Do all auction companies place bids on coins they would like to retail, if successful with their bid
TahoeDale
Posts: 1,785 ✭✭✭
In a recent article by Legends, the owners of this dealership posed the question re whether, and how they might
place bids on coins in the upcoming auction sales hosted by the new Legend/Morphy auction company.
I recognize that Heritage also has an employee(s) who review coins for the purpose of bidding on coins in their sales.
Superior, when last in business did the same.
I do not know if Goldbergs and Stacks/Bowers also participate in their sales.
But lets assume that they all do, in order to purchase coins they think they can retail to the public. Are there any ethical
requirements imposed, either by the Industry, or from within the companies? If not, should there be?
place bids on coins in the upcoming auction sales hosted by the new Legend/Morphy auction company.
I recognize that Heritage also has an employee(s) who review coins for the purpose of bidding on coins in their sales.
Superior, when last in business did the same.
I do not know if Goldbergs and Stacks/Bowers also participate in their sales.
But lets assume that they all do, in order to purchase coins they think they can retail to the public. Are there any ethical
requirements imposed, either by the Industry, or from within the companies? If not, should there be?
TahoeDale
0
Comments
“In the mid 20th century Hard Times Tokens became a passion the passion for many leading numismatists, with John J. Ford, Jr. and Donald Miller perhaps being the best known. At a memorable New Netherlands auction in the 1950’s a collection of Hard Times Tokens was scheduled to cross the auction block, including rare varieties of Low-1, with the portrait of Jackson. A catalog was prepared by Walter Breen and John ford of New Netherlands Coin Company, of which ford was co-owner. The sale was held on the rooftop facility of the New Weston Hotel in New York City, in an assembly room, next to which there was a bar. Miller well lubricated an with a fighting spirit, was set to capture a number of rarities for his own account, while Ford made it known that he was going to be the leading buyer. On the terrace near the bar Miller grabbed ford and pushed him partially over the railing, high above the streets below. The present writer (QDB) and another bystander grabbed Miller and pulled him away, much to Ford’s relief. Others rushed to hold Miller, and eventually calmed down. The sale proceeded, and record prices where set.”
It's nice to see the effort that goes into these collections!
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Worry is the interest you pay on a debt you may not owe.
I like the idea of a "Chinese Wall" between the auction and wholesale/retail operations within a firm, but this might be unrealistic. I would be very concerned if a firm underdescribed, undermarketed, or otherwise "talked down" a great coin so that they could buy it for themselves.
Goldberg i dont believe does as they dont offer coins out of auction (that I know of)
eBay and their anti shilling policy seem to be more smoke than reality very few have been suspended over the years for doing it.
Should auction companies bid on their own auctions?
In my opinion, 100% absolutely not. The auctioneer's role should be to offer a fair and honest description and appraisal of the item, promote and advertise the auction, and to facilitate its sale to the highest bidder. Nothing more. In many places, this is the law. If the auction house wants to buy something, they should not accept it as a consignment. Buy it outright from the owner or bid on it in another company's auction. I believe that doing otherwise sets up a HUGE conflict of interest. Human nature and greed are very powerful forces. What keeps the auction house from intentionally suppressing competition on the items they want?? How is this fair to the seller of the item or the honest bidders? The auction house won't pay itself the juice on the sale so they have a huge competitive advantage against the public (5-20%) when you factor in the buyer's premium.
What's to keep the auction house from offering poor assessments, photos, catalog listings on the items THEY secretly wish to own? Nope. I don't think it's a good idea. There is plenty of money for the auction house to make without buying items from their own auctions. Just my 2 cents....
<< <i>What's to keep the auction house from offering poor assessments, photos, catalog listings on the items THEY secretly wish to own? Nope. I don't think it's a good idea. There is plenty of money for the auction house to make without buying items from their own auctions. Just my 2 cents.... >>
Simple fact of the matter is 2¢ don't mean much when there are $'s to be made. One needs to check out the auctions laws in the state the firm is registered in.
<< <i>What's to keep the auction house from offering poor assessments, photos, catalog listings on the items THEY secretly wish to own? >>
Nothing, aside from the fact that once it was known that's really what they were doing, it would ruin thier reputation in the business with potential consignors. I would guess most auction houses wouldn't consider it worth the risk, but that's just me.
These coins that "fall between the cracks" are sometimes offered to dealers on show floors in the day or two after auction sessions.
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<< <i>The auction house won't pay itself the juice on the sale so they have a huge competitive advantage against the public (5-20%) when you factor in the buyer's premium. >>
Suppose you have the winning bid at $900. The auction house makes a profit of $150 or so. If, instead, they outbid you and win the lot for $1000, they make no money at all on the sale. They now have to pay the consignor (who gets more money than he would have if you had been the high bidder, by the way) and incur the expenses of marketing the coin themselves. I would imagine the high bid in the auction would have to be significantly below perceived market value for an auction house to want to own the coin themselves.
<< <i>Very close to shill bidding, which is illegal in most states. >>
Good thing it's okay for the Fed to buy Treasury paper and pretend it's a real market.
<< <i>I don't have a problem in therory but I have always been curious about the way the buyers premium is handled, do they get a 17.5% leg up on collectors? >>
Good point. The fact that they are essentially not paying a buyers premium for all practical purposes gives them a very unfair advantage over other bidders. Perhaps someone from Heritage can address this point. I've seen them post here before and I know some of their officers are members here even if they are not very active posters.
Worry is the interest you pay on a debt you may not owe.
<< <i>Very close to shill bidding, which is illegal in most states. >>
I think if you checked all the state laws on auction practices you would be wrong with the most part.
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<< <i>I don't have a problem in therory but I have always been curious about the way the buyers premium is handled, do they get a 17.5% leg up on collectors? >>
Good point. The fact that they are essentially not paying a buyers premium for all practical purposes gives them a very unfair advantage over other bidders. Perhaps someone from Heritage can address this point. I've seen them post here before and I know some of their officers are members here even if they are not very active posters. >>
Anytime you take money out of one pocket and put it in another, you're not really getting a leg up. Besides, most auction houses are giving their consignors part of that buyer's premium. If you aren't getting it, then I suggest you consign through a dealer. He will get you 105% of hammer and make a percent or two finders fee.
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<< <i>I don't have a problem in therory but I have always been curious about the way the buyers premium is handled, do they get a 17.5% leg up on collectors? >>
Good point. The fact that they are essentially not paying a buyers premium for all practical purposes gives them a very unfair advantage over other bidders. Perhaps someone from Heritage can address this point. I've seen them post here before and I know some of their officers are members here even if they are not very active posters. >>
Anytime you take money out of one pocket and put it in another, you're not really getting a leg up. Besides, most auction houses are giving their consignors part of that buyer's premium. If you aren't getting it, then I suggest you consign through a dealer. He will get you 105% of hammer and make a percent or two finders fee. >>
I know what you are saying. My point was that a typical bidder has to pay the full buyer's premium while Heritage doesn't have to pay it or, if they do pay it the money goes from the right pocket (retail side of the company) to the left pocker (auction side of the company) which gives them an advantage over the average bidder who is competing against them.
Worry is the interest you pay on a debt you may not owe.
<< <i>There is no inherent advantage to bidding in one's own sale. >>
If you know the current high bidder's max book bid and want to run them up a bit, then that would be one reason to place bids in your own sale since that would benefit both the auction house and the consignor. There are certain auction companies I do not place max bids with for that reason as I don't trust them not to run me up with their own bids.
Michael Kittle Rare Coins --- 1908-S Indian Head Cent Grading Set --- No. 1 1909 Mint Set --- Kittlecoins on Facebook --- Long Beach Table 448
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<< <i>I don't have a problem in therory but I have always been curious about the way the buyers premium is handled, do they get a 17.5% leg up on collectors? >>
Good point. The fact that they are essentially not paying a buyers premium for all practical purposes gives them a very unfair advantage over other bidders. Perhaps someone from Heritage can address this point. I've seen them post here before and I know some of their officers are members here even if they are not very active posters. >>
Anytime you take money out of one pocket and put it in another, you're not really getting a leg up. Besides, most auction houses are giving their consignors part of that buyer's premium. If you aren't getting it, then I suggest you consign through a dealer. He will get you 105% of hammer and make a percent or two finders fee. >>
I know what you are saying. My point was that a typical bidder has to pay the full buyer's premium while Heritage doesn't have to pay it or, if they do pay it the money goes from the right pocket (retail side of the company) to the left pocker (auction side of the company) which gives them an advantage over the average bidder who is competing against them. >>
Not really. As someone already stated, it's not good business sense to take gross profit from the auction side where you've already incurred expenses and then have to retail a coin with all the associated additional expenses .... unless the coin was going too cheap and there's retail profit to be had above and beyond that buyer's fee. Heritage may be many things, but they're not bad at business principles. There is no inherent advantage to bidding in one's own sale.
If an auction house has the coin in their possession then wouldn't they know more about it than any remote bidder that hadn't been able to examine it up close?
They aren't going to pay themselves a buyers premium and they can see my max bid.
After the auction will I be waking up in an alley next to a dumpster ? Let me know so I can hide cab fare in my shoe
Let's say a company buys a coin for $100 at their own auction and the underbidder is at $90. If the premium is 15% the house lost out on $13.50 by not selling at $90. While no premium may be paid on the $100, to reach the same profit (not factoring carrying costs, other fees/costs...) the coin would have to sell for $113.50 retail.
This is not factoring in a payback or cut of the premium going to the seller.
<< <i>I would be very concerned if a firm underdescribed, undermarketed, or otherwise "talked down" a great coin so that they could buy it for themselves. >>
After which time, of course, they would hype it as a great coin...
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<< <i>I would be very concerned if a firm underdescribed, undermarketed, or otherwise "talked down" a great coin so that they could buy it for themselves. >>
After which time, of course, they would hype it as a great coin... >>
Which auction firms do this?
For a typical coin worth $115 (or $117.50 for a 17.5% BF), a dealer or collector would bid $100 to account for the BP.
If the auction house is bidding they can bid $101 and get it for that. The consignor gets essentially the same amount in either case.
It's certainly a nice way for an auction house to have access to hundreds of millions of dollars worth of coins at wholesale prices all year round.
I don't know how prevalent this might be today, but in the 1970's and 1980's I never heard of anyone moaning about this being an issue. Now with more
competition and tighter spreads than ever before, tactics like this probably have to be employed. In this bear market they are probably very selective on what
coins to bid on (ie upgrade candidates, hidden varieties, special client coins, etc.). The last thing any large dealer needs today is excess inventory.
<< <i>It's certainly a nice way for an auction house to have access to hundreds of millions of dollars worth of coins at wholesale prices all year round. >>
What percentage of auctions actually end at a wholesale price level?
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<< <i>I would be very concerned if a firm underdescribed, undermarketed, or otherwise "talked down" a great coin so that they could buy it for themselves. >>
After which time, of course, they would hype it as a great coin... >>
Which auction firms do this? >>
I can't imagine any auction company would do this. If a coin was given an unflattering description in their auction and then the same coin was later given a glowing description on their retail web site, people would notice and it would become fodder on the various coin chat rooms and thus greatly hurting that auction firm's reputation. Certainly not a good business practice.
Worry is the interest you pay on a debt you may not owe.
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<< <i>I don't have a problem in therory but I have always been curious about the way the buyers premium is handled, do they get a 17.5% leg up on collectors? >>
Good point. The fact that they are essentially not paying a buyers premium for all practical purposes gives them a very unfair advantage over other bidders. Perhaps someone from Heritage can address this point. I've seen them post here before and I know some of their officers are members here even if they are not very active posters. >>
Anytime you take money out of one pocket and put it in another, you're not really getting a leg up. Besides, most auction houses are giving their consignors part of that buyer's premium. If you aren't getting it, then I suggest you consign through a dealer. He will get you 105% of hammer and make a percent or two finders fee. >>
This! I recently did my first HA through a dealer and I received more than 100% of the final value of the coins sold. And the dealer got 1% on top of that. So remember, as a seller, find a dealer to do the consignments. Indeed!
Just wondering...
Then they can have their reps bid all they want.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>I will insist on no BB fee and placing my own reserve.....
Then they can have their reps bid all they want. >>
Good luck with that
<< <i>Heritage has a retail division and I have no problem with them bidding on coins to add to their retail inventory. Any coin they buy will be at the wholesale level since they have to mark it up to make a profit so collectors still have the advantage. >>
I have a problem with it. Heritage auctions charges a 17.5% buyer's fee. The bookkeepers might add that to the cost of the coins bought by the retail division, but obviously it provides a cash flow advantage that other bidders cannot have. Also there is the temptation to place shill bids if they think that there is a outside bidder who is willing to go higher.
As for Mr. Ford, I knew a number of his contemporaries when I was young collector. While no one would dispute his knowledge, his ethics were less than stellar according to those collectors.
If I log into my Google Analytics account I can see lots of information about who visited my website. A visitor's location , entry page exit page , operating system, time spent on a particular page whether they are on a mobile device , what search terms they used to get to a page frequency of revisits , IP address .
If I have a site that someone has to log into then I can match the data up with a real person. If they have bought items in the past I know what they like and possibly how much they are willing to spend .
It would be childs play to manipulate that if you also knew the bidders max bids.
People effectively increase sale prices with shill bids on ebay all the time with much less control over the process . The ebay sellers don't own the site and as far as I know Analytics type tools won't work on ebay listings.
<< <i>I don't have a problem in therory but I have always been curious about the way the buyers premium is handled, do they get a 17.5% leg up on collectors? >>
IMO if Heritage bids on and wins a coin consigned to them, they should give the juice to the consignor.
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<< <i>IMO if Heritage bids on and wins a coin consigned to them, they should give the juice to the consignor. >>
Why?
I am not a big customer of Legend's but they've always treated me great. Laura's article on this tells me that they're struggling with these issues but will find a fair way to handle it. Identifying their own coins in auction seems a good start.
"Look up, old boy, and see what you get." -William Bonney.
<< <i>Whether directly (the auction company discloses its actions publicly) or indirectly (an agent or "friend" of the firm shill bids on their behalf), I think this occurs a LOT more than most people would think. An auction setting intrigues many buyers because of the potential for a "great buy" on an item at an attractive price. The reality is that more often than not the item being sold finds its market value through either natural (open/competitive bidding) or artificial (auction company/owner interference) means.
Should auction companies bid on their own auctions?
In my opinion, 100% absolutely not. The auctioneer's role should be to offer a fair and honest description and appraisal of the item, promote and advertise the auction, and to facilitate its sale to the highest bidder. Nothing more. In many places, this is the law. If the auction house wants to buy something, they should not accept it as a consignment. Buy it outright from the owner or bid on it in another company's auction. I believe that doing otherwise sets up a HUGE conflict of interest. Human nature and greed are very powerful forces. What keeps the auction house from intentionally suppressing competition on the items they want?? How is this fair to the seller of the item or the honest bidders? The auction house won't pay itself the juice on the sale so they have a huge competitive advantage against the public (5-20%) when you factor in the buyer's premium.
What's to keep the auction house from offering poor assessments, photos, catalog listings on the items THEY secretly wish to own? Nope. I don't think it's a good idea. There is plenty of money for the auction house to make without buying items from their own auctions. Just my 2 cents.... >>
I agree.
Worry is the interest you pay on a debt you may not owe.
K
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