The California attorney general's office is investigating complaints that RB Furniture's advertising, which touts its bankruptcy sale as "the sale of the century," is misleading.
Herschel B. Elkins, assistant state attorney general, said Friday that he is looking into allegations that some prices being charged by Irvine-based RB Furniture are no lower than prices at competing furniture stores that are not in bankruptcy proceedings.
"Their advertising . . . leaves the impression that (consumers) are getting bargains," Elkins said.
Howard Gordon, attorney for the Connecticut-based liquidator running the RB Furniture sale, dismissed the investigation, saying the complaints came from competing furniture store owners.
"Wouldn't you be suspicious if complaints were coming from competitors?" he asked. He refused to comment on specific charges about RB's prices, but RB officials have said that their sale offers good values and is going well.
The investigation could lead to a civil suit and possible fines.
The RB Furniture bankruptcy sale has generated controversy because a U.S. Bankruptcy Court judge, in an extraordinary move, exempted the liquidator from most state and local laws governing "going out of business" sales. The order by Judge John E. Ryan in Santa Ana allows liquidator Gene Rosenberg & Associates to violate certain laws--such as those barring the inclusion of newly ordered merchandise in bankruptcy sales--without penalty.
Rosenberg has contended that the order is helping RB to repay dozens of creditors left holding the bag for millions of dollars when the 29-store chain sought bankruptcy protection last November. He also said that money received from the sale is making it possible to return deposits to consumers who ordered furniture from RB before it wound up in bankruptcy court.
Nonetheless, Ryan's order has been criticized as anti-consumer by district attorneys in Ventura and Los Angeles counties. On Friday, Elkins called Ryan's order a "mistake."
"The court allowed (Rosenberg) to do things that are otherwise in violation of California law," Elkins said. The liquidator "is allowed to bring in new merchandise and sell it at a profit . . . at the same or greater margins as stores that are not liquidating. We think that is a mistake."
Ryan's order did not apply to advertising. "There is no question we have jurisdiction here," Elkins said.
The sale has irritated competitors, who claim that they have lost sales because consumers are flocking to RB stores in search of the much-publicized bargains.
One competitor, Santa Monica-based McMahan's Furniture, complained that it has lost sales even though its prices are in some cases lower than RB's.