Legal wrangling in California could affect any business that sells secondhand merchandise over the Internet. Owners of pawnshops want eBay "drop shops"--businesses where individuals take goods to be sold on eBay--to be as tightly regulated as they are. Pawnbrokers are required to fingerprint sellers, hold items for a 30-day waiting period, and file a description report for each item with the local police. Drop shops are required by a 2000 law to do the same, but pawnbrokers say the state has given drop shops a free pass. They want tougher enforcement, and for all online resellers to pay a $295 biannual licensing fee to fund a state database to monitor the sale of stolen goods. Similar disputes are happening in Ohio and North Dakota.

Ebay and many independent online auctioneers say the law should not apply to them. "This is strictly a matter of pawnbrokers, who have a 19th-century business model, and their vain attempt to survive in the 21st century," says Allen Michaan, president of Auctions by the Bay, a California business that handles both live and online auctions of antiques. "If you lose something to theft, you should hope it goes up on eBay," he adds. "That is the best database in the world for you to try to find something."

Published on: Jul 1, 2006