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Selling Online and Avoiding Lawsuits: Navigating Regulatory Risks in the Firearms Industry

Written by Orchid


June 27, 2023


Selling Online and Avoiding Lawsuits: Navigating Regulatory Risks in the Firearms Industry

In today’s digital age selling firearms online has become a common practice for businesses. However, with this convenience comes the risk of facing legal issues and potential lawsuits. Let’s explore the regulatory risk factors surrounding online sales of firearms and discuss strategies to mitigate those risks.

Understanding State Laws and FFL Compliance

When conducting online sales, businesses must be mindful of the diverse jurisdictions and the state laws that apply. Operating an e-commerce platform means navigating through numerous firearm-related laws across the country. Maintaining compliance with all applicable state laws is a condition for obtaining and retaining your FFL. These laws encompass a range of aspects, such as state licensing requirements, zoning regulations, recordkeeping obligations, background checks, waiting periods, and prohibitions on certain firearms and accessories.

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Violations of state laws can lead to regulatory actions, administrative penalties, and potential criminal prosecution. The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) may inspect your business and refer violations of state statutes to the appropriate state authorities. Failure to comply with these laws jeopardizes your FFL, making it crucial to be well-versed in the laws across different jurisdictions.

Potential Lawsuits and their Impact:

Engaging in e-commerce exposes businesses to the risk of civil lawsuits which can be financially draining. Lawsuits can arise for various reasons including harm caused by a third party’s use of the products (whether criminal or accidental), unintentional violations of law (e.g., transfer occurs day of a new statutory restriction), and intentional criminal conduct. Even if you adhere to proper procedures you may still be drawn into litigation if a product leads to harm.

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It is essential to understand the legality of products you sell, particularly those subject to prohibitions in certain jurisdictions. Laws surrounding “assault weapons,”  “large capacity magazines,” and other miscellaneous product prohibitions have been long-standing concerns, and new legislation – like Illinois’ prohibition on firearm accessories – adds to the complexity. Failure to monitor and adapt to changing laws can expose your business to considerable risks, both legally and financially.

Focus Areas and Emerging Risk Factors:

Certain areas warrant particular attention when it comes to minimizing legal risks. One significant concern arises from the emergence of statutes designed to avoid PLCAA’s (Protection of Lawful Commerce in Arms Act) protections that have been recently adopted in several states. These statutes aim to allow lawsuits against firearm industry members for activities that are intended to be protected by PLCAA. They seek to hold industry members liable for lawful commerce in firearms and require compliance with certain vague standards of conduct.

Examples of states with PLCAA evasion statutes include California, where legislators have passed laws establishing an affirmative obligation on the firearms industry to meet a nebulous “reasonable standard of conduct” and face civil liability for violations. These laws demonstrate the potential financial harm businesses may face when dealing with firearms and the importance of staying informed about changing legislation.

Mitigating Risks and Ensuring Compliance

To navigate the legal risks associated with selling firearms online, businesses should adopt proactive measures. Here are some recommendations to consider:

  1. Stay informed: Regularly monitor changes in state and federal laws that impact your business. Stay updated on pending legislation and understand the evolving legal landscape.
  2. Review orders and locations: Before shipping products, review the orders and destinations to ensure compliance with local laws. Avoid releasing shipments that violate the prohibitions or regulations of the receiving jurisdiction.
  3. Conduct thorough compliance checks: Ensure that you verify the appropriate licenses of parties involved in online transactions. Implement processes to confirm compliance with state-specific requirements, such as permits, licenses, or age restrictions.
  4. Implement robust vetting processes: Develop effective vetting processes to verify purchaser eligibility, especially for items like ammunition and accessories. This includes requesting necessary documentation, such as firearms or ammunition purchaser cards, where applicable.
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  5. Maintain meticulous recordkeeping: Fulfill your recordkeeping obligations by maintaining accurate and detailed records of all transactions. This includes maintaining records of background checks, transfer paperwork, shipping documents, and any other relevant information. Organized and thorough recordkeeping will not only help you demonstrate compliance but can also serve as critical evidence in the event of any legal disputes.
  6. Consult with regulatory or legal professionals: Given the complexity of firearm laws and the potential legal risks involved, it is highly advisable to consult with experienced professionals who specialize in firearms regulations. They can provide valuable guidance, help you navigate the legal landscape, and ensure your business practices align with the applicable laws and regulations.
  7. Implement robust customer education: Educate your customers about the legal restrictions and requirements associated with purchasing firearms and related products. Clearly communicate your policies, terms of service, and any limitations on shipping to certain jurisdictions. Providing accurate and transparent information will help customers make informed decisions and reduce the likelihood of misunderstandings or legal disputes.
  8. Obtain appropriate insurance coverage: Consider obtaining comprehensive insurance coverage specifically tailored to the firearms industry. This can provide financial protection in case of any legal claims, lawsuits, or other unforeseen events. Work closely with insurance professionals who understand the unique risks faced by firearm businesses to ensure you have adequate coverage.
  9. Monitor online platforms and marketplaces: If you sell through third-party platforms or marketplaces, be aware of their policies and guidelines regarding firearm sales. Ensure that your listings comply with their rules and regulations to avoid potential account suspensions or other penalties. Regularly review and update your product descriptions and images to accurately reflect the items you are selling and minimize the risk of any misrepresentation.
  10. Maintain a strong online reputation: Building and maintaining a positive online reputation is important for any business, including those in the firearms industry. Provide excellent customer service, promptly address any customer concerns or complaints, and prioritize transparency and integrity in all your business interactions. A positive reputation can help mitigate the impact of any potential legal issues and enhance customer trust and loyalty.

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Selling firearms online comes with inherent legal risks and the potential for lawsuits. Navigating the complex web of state laws, ensuring compliance, and staying updated on changing regulations are crucial steps for minimizing legal liabilities. By implementing effective compliance measures, obtaining appropriate insurance coverage, fostering responsible business practices, prioritizing product safety, and staying informed, online firearm sellers can significantly mitigate legal risks and safeguard their business operations.

Remember, understanding and adhering to the law is not only essential for legal compliance but also for fostering a safe and responsible firearms industry. Take proactive steps to protect your business, ensure compliance, and promote a culture of responsible firearm sales.

Legal Disclaimer:

Nothing in this article should be interpreted as legal advice. The information in this article is not intended to substitute for professional legal advice and does not create an attorney-client relationship. You should accept legal advice only from a licensed legal professional with whom you have an attorney-client relationship.