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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 item 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 items 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.
