Newspaper fined $1,000 for conducting online auction without license

By Teri Henning, Media Law Counsel
Pennsylvania Newspaper Association

In May, the State Board of Auctioneer Examiners ruled that The (Johnstown) Tribune-Democrat had conducted an online “auction” without the necessary state auctioneer’s license and fined the newspaper $1,000.

In 2003, The Tribune-Democrat contracted with an outside vendor to conduct an online “auction.” Individual advertisers “donated” items for the sale. In exchange, the advertisers received credit for advertising space equal to the amount of the final purchase price. The advertisers also agreed to purchase the same amount of advertising in the next quarter. The newspaper did not own or take possession of the items being sold. Rather, the “winning” bidder paid the newspaper the appropriate amount and received a voucher to take to the appropriate retailer. 

Under the state Auctioneer and Auction License Act, it is unlawful for anyone to conduct a sale at auction or to offer to conduct a sale at auction unless that person has obtained a license to do so. The Act also states that "[a]ny member, officer or employee of a...corporation who attempts to sell at auction or who is actively engaged in the auction profession must have a license as an auctioneer or apprentice auctioneer."

The primary issue in the case was whether the online sale was an “auction” as that term is defined in the state Act. Under the Act, “auction” is defined as:

[T]he offer to sell property by an auctioneer or apprentice auctioneer to the members of an audience congregated for the purpose of making bids for the purchase of the property in an effort by the auctioneer or apprentice auctioneer to advance the amount of the bids to obtain the highest or most favorable offer. 

The newspaper argued that because the promotion was online, the public did not “congregate” and the sale was not an “auction.” The Board disagreed, finding that the public did not have to physically be present in order to meet the definition of “congregate” under the Act. 

Some newspapers have asked whether hiring a licensed auctioneer to conduct their “auction” would resolve the legal issues. There is no clear answer to this question. Although affiliating with a licensed auctioneer would seem to reduce your risk of the state challenging the “auction,” it is not entirely clear that this would resolve all of the problems from the state’s perspective. There may still be some question about whether the newspaper or its employees could be seen as “actively engaged” in the auction profession as that term is used in the Act. It is also important to realize that licensed auctioneers in your communities may have initiated some of the complaints about newspaper “auctions.” They may or may not be appeased if you affiliate with a licensed auctioneer to run your “auction.” To the extent that you are using an outside vendor to conduct your “auction” you should, at a minimum, discuss licensing issues with that company.

Please feel free to call the Legal Hotline at (717) 703-3076 if you have any questions or would like to talk about these issues in more detail.

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