Is Auction Collusion OK and just what constitutes auction collusion?
sellitstore
Posts: 2,871 ✭✭✭✭✭
Collector and dealer in obsolete currency. Always buying all obsolete bank notes and scrip.
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My first comment is that the press release above shows one side of a complaint - the other half alleges fraud and misrepresentation by the consignor and auction house.
My next comment would be that that is a press release describing allegations. Where is the conviction?
My third comment would be, do you have anything showing convictions within the last 3 decades?
My final comment would be, how can anyone in their right mind think that two friends deciding which can have a chance to buy a coin in a globally publicized, public auction is the same as a shadowy cabal of corporations fixing a price?
Chopmarked Trade Dollar Registry Set --- US & World Gold Showcase --- World Chopmark Showcase
There’s an interesting historical thread on this topic over at cointalk:
https://www.cointalk.com/threads/morality-legality-and-auction-collusion.299547/#:~:text=In the US the Sherman,no payment passes between parties.
That is an excellent discussion of the subject and it reinforces and explains just why so many readers here just don't understand auction collusion. I was attacked so much in the other thread, I had to start this one. Your link reinforces just what I've been saying. Maybe they will believe it if they read the same statements of fact from others.
You are in serious denial. Do the research yourself. I was there and I'm telling you what happened. I don't need to prove anything to you., nor am I inclined to. I was an expert witness for Christie's. I know exactly what happened and how it was resolved. If you doubt my comments, you are free to verify elsewhere and let me know where I'm wrong. This post is for YOUR benefit and if you don't like what you are reading, move onto another thread.
I only know about this case because I was personally involved. Have there been more recent convictions? I don't know. Maybe? But how many of you even knew about this one? People like @lermish are doubting that these prosecutions ever happened. Read the Coin Talk post on this. Link provided by @Project Numismatics . It's very good.
https://cointalk.com/threads/morality-legality-and-auction-collusion.299547/#:~:text=In%20the%20US%20the%20Sherman,no%20payment%20passes%20between%20parties
Yes, I agree. Do sellers and house also collude when there may be redundant sales of otherwise rare coins - which they might space out so as to bring maximum prices?
Well, just Love coins, period.
While there are laws against bidder collusion, I’m not aware of any that prohibit sellers from offering their items at what they believe to be the most opportune time.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
No, this isn't collusion at all.
You can get into the morality question of disclosure of just how much material there is in a hoard but timing of it's sale doesn't involve collusion. As @MFeld said, we're talking about buyers making agreements not to run up the price on items at auction by avoiding bidding against each other. Bidders like doing this for obvious reasons but Mr. Feld's employer and consignors (at least the intelligent ones) aren't big fans of buyer collusion at auctions.
YOU have made a contention. Why in the world would I do the legwork to prove YOUR point? The burden of proof is on YOU.
I didn't doubt or deny anything, I asked for you to provide evidence to back up your position.
Conveniently, you did not answer a single one of my comments/question. I guess I'll continue to wait.
Chopmarked Trade Dollar Registry Set --- US & World Gold Showcase --- World Chopmark Showcase
Contention? I made a post. Stop being so contentious.
Conveniently, you did not answer a single one of my comments/question. I guess I'll continue to wait.
Yes, you will. We are in agreement on that.
What a joke.
"Hey everybody, you're wrong, and I have proof because I was there!"
Uh, that sounds crazy, What is your proof?
"You just don't get it. Do the research, I don't have a thing to say!"
I'll work on chemtrails first and get back to you
Chopmarked Trade Dollar Registry Set --- US & World Gold Showcase --- World Chopmark Showcase
Let's get this back on track by adding some details to a hypothetical situation.
The top six bust half specialists meet to discuss the sale of a landmark collection of these coins. They decide to pool their resources and not bid against each other in order to purchase much or all of the sale at prices much lower than if they had otherwise competed against each other. Then they divide up their discounted winnings proportionally or by some prearranged system, sometimes a second auction.
Is this immoral or illegal? If you are the owner of that landmark collection, do you want competitive bidding or leading dealers illegally colluding to buy your collection for less so that they can make more?
Still sound crazy to you @lermish ? Well it really happened in 1990 (not hypothetical) and probably plenty of other times since. So, I think that it's worthy of discussion.
...but that scenario is a lot more extreme than what we're talking about, isn't it?
And the point being that there are two sets of rules because I was advancing only a mild question. The real problem is when houses bid on their own offerings or consignors bid on their own lots/coins to run the price up. Might or might not be legal but I see scant difference ethically.
Well, just Love coins, period.
I might enjoy a discussion centered on the ethics of various bidding and selling strategies at auction, but it seems the OP has a particular axe to grind. I have no interest in getting in the middle of that.
Hypothetical situation #2:
You ‘re visiting in a small town, and you see a local notice for an auction which includes old coins.
Going there, you see there’s actually some terrific and valuable stuff, along with tractors, old furniture, etc.
While examining the coin lots, you notice a collector/dealer that you know is the only other person looking at the coins, while all the locals are in the barn perusing the farm machinery.
Question:
Before the auction starts, who among us wouldn’t approach the fellow collector/dealer, just to see what could be done to keep things friendly?
30+ years coin shop experience (ret.) Coins, bullion, currency, scrap & interesting folks. Loved every minute!
If they are working on a 1991 auction now, I will be dead before they get to any of mine.
The answer would depend largely upon what you mean by “keep things friendly”.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
In response to the 2008-2009 sub prime mortgage meltdown the federal government decided it "had to take action". This decision likely is rooted in and motivated by many things (including the concept that government must "fix things" that are broken [even if government action/policies caused thing to break]; the concept that the public must be reassured that government is doing something to fix things that are broken; the concept of good publicity; the concept that the private sector is out of control and needs to be reigned in; and the concept that the "bad guys" must be brought to "justice").
In deciding what action to take, the federal government, through the Department Of Justice and the US Attorney, chose to aim its enforcement efforts at real estate foreclosure investors, nationwide. Real estate foreclosure investors in large parts of society are viewed with disdain and contempt (some are worthy recipients of disdain and contempt; and many are not). The nation's real estate loan foreclosure laws are designed to strike a balance between competing interests (the homeowner/borrower who is threatened with a loss of her/his/their/its property (
); the foreclosing lender who simply wants to be paid the monies owed to it under the loan willingly taken out by the homeowner/borrower; and the private investor market whose willingness to appear and bid at a foreclosure action drives up sale prices resulting in the avoidance of the strict foreclosures that happened during the depression where people lost all of the equity in their homes. The key to this balanced system is to give adequate notice to everyone of the date/time/location of the sale, to give notice of the amount owed and to give the homeowner/borrower adequate time to act to avoid a loss of the property. To work correctly the system requires that outside, third party foreclosure investors appear at the foreclosure auctions and compete with each other to bid on and win the property.
Greed is part and parcel of foreclosure investing. Many foreclosure investors abandoned common sense and morality. They ignored the "system" by colluding with each other to suppress/limit/chill the bidding at foreclosure auctions prior to and during the sub prime meltdown.
The federal government filed criminal charges across the country against foreclosure investors. FBI agents appeared at foreclosure sales to observe the conduct of foreclosure investors, taking video and audio recordings of what was happening at the sales. These efforts resulted in convictions after trials; and plea agreements where defendants plead guilty. Some persons went to federal prison and had to pay restitution to the government.
Cynically, these efforts saw press conferences by public officials touting the noble efforts of prosecutors and investigators to go after these bad guy foreclosure investors (whose conduct was much less reprehensible and damaging than the conduct of others involved in the long process of obtaining or making no verification/liar loans to anyone who had a pulse, charging big fees for making said loans and then selling blocks of these dog poo loans into the financial markets as AAA investments). Borrowers, lenders, loan servicers and others involved in these terrible loans suffered little or no adverse consequences. They just moved on to whatever they decided to do next. However, the foreclosure investors who got greedy were ideal targets and they were taken to task for their collusion.
Collusion at auctions is a bad thing and should be avoided. If it happens those who participate in same should be punished. However one must look at the facts and determine what is harmless (i.e. two persons agreeing that one will not bid on Coin 1 and the other will not bid on Coin 2, in auctions where hundreds of other bidders are placing bids on both coins) and what is harmful (same scenario but the two bidders are the only persons interested in bidding on a seven figure ultra rarity and by colluding the coin sells at 5% of its value to the detriment of the seller).
Based on history, I'll postulate that you're going to have a long wait.
It's illegal in NY State. It also happens in EVERY auction in NY State. And, while it is illegal, if you want to have any friends, you would probably do it yourself.
My friend and I go to the same coin auction. I know he's a major buyer of paper money and will almost always outbid me for rare paper. I'm a strong buyer but not as strong as he is. Would I really run him up to the max just to avoid "collusion" or would I stay out of it knowing he'll outbid me anyway and I would rather keep his friendship than make him pay the maximum by being the underbidder on every note.
Technically, staying out of the way of a friend is "collusion". Yes, it's on a different scale than if Christie's and Heritage did it with each other, but it is still collusion. I'm going to have to put it on the list of things that there is no point in worrying about. As long as the bidding itself is open, there is always the opportunity for another entity to come in and mess up the friendly collusion. So, why am I going to spend any time worrying about it?
And if the best examples of it we can find are 20 to 30 years old, then I clearly am right to not spend any time worrying about it.
I've heard owners of major collections talk about how various types of collusion personally hurt them when they sold substantial collections at auction; the top dealers agree on what they are interested in and divide the spoils accordingly. The "free market" with collectibles is rarely free.
For one, knowingly and with intent to defraud the seller by conspiring to rig bids to make a profit.
BHNC #248 … 130 and counting.
Hammer price is where Fear meets Greed. There is bending of the rules on both sides when
those two elements are involved.
@sellitstore—I owe you and offer you my apology for having kicked off the mockery in the other thread. I did not respect a member who can teach me something—irregardless the direction this matter turns.
As a licensed auctioneer I can state that ANY agreement to keep the hammer price(s) down is ILLEGAL.
The result of collusion is cheating the consignor out of money and the auction house out of revenue from their percentage of the sale price.
An auctioneer who knows of collusion and does not report it could be sanctioned.
So, let’s not “hide” the act as a “gentlemen’s agreement” or any other euphemism.
In reality, it is difficult to enforce without hard evidence like written agreements or tape recordings of the conversations.
It is one of those situations that is like speeding. It’s only illegal if you get caught.
Just the facts Jack…….
A: The year they spend more on their library than their coin collection.
A numismatist is judged more on the content of their library than the content of their cabinet.
***** It may be that the entire issue of auction buyers collusion is a moot point today.****
Major auctions of coins, paper money, and the vast majority of other collectibles are happening via online auctions with national or international reach.
Retail buyers now dominate those auctions, and the days of a group of dealers without any competition casually ‘carving up’ an auction for their own gain are long gone.
Of course, ethical purity will never be achieved in this or any other business.
But the Internet has revolutionized the trade in collectibles, to the benefit of all collectors.
30+ years coin shop experience (ret.) Coins, bullion, currency, scrap & interesting folks. Loved every minute!
@Typekat makes a good point.
Much like in contracting, when there is a limited pool of pre-qualified bidders who make contracting their business, even mentioning prices or intent can land you in serious trouble.
Yet the line between this being a business or it being a hobby changes the way the law would be applied.
As a collector, I don't NEED to buy anything, but I can bid or not bid if I so chose. I can't bid on everything, nor do I.
Okay, as to the other thread ...
Just because I might have wanted that coin, at least at a specific price, does not mean I HAVE to bid, against anyone.
In fact, as a hobbyist, I can say, oh I would pay 1500. for that coin and not run afoul, unless I conspire to get others to bid less than that, or put myself in a position to be the top bidder at that, except for a friend that I know felt it was worth 2200., at least to them.
That's were @BustDMs point comes to play.
In my case, I said, okay, if it means that much to you, I won't bid, but some people will, so you better win it. If you research the coin, he paid good money for it. Somebody pushed him into the retail zone.
You can be sure if I HAD to have it, I would have brought my sword. And I would have told @Pnies20 to watch his arm, as I damn sure might hack it off.
“We are only their care-takers,” he posed, “if we take good care of them, then centuries from now they may still be here … ”
Todd - BHNC #242
No colusion is not acceptable.
Staying out of the way is doing him a favor.
Colluding is when someone gains an edge or advantage.
Sorry friends. I’ll be bidding all of you up to the moon after reading this thread. The good old days are gone! Dang, it sure was good while it lasted.
Collusion confusion leads to occlusion.
I think the other thread was meant to illustrate the comraderie that can take place in specialty fields, and certainly got pushed into something else by the OP here. That's why everyone was laughing, by the way. Most everyone can agree that actual collusion in an auction is illegal. It was just kind of ridiculous the way the accusations came flying of "illegal activity."
When I think of true auction collusion, I always thing of the King Farouk sale in Egypt. All the dealers and coin collectors from abroad separating the lots to keep prices down.
A couple of buds agreeing that one of them wants it more and should go for it? Happens all the live long day.
(And speeding is still illegal if you don't get caught!)
Lol
Drive safely, and drink responsibly now
Dead Cat Waltz Exonumia
"Coin collecting for outcasts..."
A word the courts use frequently is “reasonableness”, which needs to be discussed since we’re tossing around the word ILLEGAL
It’s reasonable that two friends discuss what they’re going to bid on and what coins they need. I hear it all day on the bourse floor at every show. Do they then HAVE to bid on the coins they both want? Of course not.
It’s unreasonable that dealers would discuss bids with other dealers because there would be no purpose for it other than to rig the price.
The latter is the point of the Sherman Act, the former is not.
BHNC #248 … 130 and counting.
but we need your wise input to spice up the soup
No. Staying out of the way is technically collusion and it does give him an advantage if I'm the second biggest whale in the room. Many times my friend wins for less than I would have paid, sometimes much less.
I personally have a problem with auction houses pumping bids. If they lose, they pushed your bid higher. If they win.....it pops up on the retail part of their websites, eventually, and the cycle repeats. That practice just leaves me with a bad taste. I'm fine with a reserve, but that practice described above seems deceptive.
Me.
The exact same thing happened to me at a Brian Riba (now deceased) auction. He was a dealer in ephemera but had this killer album full of currency collected during the 1870s or so. It had fifteen Alaska seal skin banknotes contained including two rare 10 Roubles. Estimate was $2000-$3000. I spotted three other currency dealers together and knew two of them casually. They didn't come over to speak with me (I'm sure that they knew what I was there for.) and I didn't start a conversation with them.
To make a long story shorter, I won the album at $24,000 + the 10% buyers premium (the standard BP back then). I consigned it intact to RM Smythe and the notes were sold at one of the Memphis paper money shows for $55,000 total.
Now if I had colluded (immoral and illegal) my profit might have been as much as $13,000, if we were able to buy the album really cheap at $2000 instead of $24,000. But as it is I made almost $30,000 profit. Do the math. Only a fool would have colluded in this circumstance, given the facts and how it ended up playing out. Collusion DOES NOT always pay.
I'm not aware of this at all. What ax to grind might that be? Yes, I'd like to include a discussion of the ethics of various bidding strategies at auction, as you suggest, if you like. What is and what is not collusion is a part of this.
I only raised this subject because it's one of the most interesting things that happened in my 50+ year numismatic career and I think that it raises some interesting ethical issues that I hadn't seen discussed in all my years here. But this board is populated by all types and some get defensive (or even offensive) when they see new people or ideas. I get that and continue to contribute for those who appreciate discussing new subjects and hearing different points of view.
All I said in the other thread was that I thought you needed a hug. If I had to guess, I think the ax to grind comment might have been made because you said you were a (well paid) expert witness for an auction house in a court case involving collusion, and you apparently have strong opinions on this. I'd be interested to hear a bit about that old case - like how did they go from the civil fraud case against the auction house and consignors to the criminal charges against the bidders, and what was the result of that prosecution?
No, actually what you describe with your friend here is NOT collusion. It's OK not to bid against a friend as long as there is no specific agreement between you and that friend. You refraining from bidding because you think that your friend will outbid you is NOT collusion under Federal law. This is Federal, not NY law.
I don't know if there may be more recent examples. I only know of this case due to my personal involvement, but nobody here seems to even know about this prosecution. I'm pretty sure that Coin World or Banknote Reporter covered this, too.
You are going to laugh.
Allegedly (I didn't see it), a $5000 check turned up in discovery in the civil suit that had "For not bidding in the Christie's auction" written in the memo space. That launched the criminal collusion investigation. And it resulted in hefty fines (up to $50,000 each) for about half a dozen defendants.
Bravo! Your post is 100% on target and it took an auctioneer to explain it to the morally challenged.
I haven't looked up the essential elements of the legal cause of action, but an agreement is likely to be interpreted as a contract which requires consideration. A group of (5) strong buyers agreeing in advance to who is bidding on what lots is substantially different than someone deciding to stand down when their buddy is enamored with a particular lot.
ha, that's nuts, and it was a big money auction, what a tangled web we weave
This is a problem when auction houses run their own material and protects it with reserves. Legal and annoying but not buyer collusion.
It is collusion because it is discussed and he stays out of my way on things he knows I'm strongly interested in.
But 2 people agreeing to stay out of each other's way is no different.
I've always said there is no such thing as a true coin auction.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Keeping a hammer price low is one thing. Talking to a friend about who should go for a coin is different and not illegal.
Same issue. Hey, buddy, I'll stay away from the bust halves if you stay away from the paper money. The whole goal is to minimize the hammer for both of us.