12/14/2007 12:00AM

Florida considers new sale rules

EmailLEXINGTON, Ky. - There's another reform effort under way in the bloodstock sales world, this time in Florida.

On Monday, sales industry participants will gather in Tallahassee to comment on a proposed Department of Agriculture rule that, as currently written, would outlaw undisclosed dual agency in horse sales and mandate disclosure of sale horses' ownership and veterinary histories.

If enacted as written now, the regulation would go further than Kentucky law. Backed by high-profile owner Jess Jackson, Kentucky banned undisclosed dual agency in 2006, but the Kentucky legislature tabled a push this year to require veterinary and ownership disclosures after Jackson and Thoroughbred industry leaders agreed to work on developing a new code of ethics for the state's bloodstock market.

Those disclosures remain voluntary in Kentucky under the new code of ethics. But Thoroughbred owner Earle I. Mack and his Kentucky-based attorney, Thoroughbred owner Joel Turner, are pushing Florida to take the lead in horse-sale transparency.

"Transparency means integrity," Mack said. "Integrity in the racing industry is what we're all about."

Mack became a public advocate for reform after a bad sale experience.

According to Turner, Mack purchased a 2-year-old in Florida after being told by the consignor that the horse had had no surgeries. He later discovered the horse had chips removed as a weanling and that the information had been disclosed in a health-information repository when the horse first sold at Saratoga's yearling sale. But the pinhooker who purchased the horse there, and later sold it to Mack, claimed not to have looked at the repository information and therefore not to have known about the surgeries.

"Instead of getting mad and trying to rescind the sale based on the misrepresentation, Mr. Mack decided that this is the kind of gap in the way disclosures occur, which vary from sale to sale, so that even someone who is extremely diligent could be victimized," Turner said. "He decided to try to do something that would benefit the industry at large. He saw this as an industry wide problem that could have repercussions long-term if the integrity of sales is not protected."

Establishing a chain of ownership, if known, and requiring sellers to turn over written disclosures or the horse's veterinary records will help prevent such problems, Turner and Mack say.

But opponents argue that the new rule is burdensome.

"The dual agency portion of the rule is very similar to the one adopted in Kentucky, and I don't think anyone in any part of the industry has qualms about that," said Tom Ventura, general manager of the Ocala Breeders' Sales Co. in Florida. "The bill of sale part of the rule will draw the most discussion because it's vague and broad in terms of the ownership disclosure on the buying and selling end and what's required on the bill of sale. And it doesn't just apply to auctions; it applies to every horse transaction."

Ventura cautions that such regulations could unduly burden consignors.

"If we make it overly restrictive, sellers might decide not to sell their horses in Florida," he said, "not because they're being deceptive, but because it's becoming burdensome."

Ventura worries that the veterinary disclosure requirements would present logistical problems, particularly in acquiring the records and ensuring their accuracy. And the ownership disclosure proposal counters auction houses' long contention that their customers have a right to privacy.

"There are good reasons why a buyer or seller might not want to be disclosed, and that person has a right to privacy," Ventura said. "People have the right to use agents and remain anonymous if they choose to, and the buyer has the right to bid or not. You can't have sales without buyers, and the market will tell us if we're effective or not."

The regulation likely would mean more record keeping, but Mack points out that full disclosure of ownership already is required for racing licenses.

"You have to disclose every owner, even if he only has 2, 3, or 5 percent in a minority interest," he said. "... We already have an example in our own racing world, where if you are hiding ownership, you are subject to strict penalties."

Mack and Turner applaud recent steps by Florida's two Thoroughbred auction houses, OBS and Fasig-Tipton, such as banning anabolic steroids and practices that can temporarily alter conformation.

"What we're concerned about is that, as quickly as they've embraced those, if we don't have strong regulations on the books in Florida that establish those as best practices, then just as quickly after a trial period, if they decided this wasn't economically beneficial to the sales company, they could remove those conditions of sale," Turner said. "I'm not saying they would, and I hope the integrity of the marketplace is as important to them as it is to us. But it's certainly a possibility, and therefore we're strongly in favor of state regulation instead of self-regulation."