind. notes intent alone violates the prosecutes persons they statute, it then for what think they argument rather than what do. The fails. 100.18(9) prosecute Section not does a seller’s state of prosecutes publishes, makes, etc., mind. It a seller who repre- advertisement, an announcement, statement or any part plan sentation of kind which is of a purpose scheme, of which is not to sell merchandise as advertised. The statute therefore requires accompanied particular by an act state of mind. complaint Because we conclude that states 100.18(1) (9), Stats., claims under subsecs. dismissing complaint order must be reversed. By the Court.—Order reversed and cause remand- proceedings. ed for further (dissenting). EICH, J. The state’s charges quoted advertisement, that American’s radio entirety majority opinion, in its "untrue, was misleading” part was of a "plan or scheme ... not sell... the ... merchandise

Case Details

Case Name: State v. American TV & Appliance of Madison, Inc.

Court Name: Court of Appeals of Wisconsin

Date Published: Jun 4, 1987

Citation: 410 N.W.2d 596

Docket Number: 85-2066

Court Abbreviation: Wis. Ct. App.