Monday, November 26, 2007

Ebay Sellers as "Auctioneers" in PA

If a fiduciary in Pennsylvania decides to consign tangible personal property for liquidation through an online listing agent, like an eBay selling service, check for its auctioneer's license.

On November 17, 2007, an article entitled "
Ebay sellers pushed to get auctioneer licenses" reported strict enforcement of PA laws & regulations governing auctioneers that require online sellers of property owned by others either to serve apprenticeships with traditional auctioneers or to take college auctioneering courses, for certification.

The article
by Ford Turner, published by the Patriot-News (Harrisburg, PA), reported the position recently taken by the Pennsylvania State Board of Auctioneer Examiners:

The legal clout behind the examiners board is wielded by the Pennsylvania Department of State. Spokeswoman Leslie Amoros said it backs up 27 licensing boards, including those that deal with nurses, landscape architects and barbers.

The purpose, Amoros said, is to maintain the integrity of the professions. In the debate about online auctioneering, she said, the state is trying to protect consumers and apply the law, which has no language specific to online selling.

“Our position is that brokers who accept goods from sellers on consignment and then sell goods on eBay and retain a percentage ... must have an auctioneer license,” she said.

The enforcement does not affect people who sell personal belongings on eBay. It only applies to vendors who sell other people’s possessions. * * *

The applicable statute is the Auctioneer and Auction Licensing Act, 63 P.S. §§734.1 et seq.; and the relevant administrative rules are Regulations of the State Board of Auctioneer Examiners, 49 PA. CODE §§1.1 - 1.31. These govern auctioneer licensure procedures.

Another article, entitled "Online Sellers Need Pa. Auctioneer's Licenses", by Bradley Vasoli, published November 20, 2007, in The Bulletin (Philadelphia, PA), confirmed the penalties sought to be applied to unlicensed online sellers who are not owners of the property they list for sale.
Online merchants who sell secondhand items on eBay face a high legal hurdle set up for them by the State Board of Auctioneer Examiners.

Pennsylvania's Auctioneer Licensing Act requires anyone who makes a living taking bids on goods not their own to serve as an apprentice auctioneer for at least two years or to complete 20 credit hours in auctioning at a school approved by the Examiners Board.Under current Pennsylvania law, that goes for the eBay sellers as well.

State authorities have recently ramped up enforcement of the requirements. This has put a significant onus on thousands of Pennsylvanians who derive most of their income buying goods and selling them on the auction site eBay or other Web sites.

Some residents in that line of work, like Barry Fallon who owned iSold It on eBay in Lower Paxton Township, and Mary Jo Pletz who ran a secondhand antique e-commerce operation in Walnutport, face charges by the Pennsylvania Department of State. * * *
An article entitled "eBay Opposes Regulation while Pennsylvania Sellers Face Fines", by Ina Steiner, posted November 20, 2007, by AuctionBytes (a trade publication for online merchants), confirmed the enforcement effort in PA and reviewed opposition to it:
eBay consignment sellers in Pennsylvania are facing $1,000 fines if they do not comply with the state's auctioneering licensing requirements. A Pennsylvania newspaper article reports that at least two bills are awaiting committee action in the Legislature designed to deal with eBay consignment sellers.

AuctionBytes wrote in April about the plight of a Pennsylvania seller who is being forced to get an auctioneer's license to operate his eBay drop-off store.
[See: "Pennsylvania Latest Battleground in eBay Consignment-Sales Regulation" (04/23/07).]

eBay said it opposes attempts to extend state auction licensing requirements to eBay sellers, or to eBay itself.

eBay spokesperson Catherine England said Monday that while eBay transactions are commonly referred to as auctions, there are several fundamental differences between traditional regulated auctions and the transactions that occur over the eBay platform. * * *

A chart of laws affecting eBay consignment sellers is available on the AuctionBytes website.

eBay states its opposition to state regulation of online sellers under auctioneer laws, and notes some recent state law changes, in its position statement "Auctioneering Regulations: eBay opposes attempts to extend state auction licensing requirements to either eBay sellers or eBay itself".

This enforcement policy adds to the business challenges faced recently by online sellers of others' property. See: "EBay drop-off stores rethink business model", by Steve Mellon, published together with "Auctioneers licenses an issue for eBay sellers", by Teresa F. Lindeman, on May 3, 2007, in the Pittsburgh Post-Gazette.

The Patriot-News article mentioned two pending bills that would change this situation in Pennsylvania, if adopted:

“The auction laws were written before the computer age, and there needs to be some change,” said Allen Shissler, a Tioga County farmer who left the auctioneer examiners board within the last 18 months. “But the board is very careful on how they want to evolve the law. ... You don’t want the politicians to be involved too much, or they will have a heyday.”

At least two bills awaiting committee action in the Legislature were designed to deal with eBay auctioneering. Their outcome will have broad implications.

While there are 2,100 licensed auctioneers in Pennsylvania, the lead sponsor of a state Senate bill, Sen. Rob Wonderling, R-Montgomery, said there are more than 15,000 state residents who make most of their money by trading and selling on the Internet

His bill would remove any requirement for licensing residents who use online trading platforms. Those who demand they have licenses, he said, do not understand the modern, electronic economy. * * *

Another bill in the state House of Representatives would require online sellers of other people’s items to register, pay a fee of about $100, and secure a bond that would cost about $50, according to state Rep. Michael Sturla, D-Lancaster, the lead sponsor. The bill would not require anyone to go to auctioneers’ school, he said.

Sellers should register with the state, he said, because the eBay system allows sellers to submit bids on their own items, driving up prices in a false manner.

“There is a consumer protection issue here,” Sturla said. * * *

Sturla's bill in the House is House Bill 1899, P.N. 2733; and Wonderling's bill in the Senate is Senate Bill 908, P.N. 1080.

One motivation for state regulation of online sellers is the potential for consumer fraud. See: "eBay fights States who enforce auctioneer license requirements", by Burleson Consulting, posted on eCommerce Tips in May, 2007 (written by a person who had been defrauded). There are many schemes utilizing eBay as a vehicle. See: "eBay Accounts Hijacked and Used to Scam Buyers", by Tim Stevens, posted on AOL News' Switched, on October 22, 2007, which discussed online fraud in Great Britain.

There is another very powerful reason justifying updated state regulation of online resellers: Fencing of stolen goods. See: "E-bay drop-off stores balking at regulation -- States want to prevent sale of stolen items", by Katie Hafner, posted by the International Herald Tribune on May 25, 2005.

This concern is real in Pennsylvania. The PA Attorney General had conducted an investigation for almost two years that resulted in criminal charges in August, 2006, where eBay was utilized to "fence" stolen goods. See: Press Release, "
Attorney General Corbett & Blair Co. DA Consiglio announce arrest of four in "Operation eBay large-scale shoplifting and Internet sales schemes" (08/01/06).

The article,
"Pennsylvania Busts eBay Scam Rings", posted by (08/05/06), quoted from that Press Release:
Agents from the Pennsylvania Attorney General's Bureau of Narcotics Investigation (BNI), along with Pennsylvania State Police and local law enforcement, have captured four principal figures in two large-scale conspiracies that sold thousands of dollars worth of merchandise stolen from stores throughout central Pennsylvania.

Attorney General Tom Corbett said the 22-month long investigation, known as "Operation eBay," focused on the use of online auctions and Altoona area pawn shops to resell sporting goods, appliances, electronics and other items which were stolen from the shelves of local retail stores. The ring also sold industrial equipment, including compressors, paint sprayers and other heavy-duty equipment stolen from businesses and construction sites throughout the region. * * *

Corbett explained that individuals who unwittingly purchased stolen items from Friedenberger via eBay auctions would often pay for the items using checks or Paypal - an online system operated by eBay. * * *

As technology enables consumer abuse or criminal conduct to take new forms, the law should change to regulate conduct effectively. Perhaps a broad-based, in-depth study should be conducted by the Legislature in this developing area.

In the meanwhile, owners of personal property, including fiduciaries, who utilize an online seller's services in Pennsylvania, should check for an auctioneer's certification issued under the current law.

Update: 05/05/08:

On May 4, 2008, Auction Bytes
posted an article entitled "Upcoming Licensing Hearing Could Impact Many eBay Sellers", by Ina Steiner, who provided a comprehensive update of the situation involving Barry Fallon.
Small-business owner Barry Fallon was scheduled to appear before the Pennsylvania State Board of Auctioneer Examiners on May 12, 2008, to face charges of conducting an auction on eBay and operating an auction house without a license. Fallon sold his consignment drop-off store in 2007 after regulators required him to get an auctioneer's license to operate the store, which operated as an iSold It franchise.

"It would be wonderful if a lot of Pennsylvania eBay Trading Assistants and Power Sellers could attend this hearing in support of all of us," Fallon said. "A show of strength might help sway their decision. If I am convicted everyone else in the state will be next. Any promotion of such mass show of support would greatly be appreciated."

Fallon said he would be defending himself since a lawyer would cost over $10,000. He faces fines of at least $2,000. * * *

The article contains many links and up-to-date information. It concludes with a link to an interview, available online: "You can hear an interview with Barry Fallon conducted last week on the Ecommerce Industry Soundbytes podcast."