From the Hotline

By Teri Henning
Pennsylvania Newspaper Association

Member Alert: State bureau takes action against newspaper for holding online 'auction'

Click here for an update to this story.

A number of newspapers have held or are planning to hold promotions that they call "auctions." The State Bureau of Professional and Occupational Affairs ("BPOA") has filed an action against one newspaper that conducted an "online auction," charging that the newspaper conducted an auction without the necessary auction license.

The case is currently pending before the State Board of Auctioneers. If the State Board finds against the newspaper, the BPOA has said that it intends to take action against additional newspapers as well. The BPOA is currently seeking a civil penalty of at least $1,000 against the newspaper.

In the case currently before the Board, the newspaper promoted and conducted what it called an "auction" online. Items were “donated” by local retailers (although they remained at the local retail stores). Individuals "bid" on items, and, if successful, could come into the newspaper to pay for the item and receive a voucher to take to the retailer. The newspaper did not own the items that were being sold. It did collect the payment and the appropriate sales tax.

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 Act does contain certain exemptions to the license requirements. Among other things, it states that the license requirements do not apply to "a specified, single sale per year conducted by the owner of property if the owner is not engaged in the business of selling the property and if the property is owned by the person in an individual capacity."

In the current case before the Board, the BPOA has emphasized that the newspaper did not “own” the property that it was selling. It remains an open question, though, whether the newspaper would have been eligible for the "single sale" exemption if it had actually owned the items. In other words, would a newspaper that owns property qualify as a "person in an individual capacity?”

The primary issue in the pending case, however, is 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 takes the position that because the promotion was online, the public did not “congregate” and the sale was not an "auction." The BPOA has argued that the Act does not require the audience to be congregated physically at one location, and that the sale was an unlawful “auction.”

Because of the uncertainty in this area and because the State Bureau of Professional and Occupational Affairs is closely watching newspapers that are conducting “auctions,” we strongly recommend that you discuss these issues with your newspaper’s lawyer before you promote or conduct any “auction” sponsored by your newspaper.

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 "fix" 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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