Home

Legislative Memo

Lev Ginsburg
Director of Government Afairs
T 518.465.7511 x207
www.bcnys.org

BILL:

S.4313-D (Squadron) /A. 1730-D (Brodsky)

Support

SUBJECT:

Establishes statewide auction business practice standards

 

DATE:

June 21, 2010

 

The Business Council of New York State opposes this legislation which would set statewide auction industry standards to be enforced at the county level.  The provisions of the bill would prove overly burdensome to auctions covered by this bill.  While this legislation is modeled after statutes in place in New York City, where apparently a need for such business practice standards was evidenced, there is no justification provided within this bill to support a statewide regulatory framework of this complexity. Although the bill has been amended to exempt livestock and thoroughbred auctions, exemptions which we support, the amendments do not address concerns raised previously about certain provisions within the bill.

Two provisions are of particular concern in terms of enforcement and business complexity:  the detailed provisions which stipulate how and under what circumstances a consignor can bid on his own items; and provisions which stipulate that the net amount received on all sales be remitted within fourteen days of the date of sale. 

There is no “one” means by which an auction house conducts its business; some auction houses own the items they are selling; others enter into a consignment agreement with the owner of the item.  The relationship between the auction house and the buying public is key and is built on trust.  To include provisions which would authorize consignors to bid on their own items puts that trust relationship in serious jeopardy.  Although the sponsors' bill language reads that this is permissive, not mandatory, the auction house is put in the role of having to inform and monitor when such bidding would occur.  Given that bidding occurs now simultaneously in many different formats (phone, internet, in-person), with the bidder often not physically present, there is no reasonable way for anyone to effectively monitor whether the provisions are actually enforceable and that someone is not bidding on behalf of a consignor without the auction houses' knowledge.  The business relationship is heavily reliant on that trust element – to trust that a consignor is not intentionally bidding up the price of an item for his own benefit.  The inclusion of language to permit consignors to bid on their own items, even within the constraints of this bill, threatens to jeopardize that trust relationship the auction house must maintain with potential buyers.

The bill also requires that net proceeds be paid to a consignor within fourteen days of the date of sale.  While the language also states “except as otherwise agreed to in writing or otherwise provided by law”, the better approach would be to no regulate the timeframe for payment at all, but merely require that the payment arrangement for consigned goods be included as part of the written agreement.  There are many factors which go into the settling of an auction – from preview to delivery of goods.  Additionally, the Internet has allowed auction houses to access a worldwide range of bidders.  A fourteen day remittance timeframe is overly restrictive and appears to be arbitrary in the face of information to the contrary. Rather, language which articulates that there needs to be a written agreement between the parties and it must include how and when sale proceeds are to be remitted, would allow for appropriate protections to the consignor and the auction house.

The bill exempts auction houses from having written contacts if they are located in counties with a population of 200,000 or less and where the anticipated value of the property to be auctioned is less than $100,000.  The dollar threshold for exemption is likely intended to exempt only the smallest of auctions.  Auctions and auction houses are businesses – and the cost of undertaking an auction from procuring the goods, to advertising the sale, to executing the sale, and to reconciling the results – is not insignificant.  The impact of this threshold is likely minimal at best, effectively rendering most auctions and auction houses across the state, regardless of the size of county they are located in, to the provisions of this bill.

For these reasons, The Business Council of New York State opposes this bill.