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If a company does not currently have something in stock does that information need to be known to the consumer? Wouldnt this fall under a pre-order since the company does not actually have the merchandise it is selling currently in stock (this is for a new item that has never been sold before). I recently purchase a product from a company which advertised it had X amount of items in stock ready to ship. Turns out the company never actually had possession of the items when they said they did. This was not known to consumers at the time of purchase.

Is this company breaking any laws?

  • Did you already pay for the item? Did they refund your money when they discovered they had no more in stock? – Brandin Jan 10 at 18:10
  • Yes already paid for the item. No refund. The thing is they are shipping out orders but they are doing so as the receive them. They did not actually have them in their possession. I also learned that they have already broken this law: smallbusiness.findlaw.com/business-operations/… I was just wondering if there was any other laws that deal with selling merchandise that you do not currently have without making that known to the consumer. – user3205214 Jan 10 at 18:19
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The contract between you and the company is for the supply of the goods. How they get them to you is irrelevant; they may have them in stock, or they may order them and ship them on, or they may send an order to the factory to ship them directly to you. There is nothing saying that they have to be in stock anywhere.

The law you refer to says that they must ship within 30 days unless they provide a specific date. In effect "shipped within 30 days" is an implicit term in the contract. If after 30 days they have not shipped the goods then you are entitled to rescind the contract (i.e. get your money back).

Where things get interesting is if they took your money knowing that they would not be able to ship within 30 days, or at least being reckless (i.e. not caring) about it. It does rather sound like this may be the case. If so then it may rise to the level of fraud, and the FTC or state authorities may take action. Try writing to the FTC. A single event won't get any action, but if they get lots of complaints then they might.

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I am limited my answer to the United States, because that is what I know about.

Many state consumer protection laws specifically prohibit this practice as a "deceptive trade practice". See, e.g., Colorado Revised Statutes § 6-1-105(1). Some of the pertinent paragraphs of this subsection include the following descriptions of conduct which constitutes a deceptive trade practice:

(i) Advertises goods, services, or property with intent not to sell them as advertised; . . .

(j) Advertises goods or services with intent not to supply reasonably expectable public demand, unless the advertisement discloses a limitation of quantity; . . .

(l) Makes false or misleading statements of fact concerning the price of goods, services, or property or the reasons for, existence of, or amounts of price reductions; . . .

(n) Employs “bait and switch” advertising, which is advertising accompanied by an effort to sell goods, services, or property other than those advertised or on terms other than those advertised and which is also accompanied by one or more of the following practices:

(I) Refusal to show the goods or property advertised or to offer the services advertised; . . .

(IV) Refusal to take orders for the goods, property, or services advertised for delivery within a reasonable time; . . .

(VI) Accepting a deposit for the goods, property, or services and subsequently switching the purchase order to higher-priced goods, property, or services; or

(VII) Failure to make deliveries of the goods, property, or services within a reasonable time or to make a refund therefor; . . .

(u) Fails to disclose material information concerning goods, services, or property which information was known at the time of an advertisement or sale if such failure to disclose such information was intended to induce the consumer to enter into a transaction[.]

Deceptive trade practices can typically give rise to enforcement actions by the state attorney general seeking injunctive relief or monetary damages or fines or both in the name of the general public, class action lawsuits by classes of persons harmed by the practice, and private lawsuits brought by individual victims of the practice (with minimum statutory damages and attorneys' fees).

But, this conduct wasn't illegal at common law (until a contract was breached through non-performance), and I am not aware of an federal law in the United States that prohibits this practice, although other aspects of the transaction might end up violating federal consumer protection laws which are administered mostly by the United States Fair Trade Commission (FTC) (e.g. if refunds are not provided within the time allowed by law which is usually 30 days).

  • If a company does not have the goods in stock, but has a supplier and expects to be able to order them on a "just-in-time' basis, and does intend to sell the advertised goods at the advertised price, would that still be a deceptive practice? – David Siegel Jun 9 at 22:51
  • @DavidSiegel: Indeed, with modern supply chain models, the whole concept of "in stock" may become rather fuzzy. – Nate Eldredge Jun 10 at 0:26
  • @DavidSiegel This is why rather than using the historic term "in stock", the deceptive trade practices act in Colorado and many other states uses a different phrase which captures the same concept: "intent not to supply reasonably expectable public demand" which is the modern day equivalent in a modern day supply model. – ohwilleke Jun 10 at 17:43

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