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.