Published: February 18, 2003
By W.A. Demers
SPRINGFIELD, ILL. – Former Illinois governor George H. Ryan surely garnered publicity by commuting the sentences of the state’s death row inmates to life in prison as he stepped down from office in January, but last August with much less fanfare, Ryan may have set a global precedent to help protect consumers from fraudulent online auctions by signing House Bill 5803, which requires Internet auction services to be registered with the Illinois Office of Banks and Real Estate (OBRE).
OBRE, in addition to overseeing state-chartered banks and thrifts, electronic funds transfer networks, real estate companies, brokers, agents, appraisers, mortgage bankers and brokers, has purview over pawnbrokers and auctioneers. OBRE officials hailed the legislation as a way to regulate the oftentimes shadowy world of businesses that provide Internet auction services.
Nationally, Internet auction complaints accounted for about ten percent of a total 204,334 complaints received via the US Federal Trade Commission’s Consumer Sentinel site between January 1 and December 31, 2001.
In Illinois, OBRE officials credited eBay, one of the world’s largest online Internet auction services, as being instrumental in working with state legislators and OBRE to develop the new law.
In brief, the Illinois law requires Internet auction services to be registered with OBRE if they are located in the state, if the seller, lessor or buyer is located in the state, or if the property offered for sale or lease is located in the state. They are required to certify that sellers and bidders register with the website and provide sufficient information to resolve problems. They must also retain transaction information – consisting of seller identification, high bidder identification and rdf_Description sold – for at least two years. They must have a mechanism or procedure in place to receive complaints or inquiries from users; and they must agree to implement a policy of suspending the accounts of users who are proven to have engaged in a pattern of fraudulent activity. Finally, registrants must agree to comply with and assist OBRE’s requests for stored information and law enforcement actions.
The law makes a distinction between live auctioneers who use the Internet as part of their live auctions and Internet auction listing services. The latter refers to a website that is designed to offer rdf_Descriptions or services through online bid submissions and that “does not examine, set the price or prepare the description of the personal property or service to be offered, or in any way utilize the services of a natural person as an auctioneer.”
According to Norm Willoughby, OBRE’s deputy assistant commissioner, while the Illinois legislation has been enacted, administrative rules first have to be filed and adopted before enforcement can begin. Those rules were filed in early January. Said Willoughby, “It will be two to three months before they will be in place.”
Other states may follow suit, said Willoughby, and he noted that the FTC was able to hear OBRE’s perspective at a workshop hosted by the federal agency last October to study possible anticompetitive efforts to restrict competition on the Internet.
FTC officials say the agency’s dual mission of balancing antitrust concerns with protecting consumers makes it difficult to weigh “legacy laws” – that is, laws that may have been enacted at a time that did not anticipate the growth of the Internet – which can ultimately limit competition and drive up costs for consumers. “With respect to the Illinois model, it is certainly less restrictive than many of the other regimes,” said John Delacourt, attorney advisor in the FTC’s office of policy planning.
Similarly, in prepared testimony to the subcommittee on commerce, trade and consumer protection in September 2002, an eBay official pointed to the Illinois model as less onerous to “cybermalls” like eBay.
“Instead of trying to fit a new business model into an existing regulatory structure, OBRE worked with us to craft a separate category of company that was not regulated in the same way as traditional auctions,” said Tod Cohen, associate general counsel, global policy at eBay. “Instead of a strict licensing requirement, the new law creates a simple registration scheme to allow individuals to contact businesses like eBay if problems arise.”
New York State, which has a strong bias for enacting consumer protection legislation, has no similar laws in the pipeline at the present, according to legislative officials in the state’s senate and assembly offices contacted for this article.
Illinois is home to between 1,600 to 1,700 live auctioneers, according to Willoughby. They were required to be licensed prior to the new law’s enactment and will be continue to be required to be licensed.
For information, 217-785-9640 or www.obre.state.il.us.
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