New Laws May Doom Second-Hand CD Sales By Wes Phillips May 6, 2007 — John Mitchell, an outside counsel for the National Association of Recording Merchandisers (NARM), warns that Florida and Utah have passed second-hand goods legislation (familiarly known as "pawn-shop laws") that could make the buying and selling of used CDs extremely unprofitable for stores and inconvenient for consumers trying to unload music they no longer wish to own.

The Florida legislation requires that second-hand dealers apply for a permit, post a $10,000 bond with the Department of Agriculture and Consumer Services, thumb-print CD sellers, and photocopy their state-approved identification. In addition, the stores would only be able to issue in-store credit and would have to hold second-hand merchandise for 90 days before reselling it.

NARM has helped Florida merchants selling used videos and video games to receive a partial exemption from the law—they do not need a permit and they only have to wait 15 days before reselling the goods.

Most states have pawn-shop laws, but until recently they have not been enforced against shops that buy and sell books, recordings, and videos. However, stricter pawn-shop laws seem to be spreading, Mitchell warns.

"State lawmakers in different states tend to talk to one another...and there seems to be some sort of a new trend among states to support second-hand goods legislation."

In states where pawn shop laws have become more restrictive, they make it unlikely anyone would bother selling used CDs. "One music retailer, who operates stores in Florida, but is not headquartered there," Billboard wrote, "reports that one of the chain's stores has already had a visit from the local police enforcing the law. As a result, the chain stopped dealing in used goods in that store."

NARM's Mitchell observes that, traditionally, used CD sales have been considered protected under the first-sale doctrine of copyright law. Further, he argues, CD resale should be protected under the First Amendment of the US Constitution, since selling a CD could be considered an opinion on the content of the CD, and therefore, collecting identification information could be construed as a violation of the right to free expression.