When a business advertises a going-out-of-business sale, Minneapolis shouldn't make things harder
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You know the economy is bad when even the Minnesota state government can't stay open for business. Cities like Minneapolis are also scrambling to attract new businesses and keep existing businesses open by pouring millions of dollars into economic development. Unfortunately, the city can also be an entrepreneur's worst nightmare because it has at the ready a growing list of regulations that can make life difficult for business owners.
Take, for example, Minneapolis' regulation of retail stores that want to advertise going-out-of-business sales. The city's ordinance prohibits businesses from advertising any sort of closing or moving sale without first getting a government-issued license.
Entrepreneurs know it's already tough to make the decision to close down a store, and the city of Minneapolis doesn't make the process any easier. First, there is the fee of $392. In other words, you have to pay the city for the right to talk to your customers. Having to pay government to exercise the right to speak, even about commerce, raises questions about whether this licensing regime is constitutional.
In addition to this fee, the business owner must submit an inventory list that includes, for each item, the original price, the intended sale price, the date of purchase, and the supplier from which the merchandise was bought.
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Even if a business is granted the "privilege" (the term is actually used in the ordinance) of conducting a going-out-of-business sale, the paperwork is just beginning. Throughout the sale, at the close of each business day, the proprietor must update the original inventory list, itemizing all items sold that day. Finally, when the sale is complete, the business must submit a final inventory containing every item not sold.
This approach is in stark contrast to Minnesota state law, which criminalizes false going-out-of-business sales without assuming all business owners are criminals. The state law provides grounds on which to prosecute false advertising. The state law is a more reasonable regulation. Its presence should reassure city leaders who are concerned about consumer welfare.
These types of regulation hurt not only small businesses but consumers as well. They raise prices and reduce opportunities for local niche competitors. They give large businesses huge advantages because they can spread regulatory costs over larger volumes far more effectively than small start-ups.
Deciding to close a business is a hard and personal decision that owners dread. But entrepreneurs realize it is part of the process of failure and innovation that drives economic growth. Entrepreneurs just want to keep enough capital from the closed business to seed the next.
Until just recently, Minneapolis law was even worse. There was a second fee of $11 for every $1,000 in inventory held by the store prior to the sale. Under that structure, one jewelry store was forced to pay nearly $10,000 before it went out of business.
Possibly fearing litigation, the Minneapolis City Council removed this absurd fee at its meeting on June 20. City officials may have hoped that by removing the most objectionable portion of this law, they could quell any complaints. The move is a welcome step in the right direction, but more must be done.
If we, as a community, value local businesses, we should support them both financially and politically by eliminating the burdens that government places in their way. And for stores that are no longer viable, Minneapolis should rely on the state law to protect consumers and should repeal its irrational going-out-of-business laws.
These tough times have many people asking what government can do to fix things. Perhaps they are asking the wrong question. Sometimes it's better to ask what the government can STOP doing. In this case, we must call on Minneapolis to stop burdening floundering local businesses with unnecessary bureaucracy and let them end a chapter of their lives as easily as possible.
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Evelyn Reisenwitz is an intern at the Institute for Justice Minnesota Chapter. The organization describes itself as the nation's only libertarian public interest law firm.
