Mail Bid Auctions - Is this ethical?

MrEureka

Hypothetically, let's say that you run a mail bid auction. You are trying to get the most money for the consignor, but you also want to treat your buyers right. The auction deadline passes and now you're compiling a list of winning bids and you realize that a coin that's worth an easy $5000 is going to sell for $1200. (Assume that the highest bid is $1500 and the second highest bid is $1100, so it should sell at $1200.) Is it ethical to buy it for yourself at $1600? On one hand, the consignor would prefer getting extra $400. On the other hand, the $1500 bidder loses a great deal. Of course, it's hard for you as the auctioneer to walk away from the opportunity to buy a 5K coin for $1600. What would you do? Is it ethical?

AmericanSilverEagleCoins

I believe that auction employees are forbidden from participating in the bidding. Just like employees and their families are not allowed to participate in sweepstakes and contests.

MrEureka

I believe that auction employees are forbidden from participating in the bidding.

Forbidden by whom?

Dave99B

100% UNETHICAL. Period!


Dave

Varlis

I think there's an assumption on the part of the bidder that he will only be competing with other bidders. The advantage that the consignor has of knowing that there will be no other bidder beyond the $1500 seems to me an unfair one. I know it's not a perfect analogy, but I can't help thinking of an eBay auction in which someone has a $1000 coin hovering at $400, and so has a friend put in a max bid of $1000. The argument is that if another bidder really wants the coin, he'll bid up to $1001; he'll get the coin and the seller will be happy. This scenario is obviously forbidden by eBay's rules, and it seems like your hypothetical ought to be considered unethical on similar grounds.

coinguy1

Andy, first, let me say that you run a lousy mail bid auction and that you should have placed your bids way earlier! I'd also suggest that for their own good (and yours, it seems), you have consignors place reserves on their higher value items.

To buy the lot for yourself under the given circumstances, would be best for your consignor BUT improper/unethical, in my opinion. Still, I struggle a bit to make sense of my thinking. Good one Andy.

PS - perhaps you could consider contacting the high bidder and trying to come up with a win/win situation for ALL involved?

darktone

It sounds kind of shady to me to do it this way. mike

sinin1

I have a feeling many of these would have a $1500 bid -(not $1200)

Go back to consignor and get their thoughts? Witha mail bid, you have a few days to let winners know don't you?


I have heard of a couple major auction houses that also have a retail outlet - do they do what you have just described? cherrypick their own auction??

CalGold

Obviously there was an oversight by the auction house here in failing to note the reserve--right. The ethical thing to do is to call the consignor and say, "Mr. Consignor, I can't seem to find the notation of your reserve on that coin. We have a high bid of $1,200 and I know that it must be less than the reserve, so could you please refresh my memory of what your reserve was."

Now if the consignor is so stupid that he says. "Oh, there was no reserve." Then the coin gets sold. But no one is that dumb.


CG

JrGMan2004

Unethical... it's like insider trading... an auctioneer should have no attachment to what he auctions and should be impartial, and not interfere in the bidding...

MS68

Andy- First off, I would like to ask you if I can participate the next time you run a mail bid sale where $5000 items sell for $1200. I havn't seen one of those for quite some time. To answer your question, in my opinion, you should have put your own bids in along with everyone else's when the sale was still running. To come in after the fact is not fair to the bidders in your sale. I am sure you would cry foul if it happened to you, which if I dare venture a guess is exactly what you are now doing!

Dog97

What does the fine print say? Like we said in the Army, check the SOP.
As the auctioneer I would have some kind of policy to cover that. I guess that doesn't really answer your ethical ?? does it?
Personally as a the owner of the coin who cosigned it I don't care who buys it, as long as I get the max $$ into my sweaty little hands.

MrEureka

To come in after the fact is not fair to the bidders in your sale.

Dave - Why?

coinguy1

Andy, wouldn't/didn't the sale have a stated end/closing time? If so, it should be honored. If not, it should have, or theoretically, it could go on forever and no one would ever get paid!

MrEureka

wouldn't/didn't the sale have a stated end/closing time?

Sure, but it's irrelevant to the real issue. After all, the auctioneer could have bid a minute before the sale if he wanted to strictly follow the deadline. If it's ethical for the auctioneer to bid a minute before the sale closes, it's ethical to bid a minute after the sale closes. IMHO, the real issue has more to do with the auctioneer using superior and arguably confidential information to more efficiently choose the lots on which it pays to take the time to calculate a bid.

CalGold

If the auction house failed to generate enough interest in a consignment to obtain bids that come any where close to fair market value, they are the last person who should benefit. Nor should bottom fishing low ball bidders be unjustly enriched by being allowed to rip the coin. There are no equities in their favor. The consignor should have had a reserve. Though he or the house erred allowing the lot to be consigned naked, the only ethical thing to do is to allow the consignor to withdraw the lot, even if it means allowing him to set a reserve after the fact.

CG

Dave99B

Why?

All bidders are bidding "blindly", except for you. Right out of the gate, this seems a bit unfair to me.

You would probably also have access to the coins for a closer look. You could not only screw the legitimate high bidder, you could cherry-pick. Unfair....completely unethical...

Dave

coinguy1

I think a relevant piece of information that has not been disclosed, is whether the auctioneer/seller states in his terms of sale, etc. that he shall have the right to bid on consigned items.

Trime

If this is a controversial issue then there are more serious problems with the coin industry than I realized. I can not imagine any way that the auctioneer for any reason should be able to have an advantage over its bidders in the purchase of a coin at any time and certainly not post closing time. A reserve should have been entered and since apparently not in this case the coin was sold as the rules indicate. The auctioneer should not manipulate the sale either; he/she should not be allowed to scan lots and call someone to bid and offer to buy,etc. Is this a hypothetical issue or is this actually going on at major auction houses?

keets

greedy, greedy.

al h.

MrEureka

I think a relevant piece of information that has not been disclosed, is whether the auctioneer/seller states in his terms of sale, etc. that he shall have the right to bid on consigned items.

Mark - Assume that the answer is "Yes". I believe that most auction companies reserve that right in their terms of sale AND in their consignor contracts.

Edited to say that I don't question for a second the right of an auction company to bid on items in their own public sales. I'm just a bit uneasy about mail bid sales.

MrEureka

If this is a controversial issue then there are more serious problems with the coin industry than I realized.

Trime - My friend, I'm afraid that this is merely the tip of the iceberg.

Trime

Since I ws curious what the fine print said I looked up the Heritage rules on their auctions. These 2 seem the closest to the issues raised in this thread. Ther is no option for withdrawing a lot after the sale unless a reserve was not met.

All items are to be purchased per lot as numerically indicated and no lots will be broken. The Auctioneer reserves the right to withdraw, prior to the close, any lot or lots from the auction. Bids will be accepted in whole dollar amounts only.


Notice of the consignor's liberty to place reserve bids on his lots in the auction is hereby made in accordance with Article 2 of the Texas Uniform Commercial Code. A reserve is an amount below which the lot will not sell. THE CONSIGNOR OF PROPERTY MAY PLACE WRITTEN RESERVE BIDS ON HIS LOTS IN ADVANCE OF THE AUCTION. ON LOTS SUBJECT TO A RESERVE, IF THE LOT DOES NOT MEET THE RESERVE THE CONSIGNOR MAY PAY A REDUCED COMMISSION ON THOSE LOTS. Reserves are generally posted online about 72 hours prior to the auction closing. IF THERE IS AN UNMET RESERVE BID POSTED ON A LOT, THE CURRENT BID DISPLAYED ONLINE WILL GENERALLY BE ONE INCREMENT BELOW THE RESERVE BID. The Auctioneer will not knowingly accept (and reserves the right to reject) live telephone or floor bids from consignors. Any successful bid placed by a consignor on his consigned lot on the auction floor or by telephone during the live session will be considered an unqualified bid, and in such instances the consignor agrees to pay full Buyer's Premium and Seller's Commissions on the lot(s).TextText

Shamika

UNETHICAL!

joeyuk

If you had to ask you already know.

MrEureka

UNETHICAL!

Shamika - Why?

MrEureka

If you had to ask you already know.

I disagree!

joeyuk

If it was not an obvious answear to you you must have seen both sides correct?

MrEureka

If it was not an obvious answear to you you must have seen both sides correct?

Correct.

joeyuk

Then to take it a step further I would think you would understand why people could feel opposite of you no matter which side you are leaning and this is why I would not do it.

roadrunner

I agree with Calgold. No way the consignor should be getting $1200 for his $5000 coin. The coin should be withdrawn as the auction house has not done there job to generate the proper bid.
The house should not benfit from this.

Now if the coin were bid at $4500 and the house wanted to bid say $4700 at least that's fair to the consignor. Though it stinks to high heaven for the bidder at $4500.

roadrunner

nankraut

I'm surprised that there's so much discussion on this issue. Bids should never be allowed after the closing date, and the auction company should never be allowed to articipate in their own auctions due to a clear conflict of interest. I'm not saying it hasn't/doesn't happen---but it's clearly unethical, IMHO.

RNCHSN

Andy,

What if the fine print reads something along the lines of, "Auctineer reserves the right to top any high bid."

Wouldn't this insure the consignor would get what the auctioneer considers a fair market value for the coin?

I might consider this an ethical practice if the high bidder has a final chance to meet/beat the auctioneers bid.

I guess this really falls back on just who the auctioneer is working for......
Is he working for the seller, as a real estate does? (prior to buyer's agents).....
Or on the other hand, is he there to provide the best bargains for his bidders?.....
Or is he there for himself, to get the absolute highest fees, and maybe cherrypick a few nicer pieces?

route66

If anyone doesn't think that this is unethical, then they probably wouldn't honor a handshake deal either. JMHO Steve

RNCHSN

I would honor a handshake deal, but I feel strongly that this circumstance depends upon the fine print in this mail bid agreement.

Dave99B

Yes, stating "Auctioneer reserves the right to top any high bid" within the auction terms would clearly make this ethical...

Of course it would also likely eliminate most of your bidders (at least those with IQs above 60).

Dave

farthing

From the "Terms of this Auction" from the last Allan Davisson mail bid auction which closed earlier this month:
"There are few formal reserves in this sale. However, there is a realistic floor of value for all of the coins offered. In most cases we can identify recent prices at or above the estimate listed. We will not enter bids for less than 60% of estimate though we may consider them at the end of the sale for unsold lots."

In other words, bottom feeding bids will be ignored.

MS68

Andy- I have no problem with a representative of an auction company bidding on items in a sale. BUT, they should be bidding during the stated times the auction is open and without using information like what other people have already bid so that the auction remains fair for all bidders. As far as mail bid sales are concened, and you will notice I stated "mail bid sales" not mail bid auctions as that is what these really are, I do not participate in these for as far as I am concerned, they are nothing more than a way to sell merchandise without having to price it. Most of these operate by awarding the high bidder the lot at his high bid. Take the Heritage Gallery sales as an example, a large part of what is sold is Heritage's excess inventory. Instead of pricing it out to individuals that come by their offices, the way they used to, they have conned people into making offers on these items, accepting the highest offer, and then on top of that charging a 15% commission pretending all the while that this is really an "auction".
This has caught on so well that I am thinking about just making a list of what I have for sale before the Baltimore show, handing it out to everyone I see, put everything out in the display cases at my table, and then just sit back and take offers. I only have to sell the coins that have "bids" that meet or exceed what I wanted for the coins in the first place and then I can just put the "coins that did not meet reserve" back into inventory to try again at the next show. And here I have been doing this the hard way all these years, silly me.

Trime

"Trime - My friend, I'm afraid that this is merely the tip of the iceberg. '

Andy,
<<<Another good thread that emphasizes the perils of the enterprise zone.>>>>

"Trime - My friend, I'm afraid that this is merely the tip of the iceberg."
<<<<And a big iceberg too!>>>>>>

FROM POST BY FARTHING
From the "Terms of this Auction" from the last Allan Davisson mail bid auction which closed earlier this month:
"There are few formal reserves in this sale. However, there is a realistic floor of value for all of the coins offered. In most cases we can identify recent prices at or above the estimate listed. We will not enter bids for less than 60% of estimate though we may consider them at the end of the sale for unsold lots."

In other words, bottom feeding bids will be ignored.

<<<<In this case, the rules are stated and must be accepted by bidders or they may shop elsewhere.>>>

Robgetty

I remember being at an auction where a large group of coins were being
auctioned off with some other misc. items. They indicated that their employees
had the right to bid along with us. On a few of the items that I (and most of
the other coin people) had no idea of the value, such as antique firearms, 1 of
the auction people would quickly move down to the front row and put bids in.

It was sort of unfair since they had already had a chance to look at the official
appraisal that the auctioneer was using, but at least they were not doing it
behind our back.

cosmicdebris

Here's part of one auction house's terms of sale:

13. The auctioneer reserves the right to refuse ridiculously low bids, which in the auctioneer's sole discretion, are felt not to have been made in good faith. The auctioneer reserves the right to open the lot at a reasonable price determined solely by the auctioneer. The auctioneer shall also have sole discretion to set initial, and subsequent bidding increments, and to accept, or to decline to accept, challenges to those bidding increments. All bids not in whole dollar amounts may be rounded downward by the auctioneer. The auctioneer may open bidding on any lot by placing a bid on behalf of the Seller, a mail bidder, COIN GALLERIES, or another participant in the sale. The auctioneer may bid further on behalf of the Seller up to the amount of the reserve by placing successive or consecutive bids for a lot, or by placing bids in response to other bidders. The auctioneer may bid for his, or its, own account at any auction and may have access to information concerning the lots, and items contained in them, that are not otherwise available to the public. Estimates given are for the general guidance of the bidder and represent the opinion of the auctioneer as to the fair market value of the numismatic item at the time of cataloguing, based on experience and comparable sale, if applicable. The actual price realized may be higher, or lower than the estimate. If a lot is reserved, the reserve may not exceed the maximum estimated price.

boiler78

I don't feel it is unethical for an auction company to bid in their own auctions. They should be required to place their bids prior to the auctions opening. The auction house would in effect be acting as another floor bidder albeit one with a significant advantage not having to pay the "juice".

joeyuk

What about the conflict of interest. If the auction was not marketed enough prices would be lower and the house benefited. Begs the question was it not marketed enough intentionaly.

MrEureka

I don't feel it is unethical for an auction company to bid in their own auctions. They should be required to place their bids prior to the auctions opening. The auction house would in effect be acting as another floor bidder albeit one with a significant advantage not having to pay the "juice".

Boiler - I'd also prefer to see the auctioneer place his bid before the other bidders. Unfortunately, they don't know in advance which lots may "fall through the cracks", and it's probably unreasonable to expect them to bid on every lot. But is it UNETHICAL for the auctioneer to bid later, after reviewing other bids? Well, if I knew the answer I wouldn't have asked you people for your opinions!

Also, there's no advantage to the auctioneer in not having to "pay the juice" (i.e., the buyers fee) because, when the auctioneer buys the lot, he will forgo collecting the juice from his underbidder. The lost income almost completely offsets the benefit of not paying the buyers fee.

dorkkarl

yes, what's more, it's standard practice. edited to say, i'm assuming that all the prerequisite warnings were given the consignor, ie. reserve offered, etc etc.

K S

UncleJoe

The question as framed in the original post did not include any "rules". The answer to the question: Is this ethical? Absolutely, positively NOT!!!!

Your job is to sell the coin to the highest bidder, not to determine if the highest bidder bid high enough. Do you also determine that the highest bidder bid too high and refuse to sell him the coin because of the ridiculous amount that he bid?

Joe.

MrEureka

Your job is to sell the coin to the highest bidder, not to determine if the highest bidder bid high enough.

UncleJoe - If we let the job description determine what is ethical, clearly there is nothing wrong. The job is defined by the consignor contract, not the expectations of bidders. And the consignor will be pleased to receive the extra $400.

UncleJoe

The "rules" were left out of the question.

My premise is that bids are submitted up until a deadline. No one should be allowed to "past post" a bid. If my premise is incorrect then I would not be involved in such an auction and it is hard for me to see others agreeing with the ability of the auctioneer to determine if the winning bid is high enough.

One might as well buy retail without the shenanigans.

Joe.

darktone

I would never bid again at an auction or mail bid sale that operated like this- it's just not right. mike

route66

A lot of you are quoting other auction rules. I doubt if any auction company has a rule that says that they can cherry pick items AFTER the auction ends. The question stated that the auction had ENDED. What is being asked is highly unethical to do in my book. And again, I wouldn't trust a handshake deal with anyone who thinks this is ethical according to how the question was asked. JMHO Steve

Dog97

I missed the part about the auction being ENDED. Like woooosh, it went right over my head. No it's not right for the auctioneer to pick out coins for himself after the auction ends. That's kinda like stealing from the real high bidder.