Are discounted buyers premiums legal in the US?

MrEureka

Discounted as in some bidders get favorable rates. I’ve always thought so, but can you point us to the statute?

MrEureka

And while we’re at it, what’s the rationale of the law? I understand that “it’s fair”, but almost every other type of business is allowed to price discriminate.

Higashiyama

I can’t speak to the legal aspect, but a seller might have a reasonable concern if an auction house is offering variable buyers fees. If this happens, the seller may not have a precise understanding beforehand of the percentage of gross revenues they will receive.

davewesen

Each state has their own auction requirements, licenses and laws.

Why would a state dictate what can be charged or paid to a consignor or buyer?

jmlanzaf

@davewesen said:
Each state has their own auction requirements, licenses and laws.

Why would a state dictate what can be charged or paid to a consignor or buyer?

To make it fair. If I charge the public 20% but my brother 0%, my brother can bid 20% higher than everyone else and still pay the same.

sellitstore

Yes, this is a question of state, not federal law.

Wouldn't make sense for an auction house to give a large discount on the BP as there is an underbidder paying full BP, but a few percent, maybe.

MasonG

@jmlanzaf said:
To make it fair.

Suppose the bidder who is being offered a lower fee is someone who buys a lot regularly. Kind of like the mint gives a discount to bulk buyers?

Justacommeman

I certainly hope not

m

djm

Several of the online auction houses have different buyers premium depending on which proxy site you bid on. They say they charge their premium plus whatever the proxy site charges them.

MrEureka

Fedex delivered dog food to my house on Easter Sunday. Two packages, 28 pounds each. Total order value was $100. So you know Fedex is charging a whole lot less to Chewy than they would charge any of us for a similar shipment. No harm done. It's a free country. But how could a smaller online retailer possibly compete?

(EDITED TO SAY) Hospitals and drug companies charge uninsured people vastly more than they would charge an insurance company for the same services, which essentially forces people to buy health insurance. Again, it's a free country, so good for the insurance companies. But the end result kind of sucks.

So why are auctions any different? Shouldn't big buyers be allowed to try to negotiate discounts? Shouldn't auction companies be free to do as they please?

Understand that I'm not actually advocating this. I just think it's an interesting question.

Gazes

I dont know the answer or even what the state of the law is. If there is some requirement that premiums be similar I would guess it's because of some theory that the auction house owes some fiduciary duty to bidders. If so, a fiduciary has a higher standard to treat its customers with more transparency than another business where there is no fiduciary duty. Again, not sure there is merit to this but it would be one way to explain it

BAJJERFAN

@MasonG said:

@jmlanzaf said:
To make it fair.

Suppose the bidder who is being offered a lower fee is someone who buys a lot regularly. Kind of like the mint gives a discount to bulk buyers?

Fine as long as the discount is at the expense of the auction house and not the consignor.

MasonG

@BAJJERFAN said:
Fine as long as the discount is at the expense of the auction house and not the consignor.

Ok- the auction house says that's how it works. How would anyone know?

daltex

I don't know, but since GreatCollections offers different premia, I assume it is legal, at least in California.

CoinJunkie

They may be legal, but I see enough downsides to an auction house's actually implementing them that I doubt any would.

BAJJERFAN

@MasonG said:

@BAJJERFAN said:
Fine as long as the discount is at the expense of the auction house and not the consignor.

Ok- the auction house says that's how it works. How would anyone know?

They wouldn't, but the consignor would know; however the likelihood of us commoners finding out is slim at best.

amwldcoin

And we all know some auction houses buy coins out of their own auctions and sell them later!

jmlanzaf

@daltex said:
I don't know, but since GreatCollections offers different premia, I assume it is legal, at least in California.

They don't offer different buyer's premiums. There is a 3% fee for credit cards, but that's for everyone. [Well, technically, a3% discount for not using credit cards. ]

jmlanzaf

@MasonG said:

@jmlanzaf said:
To make it fair.

Suppose the bidder who is being offered a lower fee is someone who buys a lot regularly. Kind of like the mint gives a discount to bulk buyers?

Heritage makes a point of staying that their house bidders pay the premium. [Although, kind of makes me laugh since they pay it to themselves. ] so, I suspect that in Texas it is not legal to charge a different premium.

MarkInDavis

This is a good question. Tough to evaluate auction results if one doesn't know what the actual amount paid is.

jmski52

I dont know the answer or even what the state of the law is. If there is some requirement that premiums be similar I would guess it's because of some theory that the auction house owes some fiduciary duty to bidders. If so, a fiduciary has a higher standard to treat its customers with more transparency than another business where there is no fiduciary duty. Again, not sure there is merit to this but it would be one way to explain it

Sounds good.

MrEureka

@MarkInDavis said:
This is a good question. Tough to evaluate auction results if one doesn't know what the actual amount paid is.

Correct. It's also tough for an unknowledgeable buyer to "go to school" on his underbidders if he doesn't know what the underbidder is actually paying. But are those issues so critical to the functioning of society that the government has to mandate how auction companies do business?

MrEureka

@jmlanzaf said:

@MasonG said:

@jmlanzaf said:
To make it fair.

Suppose the bidder who is being offered a lower fee is someone who buys a lot regularly. Kind of like the mint gives a discount to bulk buyers?

Heritage makes a point of staying that their house bidders pay the premium. [Although, kind of makes me laugh since they pay it to themselves. ] so, I suspect that in Texas it is not legal to charge a different premium.

Don't laugh. The house bidder earns his living by buying and selling coins and turning a profit. And Heritage will calculate that profit based on hammer plus the full BP. Therefore, as far as the house bidder is concerned, the BP is very real, and he will bid accordingly.

daltex

@jmlanzaf said:

@daltex said:
I don't know, but since GreatCollections offers different premia, I assume it is legal, at least in California.

They don't offer different buyer's premiums. There is a 3% fee for credit cards, but that's for everyone. [Well, technically, a3% discount for not using credit cards. ]

Call it what you want. This is a direct quote from GreatCollections.

GC's standard 12.5% buyer's fee (min $5) applies to this auction, discounted to 10% (min $5) if paid by Check, eCheck or Wire. All bids are in U.S. Dollars.

I really don't understand how this fails to answer the OP's question. GreatCollections says, straight out, that there is a class of bidders that gets a discounted premium, and then indicates what one must do to be a member of this class. Other than this disclosure, which may or may not be mandated, how is this different from any other means of discounting for certain bidders?

ShaunBC5

@daltex I think the issue isn’t with a “class” of bidder, but more with a form of payment and how the law states that you can’t charge someone MORE for using a particular payment method, only that you can give a DISCOUNT for using a particular method. It’s linguistic gymnastics, but no one is excluded from the discount, if they choose to use that method of payment.
Regarding different premiums based on quantity, or relationship or any other criteria, I have no idea.
I know with slew of goods (to individuals or companies) there is supposed to be transparency and stated tiering that anyone could reach, if criteria were met. This is obviously for public companies, as Mom-and Pops can legally do what they want in this regard (sort of).

Edit for typo.

tcollects

@MrEureka said:

@jmlanzaf said:

@MasonG said:

@jmlanzaf said:
To make it fair.

Suppose the bidder who is being offered a lower fee is someone who buys a lot regularly. Kind of like the mint gives a discount to bulk buyers?

Heritage makes a point of staying that their house bidders pay the premium. [Although, kind of makes me laugh since they pay it to themselves. ] so, I suspect that in Texas it is not legal to charge a different premium.

Don't laugh. The house bidder earns his living by buying and selling coins and turning a profit. And Heritage will calculate that profit based on hammer plus the full BP. Therefore, as far as the house bidder is concerned, the BP is very real, and he will bid accordingly.

I don't understand the house bidder - so they don't just bid on house coins like an in-house shill - they buy and sell? I don't understand all the angles

SmEagle1795

CNG and several international auction houses recently stopped their 5% dealer discount. Perhaps a law changed, or perhaps they're just trying to compete against the Heritage-sized elephant in the industry by getting as much back as possible when they're needing to give consignors 100+x% of hammer.

Aegis3

I seem to recall that Stack's Bowers' did this a few years back. I think it was 17.5% if below a set amount ($50k?) of total winning bids, and 15% if it was above that. I do not recall how this appeared on prices realized lists.

(On second thought, not adding a second paragraph on the ethics, or lack thereof, of such things.)

airplanenut

I don’t know about legalities, but I have two thoughts. For your Chewy example, a shipping company can take one truck (likely many) to a warehouse to pick up tons of packages with perfect labels. Much less work on their part to get a lot of volume. Same thing for any wholesale business. But for auctions, beyond incentive, there really isn’t any benefit to a discount in terms of work. The only thing left after bidding is shipping, and they charge for that.

Second, it would be interesting how the prices realized would be reported. Let’s say a $1000 coin with a BP of 10 or 20%. If the ho hum buyer ready to pay $1200 total sees a realized price of $1100, he’ll wonder what happened because he saw bidding (before hammer) at $1000. If the price realized shows $1200 because that’s the regular price, then is the auction house lying? If the top bidders are all paying 10% and the realized price shows 20%, then the auction records would be showing an inflated value and perhaps influencing the marking in an unjust manner.

MrEureka

@tcollects said:

@MrEureka said:

@jmlanzaf said:

@MasonG said:

@jmlanzaf said:
To make it fair.

Suppose the bidder who is being offered a lower fee is someone who buys a lot regularly. Kind of like the mint gives a discount to bulk buyers?

Heritage makes a point of staying that their house bidders pay the premium. [Although, kind of makes me laugh since they pay it to themselves. ] so, I suspect that in Texas it is not legal to charge a different premium.

Don't laugh. The house bidder earns his living by buying and selling coins and turning a profit. And Heritage will calculate that profit based on hammer plus the full BP. Therefore, as far as the house bidder is concerned, the BP is very real, and he will bid accordingly.

I don't understand the house bidder - so they don't just bid on house coins like an in-house shill - they buy and sell? I don't understand all the angles

That’s correct. They’re coin traders, buying and selling wherever they can, including at their own auctions.

MrEureka

@airplanenut said:

Second, it would be interesting how the prices realized would be reported. Let’s say a $1000 coin with a BP of 10 or 20%. If the ho hum buyer ready to pay $1200 total sees a realized price of $1100, he’ll wonder what happened because he saw bidding (before hammer) at $1000. If the price realized shows $1200 because that’s the regular price, then is the auction house lying? If the top bidders are all paying 10% and the realized price shows 20%, then the auction records would be showing an inflated value and perhaps influencing the marking in an unjust manner.

Many overseas auction firms give known dealers a discount on the BP. CoinArchives.com and others report all prices realized at hammer, so you can’t always tell exactly what a buyer paid. So it’s not a perfectly transparent market, but it doesn’t seem to scare anyone off.

jmlanzaf

@Aegis3 said:
I seem to recall that Stack's Bowers' did this a few years back. I think it was 17.5% if below a set amount ($50k?) of total winning bids, and 15% if it was above that. I do not recall how this appeared on prices realized lists.

(On second thought, not adding a second paragraph on the ethics, or lack thereof, of such things.)

That is not the same thing if ALL bidders still had the same price.

jmlanzaf

@daltex said:

@jmlanzaf said:

@daltex said:
I don't know, but since GreatCollections offers different premia, I assume it is legal, at least in California.

They don't offer different buyer's premiums. There is a 3% fee for credit cards, but that's for everyone. [Well, technically, a3% discount for not using credit cards. ]

Call it what you want. This is a direct quote from GreatCollections.

GC's standard 12.5% buyer's fee (min $5) applies to this auction, discounted to 10% (min $5) if paid by Check, eCheck or Wire. All bids are in U.S. Dollars.

I really don't understand how this fails to answer the OP's question. GreatCollections says, straight out, that there is a class of bidders that gets a discounted premium, and then indicates what one must do to be a member of this class. Other than this disclosure, which may or may not be mandated, how is this different from any other means of discounting for certain bidders?

Because it is an offer made to everyone. It's just a cash discount.

The OP is asking about preference shown to large clients or dealers which creates a sloped playing field.

ianrussell

@daltex said:

@jmlanzaf said:

@daltex said:
I don't know, but since GreatCollections offers different premia, I assume it is legal, at least in California.

They don't offer different buyer's premiums. There is a 3% fee for credit cards, but that's for everyone. [Well, technically, a3% discount for not using credit cards. ]

Call it what you want. This is a direct quote from GreatCollections.

GC's standard 12.5% buyer's fee (min $5) applies to this auction, discounted to 10% (min $5) if paid by Check, eCheck or Wire. All bids are in U.S. Dollars.

I really don't understand how this fails to answer the OP's question. GreatCollections says, straight out, that there is a class of bidders that gets a discounted premium, and then indicates what one must do to be a member of this class. Other than this disclosure, which may or may not be mandated, how is this different from any other means of discounting for certain bidders?

GC offers the discounted buyer's fee to everyone.

I think the OP is asking whether it's legal to selectively offer a discount to certain bidders that not all bidders know about or qualify for.

• Ian

Lakesammman

It's not specifically addressed in WA state, either on the buyer or seller side.

Most other businesses offer a discount for volume - can't see why a coin and currency business shouldn't be allowed to do so.

fathom

I don't know the laws in each State.

But it is common sense and in their best interest for the auction houses to project as level a playing field as possible to attract new and maintain current bidding.

jmlanzaf

@fathom said:
I don't know the laws in each State.

But it is common sense and in their best interest for the auction houses to project as level a playing field as possible to attract new and maintain current bidding.

It's also in the auction houses best interest to maintain revenues. If you gave a significant discount to large retail buyers, you are cutting your own revenue. If you gave a token discount, you are simply projecting an unfair playing field without enticing the large buyers to spend more money.

jmlanzaf

https://mikebrandlyauctioneer.wordpress.com/2018/04/02/different-buyers-premiums-for-different-bidders/

https://mikebrandlyauctioneer.wordpress.com/2018/02/08/is-that-next-bid-a-higher-bid/

It is apparently common for some firms to charge different rates for live vs. internet bidders. Once I read that, I did recall that I have attended a local auction company that does just that. The purported reason is that their internet auction host charges a fee to host the auction live.

MasonG

How about if companies set their policies up however they want and people can do business with them (or not) however they choose?

Seems pretty simple.

jmlanzaf

@MasonG said:
How about if companies set their policies up however they want and people can do business with them (or not) however they choose?

Seems pretty simple.

INSURRECTIONIST!

I believe it is the responsibility of all companies to create terms that I think are in my best interest.

airplanenut

Oh, I meant to add one more thing to my comment about shipping companies. Outside of perhaps the highest shipping times of the year (right before Christmas), capacity is always available for both the big and little guys. In other words, the discount brings high-volume shippers to the shipping company, but doesn't negatively affect low-volume shippers in terms of available services (a small company competing with a big company may be negatively affected). At auction, though, the big and little guy are going for the same limited item, which means that the discount to the big guy does negatively affect the little guy in terms of his ability to receive a service (in this case, a product--the coin).

sellitstore

Again, any discount given to preferred bidders isn't like to be too material to the total selling price, perhaps 1-3%?

BAJJERFAN

@ShaunBC5 said:
@daltex I think the issue isn’t with a “class” of bidder, but more with a form of payment and how the law states that you can’t charge someone MORE for using a particular payment method, only that you can give a DISCOUNT for using a particular method. It’s linguistic gymnastics, but no one is excluded from the discount, if they choose to use that method of payment.
Regarding different premiums based on quantity, or relationship or any other criteria, I have no idea.
I know with slew of goods (to individuals or companies) there is supposed to be transparency and stated tiering that anyone could reach, if criteria were met. This is obviously for public companies, as Mom-and Pops can legally do what they want in this regard (sort of).

Edit for typo.

There is no law AFAIK regarding credit card charges. That's an agreement between the merchant and the CC company that the merchant will not charge a customer more if they use a CC.

MasonG

@BAJJERFAN said:
There is no law AFAIK regarding credit card charges. That's an agreement between the merchant and the CC company that the merchant will not charge a customer more if they use a CC.

Credit card companies are, by law, not allowed to prohibit the use of a cash discount:

15 U.S. Code § 1666f - Inducements to cardholders by sellers of cash discounts for payments by cash, check or similar means

(a) Cash discounts
With respect to credit card which may be used for extensions of credit in sales transactions in which the seller is a person other than the card issuer, the card issuer may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means rather than use a credit card.

jmlanzaf

@sellitstore said:
Again, any discount given to preferred bidders isn't like to be too material to the total selling price, perhaps 1-3%?

That is assuming the discount is 1-3%. It could be anywhere from 0 to 20%, after all, if they wanted to give one.

I don't know of anyone who does that, but I do know of at least one auction company that charges internet bidders 3% more than in-house bidders. If you can charge 3% more, you can charge 5% more.

tcollects

@MrEureka said:

@tcollects said:

@MrEureka said:

@jmlanzaf said:

@MasonG said:

@jmlanzaf said:
To make it fair.

Suppose the bidder who is being offered a lower fee is someone who buys a lot regularly. Kind of like the mint gives a discount to bulk buyers?

Heritage makes a point of staying that their house bidders pay the premium. [Although, kind of makes me laugh since they pay it to themselves. ] so, I suspect that in Texas it is not legal to charge a different premium.

Don't laugh. The house bidder earns his living by buying and selling coins and turning a profit. And Heritage will calculate that profit based on hammer plus the full BP. Therefore, as far as the house bidder is concerned, the BP is very real, and he will bid accordingly.

I don't understand the house bidder - so they don't just bid on house coins like an in-house shill - they buy and sell? I don't understand all the angles

That’s correct. They’re coin traders, buying and selling wherever they can, including at their own auctions.

well shoot why don't they bid on the coins I want? I assume in-house bidders don't also represent outside buyers? does every dealer know who the in-house traders are?

BAJJERFAN

@MasonG said:

@BAJJERFAN said:
There is no law AFAIK regarding credit card charges. That's an agreement between the merchant and the CC company that the merchant will not charge a customer more if they use a CC.

Credit card companies are, by law, not allowed to prohibit the use of a cash discount:

15 U.S. Code § 1666f - Inducements to cardholders by sellers of cash discounts for payments by cash, check or similar means

(a) Cash discounts
With respect to credit card which may be used for extensions of credit in sales transactions in which the seller is a person other than the card issuer, the card issuer may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means rather than use a credit card.

I wasn't talking about discounts. They are not supposed to charge more if you want to use a CC is my understanding. Some do tho. Many have the CC fee built into the price. One mechanic here charges more if you want to pay with a CC. Others just take the card. Go buy a $1000 TV at best buy and ask for a cash discount. I bet they tell you to take a hike. Semantics, schemantics. Heritage offers a discount for cash which amounts to for me the 1% cashback reward. Since I'm going to get the reward points anyway why give up the protection a CC offers?

ShaunBC5

@BAJJERFAN it IS all semantics. What you say about not being able to charge more for CC transactions, but being able to discount cash/debit ones is what I was getting at.
“They’re aren’t charged more, sir. You are charged less.”
I guess I was getting at that and also that it was available to everyone.

BAJJERFAN

@ShaunBC5 said:
@BAJJERFAN it IS all semantics. What you say about not being able to charge more for CC transactions, but being able to discount cash/debit ones is what I was getting at.
“They’re aren’t charged more, sir. You are charged less.”
I guess I was getting at that and also that it was available to everyone.

Go to GunBroker.com A lot of sellers there list for bid or buy at a cash price and want MORE if you use a CC. Some there are also willing to eat the fee. A lot of places have the fee figured into their price and may or may not give a discount for cash. It's dang tough for a casual seller to make much money selling bullion if they have to eat a 3% PP fee and pay any kind of pricey shipping. When's the last time you asked for and got a cash discount from a grocery store or mainstream merchant?

HashTag

yolo

jmlanzaf

@HashTag said:
Most definitely there are discounted buyer fees and seller fees. Most folks here know all about it but don't want to shoot themselves in the foot. Not just collectors but MOST dealers receive a discount at two major auction houses I know of. It my not be a matter of "class" but more related to your net worth. Like most things, the more you spend the more discounts and perks you'll receive. Heck I personally haven't paid a seller fee in over 10 years. Two dealer friends state they get 105% of hammer price. It's not a secret just not discussed so the wealthy can keep their money.

There have always been discounted SELLER fees. Everyone knows about it. It's the whole reason there are seller fees and buyer fees: they use the buyer fees to pay a premium to sellers who have items they want. It is not connected to net worth but to the level of consignments. If a hobo found a continental dollar in a stream bed, he could get 110% from Heritage or Stack's.

I have never heard of discounted buyer fees.