Not Licensed? You May Need to Think Twice Before Starting a Penny Auction

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You found the perfect domain name, hosting and software, you’ve even sourced products, everything seems to be going ok and you’re excited to start marketing your new penny auction. However, did you forget to check your state laws governing auctions to see whether or not you can legally run an online auction without an auctioneers license?

That’s right, some states require that anyone hosting an online auction have an auctioneers license or hire someone that has an auctioneers license to oversee the auctions, if not you could be faced with fines and legal ramifications.

For instance, one prospective penny auction site owner in New Hampshire told us awhile back that she found out that a new law has been voted on by both House and Senate, she told us that any use of the word auction constitutes an auction and would therefore need to be overseen by a licensed and bonded auctioneer.  Additionally, any form of bidding would indicate the act of an auction and must be overseen as well. She also told us that they were waiting on final wording on a similar law in Pennsylvania about owning the items that are auctioned being legal.

Today we were informed that Wavee.com was shut down by the Georgia Governor’s Office of Consumer Protection, http://consumer.georgia.gov/. Wavee was in violation of GA laws because they did not have an auctioneer’s license. 

For legal advice pertaining to any specific legal matter of any kind, please consult an attorney.

According to the TX Department of Licensing and Regulation, an online auction does not need a licensed auctioneer, because they do not consider someone conducting an online auction to need a license, since it is not “bid calling.” The definition of “auctioneer” pursuant to Chapter 1802.001(5) Texas Occupations Code (Auctioneer Law) includes that he or she act as a “bid caller.” Online auctions do not have an auctioneer as a “bid caller.”

Anne Benedetto of AuctionHouseTalk.com says that there are 21 states that currently don’t require someone hosting an auction to have an auctioneering license. You will also have to take a look at laws governing online auctions and whether or not you need an auctioneers license.

This information is as of April 2010- laws are always changing so make sure you do your homework:

“Here is an alphabetical list of the 21 license free states: Alaska, Arizona, California, Colorado, Connecticut, Hawaii, Idaho, Iowa, Maryland, Michigan, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, Oklahoma, Oregon, Utah and Wyoming.

There are a couple of states that have not been placed on this list because auctioneers are required to be licensed if they are auctioning real estate. Also, in order to conduct a live auction, a permit could be required in some of the cities, towns or counties within these states. Before doing business in any area, people should always check with their state or local agencies for a list of policies and procedures. Such things are always changing.”-Anne Benedetto – Do All Auctioneers Need a License?

We’re still in the process of contacting all 50 states to see what we can find out.

Before you start a penny auction site & before you even continue to run your’s make sure you are acting in accordance with the law. 

Discuss this in our penny auction forum.

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