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6/7/2007

News

TREATED LIKE A CRIMINAL
A new law cracks down on used CD sales, but why?

 

Fifteen years ago, an unexpected boom was taking root in the music industry, one that owed as much to the short shelf life of such rackjobber favorites as Milli Vanilli and New Kids on the Block as it did opportunistic entrepreneurialism. The used CD was, at the time, a revolutionary concept; a hasty record-buying decision made in a fit of bad taste could be corrected for cash, and college students always had the option of raiding their collections to raise beer money.

Today, however, the industry isn’t what it used to be. With the Recording Industry Association of America reporting alarming annual sales drops – down 15 percent last year alone – and downloads (legal and otherwise) eating up market share, used-CD retailers can count themselves lucky to have a jewel case to stand on, let alone a profitable business.

Now they’re facing an even bigger battle than sagging sales: a little-known revision to the secondhand dealer statutes passed in the 2006 legislative session that has many Florida used-CD retailers running for cover.

House Bill 651, authored by now-Lt. Gov. Jeff Kottkamp, cruised through the state House and Senate rewording an outdated statute – Section 538 – that previously applied to both pawnbrokers and secondhand dealers. The new law puts the pawnbroker language in its own separate statute, and puts stricter limits on anyone dealing in many secondhand products, ostensibly to support better law enforcement investigations. Mandatory fingerprinting, holding periods and detailed filing systems are now required by law, as is a $10,000 bond for stores, leading some to cry foul.

But, due in large part to some confusing wording, questionable exemptions and even some suspicious reporting on the national level, it’s difficult to ascertain just where the foul may be.

“You’ve been buying CDs for 20 years theoretically,” says Ray Ehmen, who has owned Antique Row music emporium Rock ’n’ Roll Heaven for 20 years. “You got married, you got a girl, a little girl, and you say, ‘I don’t listen to all this stuff, and we need to buy some things. I know they aren’t worth a fortune, but let’s just take them down to the CD store and sell them, honey.’ You walk in, and I say, ‘First of all I need a copy of your driver’s license, and I need your thumbprint, then you’re going to have to fill this form out and sign it, and I can only give you store credit.’ ‘What? Wait a second, I bought these and I paid taxes on them. You’re telling me you can only give me store credit now?’ How is that going to make you feel as an American taxpayer and consumer?”

Ehmen’s frustration – and that of other music retailers – has only recently surfaced. The law in question has been in effect since October of 2006, and until now has seemed to earn little notice. Why now?

Primarily due to an article headlined “Second-Hand Woes: Used-CD Merchants Shaken by New State Laws,” which was published in the May 12 issue of the music industry trade publication, Billboard, and was picked up by Reuters. The news caught on like an ingratiating pop single, showing up on music industry and music fan message board sites and prompting a scare.

In the article reporter Ed Christman details the finances and the rules of the new law – especially the one involving store credit only, no cash – before issuing this ominous statement: “At least one Florida town has enforced the law, resulting in the cited merchant pulling used CDs from its store.”

But Christman didn’t provide any other details – even the name of the town. Contacted to clarify, he wouldn’t elaborate. “While I always go out of my way to help a fellow reporter, I am afraid this isn’t going to be one of those times, at least with that aspect of the story,” he wrote. “Truly sorry.”

Ehmen suspects that there is no Florida town enforcing the law, and no Florida store that got in trouble for breaking it.

“Well, that’s because it doesn’t exist, my friend,” he says. “It doesn’t exist yet. Everything’s about scare tactics now, anyway.”

He may be right. Ron Gay, a tax law specialist with Florida’s Department of Revenue, doesn’t recall any such enforcement on a used-CD store, only on an Internet store in Tallahassee. Local law enforcement departments report non-compliance to the Department of Revenue, who can in turn issue a fine of up to $10,000, says Gay, so his agency would know. (According to Sgt. Barbara Jones of the Orlando Police Department, inspections are done once a month on pawn shops and secondhand dealers. Dates and locations are chosen at random.)

State representative Sandra Adams, R-Oviedo, co-sponsored the law with Kottkamp last year, saying it’s the third time she’s seen it come up in the past few years. Her history in law enforcement made her an expert on secondhand dealers and pawnbrokers, she says.

“The way it is written is basically, if they’re taking in property that falls in the category of the items on there, they have to file the proper paperwork, as would a pawnbroker,” Adams says. “It is basically meant to help people in locating stolen property, if that property has been sold.”

She says the revisions are meant to clarify existing laws and assist law-enforcement investigations.

“It’s interesting, because under 538 back when – and I’d have to go back and find an old statute book at this point – that secondhand dealer who purchased those items was still required to fill out some paperwork,” she says.

She points out that the fingerprinting requirement is similar to what is required at banks. Adams also makes one major clarification: If somebody is trading for store credit or other merchandise, she says, they do not have to fill out the paperwork. Only when cash is exchanged for secondhand goods – something she says that the revised law does not forbid – do the more stringent measures kick in.

As for some of the accusations floating around the Internet that the new law makes it harder to deal in used CDs than in guns, Adams has this to say: “I think that’s not an accurate analysis, because when you’re dealing in guns, not only do you have to do the paperwork, but in order to sell that gun, you’re going to do the three-day check and everything else. Firearms have serial numbers. Firearms have requirements.”

DVDs and video games have serial numbers as well, however, making them far more traceable than a Madonna CD that’s sold 5 million copies. When it came time to finalize this law, secondhand dealers of those media were allowed partial exemptions.

It’s a fact that leaves folks like Ehmen suspicious.

“First of all, why is there a moratorium on the DVD market, which is so much more valuable even on a used market than a stinkin’ CD?”

It’s a good question, but again, answers are elusive. Adams says she wasn’t present for the negotiation of the DVD/video game exemptions. John Rogers of the Florida Retail Federation – lobbying representatives for big-box retailers like Wal-Mart – says his group wasn’t involved. The RIAA – heavily embroiled in their battle against individual downloaders – says the same thing.

Meanwhile, the National Association of Recording Merchandisers – music retail’s legislative watchdog – is trying to catch up with what they perceive to be a growing trend against used-CD dealers in state legislatures. NARM president Jim Donio deemed Florida’s new rules “very confusing, very complicated” on a National Public Radio segment May 29, adding that the effects on the used-CD business were probably an “unintended consequence.”

It’s more than that for Ehmen, though.

“I hope the public really takes a hard look at this and questions its legality, because it’s going to impact everyday people. We have little people coming in here all the time who don’t have 13, 15 or 18 dollars for a CD; they have two to five dollars to spend a week. They’re the bread and butter of our society, and what they’re telling them is, ‘You know what? Screw you, buddy. Stay home and just watch TV; you don’t even need to go out and spend your five dollars on a CD now.’ That’s a shame.”

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