Morality, legality and auction collusion

There was a much-ridiculed law in Wisconsin not too many years ago (for all I know it's still on the books) requiring that every slice of pie served in a restaurant be topped with a wedge of cheddar cheese.

 

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Sounds like a very creative idea . Seriously, I do see how that scenario has slid pretty far down the slippery slope. However, that scenario won't happen today because of the ease of announcing sales and advertising. If today an auction company were to attracts so few potential bidders that all of those bidders know one another and were able to coordinate and execute such a plan... well, I think that auction company's failure is warranted and they should find a new line of work. It simply couldn't happen this day and age though.

If the auction companies really want to ensure that their customers never talk to one another and plan bids, they should only have fixed price sales. Solved on CoinTalk, no expensive lawyers needed (and no new laws needed)

Further evidence that there are too many lawyers and too many laws

As Sallent pointed out, there are tons of stupid laws still on the books and tons of technically illegal activities which no one is going to prosecute.

 

Worst thing about stupid laws is when they can be inconsistently prosecuted. It was a classic totalitarian strategy. They'd go after political opponents with petty laws that everyone breaks.

 

I certainly don't think that it is unethical to refrain from bidding on an item that a friend wants to buy whether it is illegal or not. I also highly doubt that it is illegal or enforceable even if it is.

I am under no obligation to buy from an auction and they are under no obligation to sell to me. When something is auctioned it is natural for a seller to hope that competition drives up price. They must also be willing to accept as part of the risk of selling in an auction that lack of competition can keep the price low. That's why there is a minimum bid!

 

I would assume that there are always small groups of friends and fellow hobbyists who routinely do this. It's an expected part of the process.

If I were consigning and were concerned about it, I'd sell those coins at fixed prices rather than auction. Solved.

Edited: and what @Curtisimo said: that is why minimum bids exist.

If we want to go further down this road, shall we talk about some of the dubious practices of auction houses? Hidden reserves, bidding on their own lots...

I don't mean to sound anti-auction house. I'm generally very happy with the abundance of auction houses and their practices and much prefer bidding in auctions to buying at fixed prices.

 

Here's a Canadian perspective: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03152.html

According to it, one way to cover your butts for sure would be for the two friends to inform the auction company in advance that they will be divvying up the lots they both want. Perhaps the same would apply elsewhere. (Though I share the opinion of some of those above that this activity falls outside the scope of these bid-rigging laws.)

 

I tried picturing me selling my coins... but all I could manage was to visualize something like this.

Yup... they are getting buried with me

 

But the rules are there to keep the game more or less fair. Surely you'd agree that the extreme situation of a bidding ring between dealers isn't legitimate? Or that businesses competing for a government tender shouldn't be allowed to collude to impose a high price? Saying that there's a maximum that the government would pay doesn't make it OK. It's shades of grey, but I don't think it can so easily be explained away. If I was selling an inherited collect through a reputable auction house I'd be really peeved if I discovered that collectors were agreeing prices amongst themselves in advance.

 

That's why a seller/consignor has the option of setting minimum bid, and why they could instead choose to sell for a fixed price. I really don't see the problem here.

 

I really don't see the problem. At the end of the day there's nothing binding collectors to those agreements and the internet is vast enough that there are few sales where every single interested party could work together. And on top of that a consignor can set a minimum bid and should be fully aware that their coin may only sell at that price. Sometimes when I win lots at the opening bid I wish the seller would have set a lower opening to possibly save me a little cash but I shouldn't be peeved at the seller for the opening price they chose.

Here's another example that I'm sure some sellers would be peeved by but I think is perfectly OK: I know that later this year and early next year a nice selection of RR coins will be up for sale. I decided not to bid on a lot recently up for auction because an example I like better will be coming up soon. Some might consider that collusion but it's a natural part of being a specialist collector. I regularly communicate with several others with similar specialization and sometimes these topics come up.

 

Reserve is to limit downside. But you don't sell at auction to get the minimum. You sell to have a chance of getting more in open competition. If the competition isn't open and fair, you're not getting what you expected. In the example of a dealers' ring colluding to buy at reserve and then reselling among themselves, it wouldn't do to say it's fine because sellers got the minimum. It undermines the purpose of auctions. The end logic is to have collectors decide amongst themselves who will buy for the reserve in each case, and at that point no one would consign to auction at all.

 

According to the link below, both colluding parties have to benefit in order to violate the Sherman Act. Clearly, refraining from bidding against a friend is not violation of the act.

https://mikebrandlyauctioneer.wordpress.com/2010/05/14/what-is-collusion-at-an-auction/

 

But if there is an expectation of quid pro quo, then there is mutual benefit. And there is case law on that.

 

I honestly can't comment on the legality of any of the above situations in any meaningful way because it is outside of my scope of expertise.

I can only say that I'm not looking for, and not even capable of achieving, an unfair advantage in a major international auction.

I don't really follow you here. The sellers expectation should have no bearing on an auction transaction. I might expect to pay 1990s prices for an Athenian Tetradrachm but the reality would be quite a different thing. Auctions are inherently a risk for the seller.

 

What is the benefit to the one not bidding? Nothing. He comes away empty handed. If, on the other hand two bidders colluded to drive a hammer price down, then sold the winning lot and split the profit, well you might have something.

 

I can only reiterate the points I've made several times. Ensuring multiple avenues of profitable sale to any given potential seller is not my concern-- not my problem-- shouldn't be the government's responsibility either, and I resent the "need" for laws trying to make it seem so.

Same for me.

 

No, if the empty handed person expects that the other party will refrain from bidding in a future sale, there's benefit. Some of the case law on this is surprising. The act itself is extremely brief and basically tells the courts to get on and make their own decisions. And they have.

 

"It undermines the purpose of auctions."

That's the crucial point. I can't pretend I've never discussed possible bids on a handful of coins with one or two likely bidders-- I absolutely have and probably will again, because my pockets aren't particularly deep and like anyone I need to marshal my resources. I'm well aware however that doing that convicts me of a measure of hypocrisy and I find myself having those discussions less frequently now. I like to know what the true market is for a coin, even if that costs me a fair amount of money on occasion.

 

The legitimacy of the laws is a different question, but they exist if we like it or not. But the act was passed at a time when, for example, the Havermeyer family operated a sugar cartel that bumped up the price for consumers while lavishly lining their pockets - legally. Consumers could choose to pay their prices or not buy sugar. Ditto Rockefeller in the oil market. And English antique dealers operated rings in the art market, too. There are real victims, even if they are dispersed.

 

I'll worry about it while eating my pie and cheddar cheese wedge in Wisconsin.