Going Once, Going Twice … Judge Not Sold on Tennessee Online Auctioneer Licensing Law

Try it you will like it

In a win for free markets and consumer choice,
U.S. District Court Judge Eli Richardson issued a preliminary
injunction
on July 23 barring
the state of Tennessee from enforcing a new law that would have made online
auctioneering a licensed profession.

The law, which was passed
unanimously
 and
signed by Gov. Bill Lee, a Republican, was set to take effect on July 1.

If it had, unlicensed online auctioneers would
have been forced to pay state-imposed fees, complete lengthy education or
apprenticeship requirements, and pass state exams, or else lose their jobs.

The
bill also would have imposed stiff requirements on out-of-state companies.

According to the initial complaint filed by
the Beacon Center of Tennessee, a free-market think tank, any company looking
to facilitate an online auction in the state would need to have at least one
employee “serve in an apprentice capacity under a full-time principal or automobile
auctioneer for six months, take an examination, pay fees, and undergo continuing
education” and “maintain a place of business in the state, or register as a
nonresident, maintain an escrow account that keeps proceeds from auctions in
Tennessee, agree to be audited, and file an irrevocable consent to suits and
actions in Tennessee courts.”

State lawmakers decided to impose this novel
scheme on online auctioneers despite more than a decade of successful,
unlicensed auctioneering.

Anyone found to be continuing to operate
without a license would have faced civil and criminal charges.

In an attempt to save the online auction
business he founded and the jobs of his experienced—albeit unlicensed—employees,
Will McLemore and other members of the Interstate
Auction Association sued the state of Tennessee to “restore freedom for online
auctioneers.”

Occupational licenses are, in theory, meant
to protect consumer safety by imposing certain minimum standards on a
profession and forbidding anyone from working in that field without obtaining a
license from the government certifying that they have met those standards.

As Heritage scholar Paul Larkin noted, over
the past 70 years, occupational licensing has been “one of the nation’s
principal forms of economic regulation
.”

Certainly, licensing schemes make sense for
some fields, such as the medical profession, where the risk of grave harm to
consumers can be high. But over the past few decades, states have grown
license-happy.

According to a 2015 White House report, the “share of workers licensed
at the state level has risen fivefold since the 1950s.” This alarming spike is
not because Americans are gravitating towards historically licensed professions.

Instead, states are licensing more and more professions that present little risk of
genuine harm, like barbering or interior decorating. As Heritage scholars have pointed out, in this sort of occupation,
harms to consumers are “small and reparable,” and markets can quickly weed out
unqualified workers.

Licensing schemes create considerable barriers to entry. Often, the licensing qualifications bear little relation to the occupation itself.

Onerous and arbitrary requirements can deter
new workers from joining a field or lock out those who cannot afford to
complete those requirements. Diminished competition forces consumers to pay
higher prices and reduces their choices.

That’s because established practitioners can
charge more for their services. That creates a powerful incentive for
incumbents to lobby for licensing requirements, not because of legitimate
public health or safety reasons, but because they want to protect their own
business interests from competition.

That certainly seems to be the case with
auctioneering in Tennessee.

Tennessee exempted online auctioneering from
licensing requirements in 2006. Since then, there have been few public
complaints.

For example, as the Tennessee Department of
Commerce & Insurance’s own Auctioneer Law Task Force found, out of 117 total complaints,
only 15 were related to online auctions, and only three of those complaints
resulted from the “extended time ending”-style online auctions in which
McLemore’s company engages.

According to Braden Boucek of the Beacon Center, which is
representing McLemore, the “vast majority of complaints about online
auctioneering came from business competitors who don’t like having to compete
with a new business model.”

Since 2016, licensed auctioneers have “aggressively
rallied to expand their reach into the online marketplace,” lobbying to prevent
innovative online upstarts from overtaking the auctioneering market.

Despite the utter lack of consumer harm, the
Auctioneer Law Task Force recommended that licensing requirements be
implemented for online auctioneers in Tennessee. The state’s General Assembly concurred, with “the public welfare
requiring it.”

McLemore contends that Tennessee’s law
violates the U.S. Constitution’s prohibition against states regulating
interstate commerce, and that it infringes on his First Amendment right to
“speak” for a living as an auctioneer.

The first argument is rooted in the U.S.
Constitution’s Commerce Clause, which grants Congress the power
to regulate interstate commerce. The clause implicitly blocks state efforts to adopt
protectionist laws that unduly burden interstate commerce.

Beacon argued that Tennessee violated the
“dormant” Commerce Clause by requiring out-of-state auctioneers to obtain a
Tennessee license for any online auction in which a state resident bids.

Second, McLemore argues that the licensing
scheme impermissibly burdens the free-speech rights of auctioneers, because the
law is overbroad and fails to advance “any legitimate government interest.”

As the Beacon Center notes, under the First
Amendment, occupational speech—that is, speech “made by a
professional”—is “just speech” and is “entitled the same full-blown
constitutional protections of any other speech restriction.”

 McLemore
argues that auctioneering is a profession centered on speech, and the complaint
notes that “people do not forfeit their speech rights just because their speech
is an occupation.”

In granting the preliminary injunction to
block enforcement of the new law, Richardson—an appointee of President Donald
Trump—found that McLemore and his associates have “shown a likelihood of
success on the merits of their Dormant Commerce Clause claim” and that failure
to act against Tennessee’s expansion of occupational licensing to include
online auctions would result in “immediate and irreparable injury.”

That’s a significant victory for auctioneers,
for consumers, and for the free market. The case is ongoing, but hopefully,
this is just the first step toward protecting the rights of workers against
senseless and protectionist regulation.