State v. American TV & Appliance of Madison, Inc.
146 Wis.2d 292, 430 N.W.2d 709, 1988 Wisc. LEXIS 82 (1988)
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Rule of Law:
An advertisement using general superlatives to describe a brand is non-actionable puffery. A claim for a bait-and-switch scheme requires allegations of overt acts of discouragement, not merely circumstantial evidence of a seller's profit motive to sell more expensive items.
Facts:
- In January 1985, American TV & Appliance of Madison, Inc. (American) ran a radio advertisement 164 times on 22 stations.
- The ad stated that Speed Queen and Maytag are the 'best' and 'finest' brands of washers and dryers and that during its 'January white sale' and 'clearance sale,' a Speed Queen washer and dryer set was on sale for $499.
- For the sale, American ordered twenty of the advertised $499 sets, which cost the company $520 per set to purchase.
- American also ordered one hundred thirty-three more expensive washer and dryer sets, with costs to American ranging from $518 to $604.
- During the sale period, American sold only four of the advertised $499 sets but sold a much larger number of the more expensive models.
- American employed a commission system under which salespersons received no commission for selling the $499 sets because they were sold below the wholesale cost.
- American did not permit customers to use credit cards for the purchase of the $499 sets.
Procedural Posture:
- The State of Wisconsin filed a complaint in the circuit court for Dane county against American TV & Appliance of Madison, Inc., alleging violations of state deceptive advertising statutes.
- American TV filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted.
- The circuit court (trial court) granted American TV's motion and dismissed the complaint.
- The State of Wisconsin appealed the dismissal to the Wisconsin Court of Appeals.
- The Court of Appeals (intermediate appellate court) reversed the circuit court's order, concluding the complaint was legally sufficient.
- American TV petitioned the Supreme Court of Wisconsin for review of the Court of Appeals' decision.
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Issue:
Does a merchant's radio advertisement violate Wisconsin's deceptive advertising statutes when it uses superlative terms like 'best' and 'finest,' describes a sale as a 'clearance,' and the merchant has economic incentives to sell more expensive, unadvertised models?
Opinions:
Majority - Callow, J.
No. The advertisement does not violate Wisconsin's deceptive advertising statutes because the claims constitute non-actionable puffery and the complaint fails to allege the necessary elements of a bait-and-switch scheme. The court reasoned that the terms 'best' and 'finest' referred to the Speed Queen and Maytag brands generally, not the specific $499 model, which is a classic example of puffery—a subjective exaggeration that cannot be proven true or false. The use of 'clearance' was not deceptive, as a merchant can clear out stock regardless of when it was acquired. Regarding the bait-and-switch claim, the court found the complaint legally insufficient because it failed to allege a 'plan or scheme' involving any improper overt acts. The complaint did not allege that the $499 sets were unavailable, defective, disparaged by salespeople, or that American refused to sell them. The existence of economic incentives, such as a commission structure encouraging the sale of more profitable items, is common in retail and, by itself, does not constitute an illegal bait-and-switch plan.
Dissenting - Steinmetz, J.
Yes. The complaint was legally sufficient to state a claim, and the case should not have been dismissed. The dissent argued that the majority failed to correctly apply the standard for a motion to dismiss, which requires taking all alleged facts and reasonable inferences as true. A reasonable listener could infer from the ad that the specific $499 set was being called the 'best' and 'finest.' Furthermore, describing a sale as a 'clearance' for items specifically purchased for that sale could be found misleading by a jury. The dissent contended that a 'plan or scheme' for a bait and switch could be reasonably inferred from the totality of the circumstances alleged: advertising heavily while stocking very few of the advertised units, selling the units at a loss, and creating a commission structure that provided a strong disincentive for salespeople to sell the advertised product.
Analysis:
This decision clarifies the distinction between permissible puffery and actionable false advertising under Wisconsin law, siding with the traditional view that general superlatives are not statements of fact. More significantly, it raises the pleading standard for bait-and-switch claims by requiring allegations of specific, improper overt acts of discouragement. The ruling suggests that merely creating a business environment with strong economic incentives to 'upsell' customers is not, without more, an illegal scheme. This makes it more difficult for the state or consumers to pursue bait-and-switch actions based solely on circumstantial evidence like stocking ratios, advertising frequency, and commission structures, thereby providing more protection to retailers' common sales strategies.
