The Federal Trade
Commission has issued its final amendments to the Hobby Protection
Rules, extending violations both to those who create and those who
market imitation coins and political collectibles sold to hobbyists.
The final amendments to its rules — also known as the Rules and
Regulations under the Hobby Protection Act — were posted in the Oct. 14
Earlier this year the Federal Trade Commission sought public comment
on two proposed amendments to the rules. First, it sought to extend
the Hobby Protection Act to cover sellers of imitation numismatic
items including replica coins and paper money. Second, and perhaps
more importantly, it proposed barring persons from giving substantial
assistance or support to those who manufacture, import or sell
imitation numismatic and political items.
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An Oct. 11 press release from the Federal Trade Commission said that
the commission received no objections or other substantive comments in
response to its 2016 request for comments about the expansion of its
Hobby Protection Rules.
The new amendments are the final step of H.R. 2754, the Collectible
Coin Protection Act, which was a short set of amendments to the Hobby
Protection Act that President Obama signed into law on Dec. 19, 2014.
The new rules are not designed to target an individual who mistakenly
passes along or sells a counterfeit coin. Instead, they prohibit
“knowingly engaging” in any act or practice that violates the law.
It allows counterfeit coin protections to be enforced across a
broader spectrum of the life cycle of a counterfeit item, going beyond
the mere manufacture of the item to include the importation, shipping
and sale of it.
The Collectible Coin Protection Act expanded the
scope of the Hobby Protection Act, making it a violation of the act
“for a person to provide substantial assistance or support to any
manufacturer, importer, or seller if that person knows or should have
known that the manufacturer, importer, or seller is engaged in any act
or practice” violating the act.
Jimmy Hayes, legislative consultant for the Industry Council
for Tangible Assets, told
World in 2014 that the CCPA “not only responds to the advances
in counterfeiting technology but also expands the remedies to those
harmed by the sale of counterfeits.” Hayes said that the expanded
provisions in CCPA allow “greater and quicker response to wrongdoers
who move from place to place. This also provides the path to seizure
of the counterfeits during the initiation of legal proceedings.”
The Collectible Coin Protection Act also includes a section
regarding the unauthorized use of registered trademarks belonging to a
collectible certification services, to extend enforcement to fake coin
encapsulation holders bearing the logos of legitimate coin grading services.
The Hobby Protection Act was signed into law on Nov. 29, 1973, by
President Nixon. At its core was a requirement that manufacturers and
importers plainly mark numismatic items with the word COPY and clearly
mark imitation political items with the calendar year when the items
were manufactured. The marking is supposed to be plain and permanent.
These markings were clarified in 1975, and in 1988 the Federal Trade
Commission amended its rules to provide additional guidance on the
minimum size of letters for the word COPY as a proportion of the
diameter of coin reproductions.
A review of the rules in 2004 did not yield any changes, with the
Federal Trade Commission clarifying that it did not have authority
under the existing Hobby Protection Act to expand the rules to better
protect consumers. The signing of the Collectible Coin Protection Act
into law in December 2014 provided the Federal Trade Commission with
the tools that it needed.
The influx of counterfeits from Asia, along with advancements in
technology such as 3-D printing, have made counterfeiting a continued
problem. The flooding of counterfeit U.S. coins from China seems to
have eased, due in part to eBay cracking down on the sale of these and
also through the advocacy of many in the hobby, including Coin World’s
former editor Beth Deisher.
In 2014 the Federal Trade Commission again sought public comment on
the costs, benefits and overall impact of the Hobby Protection Act.
The comment period closed on Sept. 22, 2014, with just six comments
received, each in favor of the Hobby Protection Act as a way to
protect consumers from fraud. Based on the comments, the Federal Trade
Commission concluded that there was a continued need for the Hobby
Protection Act and that the costs that the act imposes on businesses
were reasonable and did not impose undue costs upon the public.
While several comments addressed “fantasy coins,” or
government-issued coins altered by nongovernmental entities to bear
historically impossible dates or other features marketed as novelties,
the Federal Trade Commission decided that it was unnecessary to amend
the rules to address these. However, it concluded that such coins
should be marked COPY because otherwise they could be mistaken for an
original numismatic item.
Daniel Carr, who operates the Moonlight
Mint in Colorado, submitted a public statement on Sept. 14, 2014.
Carr is well-known for his fantasy creations, such as a 1964-D Morgan
silver dollar fantasy issue, creating a physical example of a coin
that likely never existed (though the U.S. Mint did create dies and
hubs for the creation of a 1964 Morgan dollar).
To create this piece, Carr uses an old Denver Mint press to
overstrike an existing Morgan silver dollar with the new design
featuring the new date. He writes that the resulting product is “the
most exacting and faithful rendition available. Holding this coin in
hand gives the viewer a true sense of what it would be like to own an
original 1964-D Morgan silver dollar (had any actually been
produced).” He makes clear that his creations are not to be used as
money and are not endorsed or approved by the U.S. Mint.
On his website Carr further clarifies three points in an effort to
conform to current law. First, he writes, “These are not copies of
Morgan silver dollars — they are privately over-struck on GENUINE
government-issue Morgan silver dollars that were originally minted
from 1878-1921.” Second, he clarifies, “According to the US Treasury,
no 1964 Morgan silver dollars were ever minted — so this can’t be a
copy of one since they don’t exist.”
Finally he writes, “Defacing of US coins is legal so long as the
defacement isn’t for fraudulent purposes.”
He ends the listing by stating, “By purchasing one or more of these
coins, the buyer agrees to provide full disclosure of their origin
when reselling them. Failure to provide potential buyers with complete
and accurate information when offering these coins could result in
criminal and/or civil fraud charges. In other words, don’t even think
about trying to sell these to unaware buyers as original 1964-D Morgan
Carr observed in his 2014 public comments that the Hobby Protection
Act allows reproduction coins to be produced, explaining, “And since
the typical method to produce such reproductions is via molds or dies,
the Hobby Protection Act indirectly allows molds or dies in the
likeness of US coins to be made and possessed.” He added, “Alterations
of genuine original numismatic items is a common practice and should
be allowed to continue,” as long as they are not intended to defraud.
Carr concluded that novelty numismatic items (whether marked COPY or
not) are collectible and they are not a problem when they are properly
marketed and are not made to deceive collectors. However, Carr
acknowledged that counterfeits made and sold with an intent to deceive
are a serious problem and the differentiation between a novelty
numismatic item and a counterfeit is the intent to defraud.
Researcher Roger Burdette wrote on Sept. 9, 2014, that the Hobby
Protection Act has been successful in protecting collectors by
providing guidance for makers of replicas. He wrote, “In recent years,
however, the quantity and quality of false numismatic items and
unmarked replicas has increased. Part of the increase comes from mass
produced counterfeit coins produced in the Peoples Republic of China,
Indonesia and the Republic of China (Taiwan), and imported into the
United States. All of these pieces are in the likeness or similitude
of a coin of the United States or other country. All fail to comply
with the Hobby Protection Act’s marking requirements.”
Burdette concluded, “While the original law has been remarkably
effective, it now requires enhancement in order to combat the flood of
counterfeit and unmarked replica pieces being openly imported,
manufactured and sold in the United States. The greatest impediment to
strict compliance has been the voluntary nature of enforcement.”
Attorney and then Coin World columnist Armen Vartian warned
that expansion of the Hobby Protection Act would have the possibility
to confuse the hobby.
He wrote in his public comments in 2014, “It seems incongruous to
require that the word ‘COPY’ be placed on an item that is not, in
fact, a ‘copy’ of an original numismatic item,” suggesting that it
could be read to require “COPY” to be stamped on some widely accepted
numismatic items that are legitimate collectibles.
The new rules are effective Nov. 16.
The Hobby Protection Act of 1973 was sought by hobby leaders as a
means of combating the widespread sale of unmarked numismatic replicas
in the marketplace.