Amendments extend enforcement scope of Hobby Protection Act

Federal Trade Commission adopts revised regulations
By , Coin World
Published : 11/04/16
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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 Federal Register

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 Coin 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.

Clear Copies

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. 

Continued Threat

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.

Fantasy coins 

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 silver dollars!”

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. 

Successful protection

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.” 

Possible confusion

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. 

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