Firearms auction site says IL agency's attempt to regulate its business unconstitutional, illegal

By Jonathan Bilyk | Feb 22, 2016

The Georgia-based operators of an online firearms auction site have challenged the authority of the state of Illinois to regulate their business, claiming a January decision by the Illinois Department of Financial and Professional Regulation to take aim at the business is unconstitutional and treats the business unfairly.

On Feb. 18, filed suit in Cook County Circuit Court against the IDFPR, the agency’s secretary, Bryan A. Schneider, and the Illinois Auctioneer Advisory Board alleging the state violated the U.S. Constitution and Gunbroker’s due process and equal protection rights when the state agency fined Gunbroker $10,000 and ordered it to stop doing business in Illinois for not registering with the state under Illinois’ Internet Auction License Act.

According to the court documents, the IDFPR initiated its action against Gunbroker in October 2014. However, the cease and desist order and the $10,000 civil penalty were not handed down until Jan. 14, 2016.

While conceding the law appears to require online auction businesses, such as Gunbroker, to register with the state, Gunbroker said its business model is distinct enough to make it “very different from the traditional in-person auctions that state auction laws were designed to regulate.”

Gunbroker said they merely act as a platform to connect federally licensed firearms sellers with buyers, who hold appropriate government documentation and have been cleared by federal background checks to purchase firearms. The site also offers sellers the opportunity to sell swords, knives, archery equipment and hunting gear, among other items.

Gunbroker “operates as a technologically advanced advertising medium for the 21st Century, much like people once used classified ads in the newspaper,” the complaint said. “The buyer and seller come to terms on price over the website. The buyer then makes payment directly to the seller through a payment process designated by the seller, and the seller sends the buyer the item.”

Gunbroker said it “never comes in contact with, takes or transfers title to, examines or represents the condition of, or receives the items being auctioned.”

Gunbroker said it is “simply an automated advertising conduit to connect willing sellers and willing buyers, but the actual transactions between them are completed without (’s) involvement.”

Gunbroker said it earns money from “small success fees” paid by sellers who complete transactions.

Further, as an out-of-state business with no physical presence in the state and not making any direct sales to Illinois customers, Gunbroker argued the U.S. Constitution’s commerce clause places its business solely under the jurisdiction of the federal government and beyond the reach of Illinois’ auction regulations.

And, Gunbroker said as “the operator of an internet business … (it) does not control the location of prospective purchasers and sellers who avail themselves of the website,” yet, should it apply for registration, as the IDFPR has demanded, it would also be subject to any number of other regulations imposed by Illinois.

“In essence … that application of the Act to plaintiff’s business triggers a domino effect of regulation by other state agencies and therefore opens a gateway to total jurisdiction over the out-of-state business by the state of Illinois as if it were a domestic corporation rather than a foreign corporation,” Gunbroker said in its complaint.

Thus, any requirement to register with the state represents a “heavy burden” that is “not outweighed by any legitimate state interest.”

Further, Gunbroker noted the IDFPR has not similarly enforced the rules on all similar websites available to Illinois residents, as “only 14 out of state businesses licensed by Illinois under the Act despite the thousands of internet sites which conduct internet sales where the requirements of the Act, as written, are easily met.”

“The numbers produced by the (IDFPR) belie its contentions that it is acting for the public welfare,” Gunbroker said.

And, Gunbroker said the IDFPR, in issuing its cease-and-desist order, overstepped even its authority under the state law, which it argued requires the state agency to obtain a court order barring a business allegedly violating the law from operating in the state.

Gunbroker has requested orders from the court declaring the actions by the agency unconstitutional and illegal, and vacate the agency’s order and the $10,000 fine., of Kennesaw, Ga., is represented in the action by attorney Ellen K. Emery, of the firm of Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, of Chicago.

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Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer PC Illinois Department of Financial and Professional Regualtion

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