auction houses and their own items?

[lund6771]

I think that there is no question that auction houses put items that they've aquired into their own auctions...is there anyway that it is policed?...what would stop them from throwing in false bids to drive their own items up?

It's obviously illegal...but I also heard that it is legal in Nevada...

any other thoughts on this?

[David]

Consignment auction houses make money on all the lots, consignments and theirs. If you have concern about potential shilling (and I'm not suggesting it's an illegitimate concern) it would apply to all lots. I believe REA only auctions consignments and employees aren't allowed to bid on any lots.

I don't take issue with an auction house putting their own stuff in, as long as it's authentic and well described.

[kingjammy24]

david,

you're comfortable with the conflict of interest of an auction house auctioning off materials that they own?

for me, the real concern isn't shill bidding because a) it's illegal b) david is right in saying that if an auction house were to shill bid then whether they own the item or not is irrelevant. the auction house takes a cut of all final prices so the shill would want to drive up prices on both consigned and directly-owned items.

for me, the concern is:
a) they either don't recognize or don't care that placing items you own into your own auction is an obvious conflict of interest. if they don't recognize this or don't care, then where else are they "cutting corners" or looking the other way?

b) the authentication issue. when an auction house spends its own money to acquire an item, it immediately has a very pressing need to auction this item off in order to make their money back. the higher the dollar value, the greater the pressure. this situation doesn't occur if you auction off only real consignments. if i consign an item to an auction house and it fails authentication or doesn't sell, they aren't in debt because it didn't sell. conversely, if they spend $200k on some jerseys and they don't authenticate positively or sell, they're immediately in the hole for $200k and that's a big deal. in 2001, lelands purchased 6 gretzky oilers gamers for the purpose of putting them into their own auction. can you imagine what 6 legit gretzky oiler gamers would cost? you're looking at $80k-$100k. if someone purchased $100k worth of jerseys how eager do you think they'd be to have them pass authentication and sell for at least $100k? if both of those things don't happen, then that's a $100k debt they just incurred. as it turns out, after they purchased them, lelands learned that at least 2 of the jerseys were fake and were pulled from the auction. (kudos to lelands for not passing their loss onto the buyer. something tells me lelands didn't eat that loss and likely pursued legal action against the dealer they bought them from.) what if all 6 had turned out to be fake though? thats an $80k-$100k loss from 6 items alone. it's a conflict of interest because it creates a situation where the auction house is unfairly biased towards having certain items authenticated positively and towards selling those particular items for a certain price in order to recoup their investment. it's a sticky place to be when you control the auction process and also directly employ the authenticators who help decide whether or not you'll recoup your substantial investment.

ideally, the role of an auction house is simply to act as a neutral, third party broker between a consigner and a buyer. when they own the items, that neutrality is negated. they now have a strong, vested interest in selling their items and having them authenticated positively. a judge, for example, is forbidden from having a personal stake in the cases he adjudicates. if he did, it might affect his actions and the results would be unjust. the same is true for an auction house that purports to offer a level playing field for both sellers and buyers and is supposed to offer unbiased authentications. when the auction house IS the seller, then there's the immediate risk that they're going to sway the playing field in their favor. also, how can the authentications be free from the risk of bias when the sellers directly employ the very people authenticating their items?

rudy.

[staindsox]

First, great post Rudy!

Secondly, I just wanted to comment on shill bidding. Many of you may or may not know, only REA is a guaranteed shill-free auction. Rob Lifson uses software that will not let anyone see what dollar amounts have been bid, not even the auction house running the auction can see the bids entered. He challenged his competitors to use the same software, but nobody else has used it. Why is that? Although we would like to assume all the big houses are honest, and I'm sure many are honest, I have to commend Rob Lifson and REA for putting their money where their mouth is. We don't have to assume that they're honest, they leave no doubt and prove it to us. That's one of the many reasons why they are the best in the business.

Chris

[David]

As a collector I chose to deal with sellers (dealer, collector, consignment auction house) that are knowledgeable and honest. Before long you can usually figure out if a seller is dishonest. To me, someone selling his own stuff doesn't make him unreliable about authenticity.

[otismalibu]

I'd be interested to see a list, by auction house, where members post what they won their item for and what their max bid was.

No need to identify the item...just the numbers.

[DConLA]

If certain auction houses can and do bid on their own items in the states where shill bidding is allowed and nobody outbids them then is that price a true realization? How do we know for sure that the price realizations are in fact real sales? Sounds like some of the auction houses pad their sales so that it seems that they get premium numbers. What do you guys think?

[CollectGU]

Stop beating around the bush. What exactly are you implying? Who are you referring to and what proof do you have. If none then what is the oint of your post? to make innuendo's?

Regards,
Dave

[kingjammy24]

there are no states where shill bidding is allowed. it's a federal felony offense. if it occurs in an online auction, then it's considered wire fraud and is punishable by up to 5 yrs in the clink plus significant fines/restitution. it probably wouldn't be difficult to also incur a charge of mail fraud in there as well which is another federal offense. additionally, every state has laws against fraud and shill bidding constitutes fraud.

and yes, all of this includes the great state of nevada.

rudy.

[David]

I agree that, with shill bidding by whomever and for whatever reason, you can determine the financial value from the sale, nor even know if the item sold.

That was the old problem with eBay auctions with private bidding-- you couldn't know if even one of the bids was legitimate. I automatically ignored all the realized prices. Only a fool would take them as gauge of market value. With open bidding, you could at least say "I know those bidders. They're legitimate collectors of that kind of stuff."

[kingjammy24]

if shill bidding were actually legal in nevada, don't you think every single auction house in the country would relocate to nevada?

hypothetically speaking, even if it were somehow "legal" in NV then it's ultimately irrelevant because they'd be indicted on federal offenses anyway.

lund, whoever told you that was either having some fun or is woefully misinformed. you asked what stops them from throwing in false bids. quite likely it's their desire not to go to jail.

rudy.

[DConLA]

I Don't Deal In Rumor Or Innuendo.i Said If This Practice Goes On In Any State.then Wouldn't That Be Padding The Books. My Question Was Purely Hypothetical. It Was Just A Responce To The Thread.