The report, “Regulating Secondary Gun Markets: Focus on Consignment Auctions,” documents the results of a survey by IPGV of consignment auction businesses in Iowa that sell firearms as part of their regular trade or business. The survey found that of 34 consignment auction business that sell firearms on consignment, 28 (82 percent) are not licensed to sell firearms. The survey was conducted by telephone in May 2003.

Only one of the surveyed consignment auction businesses, Auction Outlet of Omaha in Des Moines, responded that they were a federally licensed firearms dealer. Five consignment auction businesses responded that they arrange for their firearm sales to be conducted through a licensed firearms dealer. Four other businesses responded that while they were not licensed, they require all gun purchasers to possess either a valid Permit to Acquire Pistols or Revolvers or Permit to Carry Weapons.

Under federal law, it is unlawful for any person to engage in the business of dealing in firearms without a license [Title 18 USC § 922(a)(1)(A)]. The penalty is a fine, imprisonment for not more than five years, or both [§ 924(a)(1)(D)].

As applied to a dealer, the term “engaged in the business” means – a person who devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms, but such term shall not include a person who makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms [§ 921(a)(21)(C)].

In a typical consignment auction business, an auctioneer enters into a consignment agreement with an owner of firearms to sell the owner’s firearms. The auctioneer takes possession of the firearms in advance of the auction. The firearms are inventoried and tagged for identification and typically arranged on tables for viewing by the general public prior to the auction. Sometimes, photographs of the firearms are posted on the auctioneer’s website. The auctioneer often advertises upcoming auctions in newspapers and other media outlets. The auctioneer receives a commission or percentage, usually 10 to 25 percent, of the final selling price of each firearm sold by the auctioneer.

“For the typical consignment auction business, it is clear that the auctioneer devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit,” said John Johnson, executive director of IPGV. “Thus, consignment auctioneers meet the key elements of the definition of being “engaged in the business” of dealing in firearms, and therefore, need a license to do so lawfully.”

IPGV observed firearm sales at two consignment auction houses – Hoge’s Then & Now Auction House in Coggin and Sharpless Auctions in Iowa City. At Hoge’s Then & Now Auction House, IPGV witnessed the sale of approximately 45 firearms over the course of six auctions. At Sharpless Auctions, IPGV witnessed the sale of approximately 41 firearms on a single night. Neither auction house is licensed to sell firearms.

IPGV has documented its observations at Hoge’s Then & Now Auction House and Sharpless Auctions in letters to Charles Larson, Sr., U.S. Attorney for Iowa’s Northern District (which includes Coggin) and Steven Colloton, U.S. Attorney for Iowa’s Southern District (which includes Iowa City). The letter asks the U.S. Attorney’s office to enforce federal firearms laws that relate to dealing in firearms.

“Dealing in firearms without a license is not just a technical violation of federal law; it is a matter of public safety,” explained Kirsten Meredith, IPGV’s communications director. “Under the Brady Law, federally licensed firearms dealers are required to conduct criminal background checks on all buyers. However, unlicensed auctioneers who sell firearms on consignment do not conduct background checks. Thus, these consignment auction businesses provide convenient venues for felons, domestic abusers, minors, even terrorists and other persons who are prohibited by law from possessing firearms to buy firearms without having to undergo a background check. This puts Iowans at increased risk of gun violence.”

IPGV also sent a letter to Tom Olson, president of the Iowa State Auctioneers Association. The letter asks Olson to inform member auctioneers of federal law regarding the sale of firearms so that they can take appropriate action.

State Senator Jack Hatch (D-Des Moines) noted that firearm sales by consignment auctioneers are just the “tip of the iceberg” of a much bigger national problem – unregulated secondary gun markets not subject to Brady background checks. Secondary gun markets include gun shows, flea markets and garage sales, estate sales, consignment auctions, firearm sales over the Internet and through classified ads in newspapers, and other person-to-person sales. About 40 percent of all firearm transfers take place on secondary markets without background checks, according to Hatch.

Hatch called on the Iowa legislature to pass legislation he has introduced in the Iowa Senate to regulate secondary firearm sales in Iowa. Senate File 163 (and its companion bill in the House, House File 207) would require that all firearm sales between two or more unlicensed individuals be conducted through a federally licensed firearms dealer and meet all federal and state laws.