I think it's more of a myth it's a PC thing. Stores are probably more incline to avoid it simply for reasons of possible discrimination on religious grounds or the like.
That's what I suspected. Not having a go at Riverwolf or anything. It's a tale I've heard at least a dozen times here on RF in varying forms, but I am skeptical that it's illegal, and think it's more people avoiding hassle/negative business.
Conversely, you still get a far swag of 'Merry Christmas' in Australia, even from atheists like myself...I wonder if it's due to the holiday being almost totally secular, and the country itself being more secular than America? Dunno...not something I generally think about.