Price manipulation at auctions

Ed62 · December 18, 2012 10:57PM

Who can describe (or has experienced) cases of price manipulation in bidding at public coin auctions?

I will save my example for last.

coinlieutenant · December 18, 2012 11:05PM

This should be a good thread...

RYK · December 18, 2012 11:10PM

My only personal experience was with a now defunct/merged away auction company. I bid x on a classic head gold $5, and on the day of the auction, my bid did not meet reserve (x plus 25%). I thought that I was out of the coin and mentally moved on, only to find out the next day that suddenly I was the high bidder and won the coin at my high bid, of course. The coin was disappointing, the experience was sleazy, and I never bid again on one of their auctions.

BillJones · December 18, 2012 11:14PM

Since I've been a collector for over 50 years I can site many. At local auctions that they can be ridiculously obvious.

At one local auction there was kid in the front row who bid on almost every lot. Before long it became obvious that he was "the company shill" who was there to make sure that nothing went too cheap. He was very poor at his job because the auctioneer sometimes had to prod him to make a bid.

At another local auction the auctioneer would open a lot at a low price then proceed to "take" bids from the back of the room. When I turned around to see who was bidding against the front the room, I noted the it was "the back wall." No lie. The guy had no bids from the back, he was just raising the numbers from the back wall. The people in the front of the room were bidding "against the wall."

At a local bid wall auction, that had a live component, there was one dealer who would constantly bid on every lot, sometimes at levels that made no sense for a dealer who was looking to resell what he bought. At one point his bids were so obviously kooky that the other dealers in the room burst out laughing. Later the auctioneer got one of those clip-on telephone receivers that was hooked to his ear. He claimed to be getting "client's bids," but later we found out that the "client" was this same dealer who was bidding from a phone upstairs.

When I was dealer I had several other dealers ask me to bid on lots they had posted on eBay. "You don't have to buy them," they told me. "Just place these bids." I declined to do that for ethical reasons.

I've got more, this is a start.

Greeniejr · December 18, 2012 11:48PM

I was at a major auction bidding for a customer and he was interested in an esoteric piece of exonumia that was buried deep in the auction and not pictured anywhere. This customer scours catalogs and found it and really wanted it. The item was not unique and condition was pretty homogenous with the other examples of it that had sold which made the person pretty confident of what he was going to have me bid. He figured they had recently sold for under $400 so a limit of $800 was reasonable. The item opened at $1 no reserve and a "phone bidder" who had bid on a lot of the session immediately jumped the bid to $1000 at which price they bought it. Looking at the auction prices after the fact, it showed that the item did not sell.

Hopefully this is generic enough to pass the "don't throw anyone under the bus" rule

Ed62 · December 19, 2012 12:04AM

Bill Jones is ahead so far !!

Unknown · December 19, 2012 12:14AM

This content has been removed.

DAM · December 19, 2012 3:06AM

These stories are interesting and so sad.

What ever happened to honesty and morality?

yellowkid · December 19, 2012 3:23AM

I played poker once with an owner of a major Maine auction house who when asked about "those bids" laughed and said it "looked like" someone was bidding. It's called pulling bids out of the air, more prevalent, I think , in the past and was quite common.

DoubleEagle59 · December 19, 2012 3:43AM

These are the reasons in the past 20 years, I have only purchased coins at auctions on only one occassion.

True, there are good auction firms out there, but even with these good firms, you're competing against too many other bidders and then you also have the buyer's fees.

I can do much, much better at coin shows and other venues.

Most auctions out there are nothing close to a 'true' auction.

Auctions are necessary only if you're looking for that one very rare item that is not found anywhwere else.

But be prepared to pay through the nose for it.

BillJones · December 19, 2012 4:10AM

I have told this story before, but it bears repeating.

Many years ago I went to a sparsely attended, Saturday session of an auction that was conducted by a major firm that is no longer in business. The lots consisted of a collection of California fractional gold pieces.

As the bidding began, people in the front of the rooms were offering amounts like $300, $400 or $500. Then in the back of the room this guy shouts out in a loud voice, "$5,000!!" That immediately ended the bidding, and he won the lot. When the next lot came up, the same thing happened. People in front were bidding a few hundred dollars, and this guy in the back would suddenly shout out "$5,000!!" or "$6,500!!!" The same bidder did this over forty times. Why would a sane person apparently pay WAY MORE than they had to pay to buy the lots they wanted?

A few weeks later I got my answer. The same firm published a fixed price list of California fractional gold tokens at prices that seemed very high for the time, but not as high as these types of items had sold for "at auction." The game was establish a high "public auction" price for something when there were few witnesses so that you could justify the prices to your "retail clients."

Justacommeman · December 19, 2012 4:16AM

<< At another local auction the auctioneer would open a lot at a low price then proceed to "take" bids from the back of the room. When I turned around to see who was bidding against the from the room, I noted the it was "the back wall." No lie. The guy had no bids from the back, he was just raising the numbers from the back wall. The people in the front of the room were bidding "against the wall."
>>

I once bid against a lamp. No lie. MJ

DoubleEagle59 · December 19, 2012 4:18AM

<< I have told this story before, but it bears repeating.

Many years ago I went to a sparsely attended, Saturday session of an auction that was conducted by a major firm that is no longer in business. The lots consisted of a collection of California fractional gold pieces.

As the bidding began, people in the front of the rooms were offering amounts like $300, $400 or $500. Then in the back of the room this guy shouts out in a loud voice, "$5,000!!" That immediately ended the bidding, and he won the lot. When the next lot came up, the same thing happened. People in front were bidding a few hundred dollars, and this guy in the back would suddenly shout out "$5,000!!" or "$6,500!!!" The same bidder did this over forty times. Why would a sane person apparently pay WAY MORE than they had to pay to buy the lots they wanted?

A few weeks later I got my answer. The same firm published a fixed price list of California fractional gold tokens at prices that seemed very high for the time, but not as high as these types of items had sold for "at auction." The game was establish a high "public auction" price for something when there were few witnesses so that you could justify the prices to your "retail clients." >>

Another reason that I forgot in my above post.

This has happened many times at auctions here in Canada, only to see the high price later published as a retail price for coin investors who have more money than they know what to do with.

nags · December 19, 2012 4:40AM

I was at an art auction and had one piece that I intended on purchasing if the price was reasonable. There was a dealer who was bidding strong money for items the category that my item was in. When my item come up the dealer happened to have stepped out for some reason. I was the high bidder at what I thought was a solid deal. After I was the high bidder, and nobody else raised the bid, the auctioneer asked where the dealer was. He waited a good 2 minutes for the dealer to come back in and subsequently bid me up. I really wanted the item but was to P.O's to continue to bid.

Another thing that bothers me is when the auctioneer or their employee's bid. If I were a consignor I would be upset if an auctioneer were bidding on my items. Under normal circumstances the auctioneer has a vested interest in getting the most $ for the items. If they are also buying, there is a conflict of interest and may use various tactics to have items sell cheaper for their own personal gain.

DoubleEagle59 · December 19, 2012 4:45AM

I just remembered, about 20 years ago, my one time I consigned an item at a very large Toronto auction house.

It was a rare Canadian 1884 10c, ICCS graded ef40.

I could tell the auctioneer liked the coin so my spidey senses were on alert during the sale.

Well Ive never witnessed a faster 'sell' on the floor in my life.

Whereas other adjacent items were sold at a snail's pace, when my item went up for sale, it started at my reserve and was hammered down within a split second of opening without any chance of additional bids.

That was the last time for me!

roadrunner · December 19, 2012 4:50AM

I had consigned a 1906? Japanese 20 Sen to a an auction house that did phone bidding only. This was 15-20 yrs ago. The coin was worth $50 per the world coin catalog but ended up bringing $1200+ in furious bidding. I was ecstatic since I paid $22 for it. The bad news was that it was returned and went up for sale again. This time I decided to "protect" my new found "rare" gem with a $750 reserve. Yup, I ended up buying it back at exactly my high reserve. Sheesh! A few months go by and I decide to consign it again. Not having learned my lesson, I still set a reserve, but only at $225. Yup....I ended up buying it back a 2nd time at exactly my high reserve bid. More months go by and I just consign the darn thing w/o reserve and let 'er go. Went for $78. With the buybacks factored in I lost >$100 on that coin. When I asked a principal in this auction company how this whole thing could have transpired with this apparently rigged price action....they just shrugged their shoulders.

This one is really coin manipulation and not price manipulation....but a good story nevertheless. I had paid $8500 for a gem 1831 bust quarter at a 1983 major NY auction (no, not Stacks). There was strong bidding on that gem toner. I had spent about 15 min scouring that coin in lot preview such that I knew every nook and cranny and what it was worth. Imagine my surprise when I received my winning lot in the mail a few weeks later and it had a huge die scratch/gouge the middle of the obverse that was visible at arm's length. Despite my complaints I got stuck with the coin. It was impossible that had I missed that damage during preview. I couldn't find any dealers that attended the auction who would corroborate what I saw. So it was chalked up to a $2,000 "life lesson." I guess it was fitting that sometime in the past 10 yrs or so the former owner of that firm got indicted on coin fraud charges and was sent away to prison. What goes around, comes around.

MarkBen · December 19, 2012 5:18AM

Unfortunately, I've had bad experiences with major firms:

1. Very recently, I bid "live" on the Internet. I could see and hear one person on the floor bidding against me. Every time I raised my bid, she bid one increment higher. When I suddenly stopped, she was the high bidder. To my surprise, she was allowed to retract her high bid on the coin, and, suddenly, I won the coin. I guess that they forgot that I could see what was happening.

2. With another firm, I noticed that, every time I won a coin with an Internet "maximum bid", I won it at my maximum bid. I never won a coin with this firm below my maximum bid. It didn't pass the smell test.

Here is what I learned:

1. Don't use Internet "live" bidding.
2. Don't use maximum bidding.
3. Don't trust auction companies

magikbilly · December 19, 2012 5:40AM

Hi,

I have seen some of what Bill has but not in coins but my other areas. The most obvious is the "back wall" bidder (and this is the world's most famous auction house of its kind), and the "phone bids", and tracking the items and seeing them again and again between certain dealers. The fake establishment of "auction" prices etc. Ah, as many of these items are fake to begin with....

Eric

pennyannie · December 19, 2012 5:42AM

Years ago i needed a dump truck and my father and i went to a Richie brothers auction. We both had bidder numbers as we were there to buy our own stuff on some things. We had looked at the trucks and agreed on the one i wanted and tried to come up with a realistic price. This was a large 2 day auction with 100's of bidders. I had gone off looking at some other lots and spent to much time and saw that they had made it to the dump trucks. So i made a mad dash and the bidding started on the one i wanted. Halfway thru i figured out my dad and i were bidding against each other. lol. I am glad we did not drive the price up to bad as i was the one writing the check for that lot.

WTCG · December 19, 2012 5:46AM

BillJones's responses are pretty good. It isn't unusual to find yourself bidding against a bidder who doesn't really exist or find that the underbidder is the consignor.

DoubleEagle59 · December 19, 2012 5:51AM

The only auction that I bid on (absentee bid) which I posted above, I actually won all five lots and strangely enough, I won all these five lots at my maximum bid.

I thought something was not quite right and to my surprise it was actually all quite legal as the fine print in the auctioneer's catalogue said "absentee bids can be sold for their maximum amounts".

This is another reason why I prefer Ebay. At least Ebay you have a fighting chance of getting something for a lot less than your maximum bid.

magikbilly · December 19, 2012 5:56AM

<< The only auction that I bid on (absentee bid) which I posted above, I actually won all five lots and strangely enough, I won all these five lots at my maximum bid.

I thought something was not quite right and to my surprise it was actually all quite legal as the fine print in the auctioneer's catalogue said "absentee bids can be sold for their maximum amounts".

This is another reason why I prefer Ebay. At least Ebay you have a fighting chance of getting something for a lot less than your maximum bid. >>

Now that there is good fun. Reading the fine print at any of these auction houses terms.

Eric

PerryHall · December 19, 2012 6:11AM

<< Unfortunately, I've had bad experiences with major firms:

1. Very recently, I bid "live" on the Internet. I could see and hear one person on the floor bidding against me. Every time I raised my bid, she bid one increment higher. When I suddenly stopped, she was the high bidder. To my surprise, she was allowed to retract her high bid on the coin, and, suddenly, I won the coin. I guess that they forgot that I could see what was happening.
>>

What did you do? Did you tell them that you have no interest in getting screwed and they can keep the coin? The person bidding against you was probably the consignor of the coin.

g048406 · December 19, 2012 6:28AM

The most obvious auction manipulation I have ever seen was on eBay. The now defunct ebay seller Neyronix and his 2 shillers, adams21 and samuel100elm. Often times these shills would by the same exact coin from Neyronix 4 different times in less than 2 months.

DoubleEagle59 · December 19, 2012 6:35AM

<< The most obvious auction manipulation I have ever seen was on eBay. The now defunct ebay seller Neyronix and his 2 shillers, adams21 and samuel100elm. Often times these shills would by the same exact coin from Neyronix 4 different times in less than 2 months. >>

Yes...Ebay too can have its problems.

But I believe Ebay is a whole lot more transparent than any of the auction houses, as it's fairly easy on Ebay to spot and identify the schill bidders. Auction houses not so much.

g048406 · December 19, 2012 9:50AM

<< 

<< I believe Ebay is a whole lot more transparent than any of the auction houses, as it's fairly easy on Ebay to spot and identify the schill bidders. Auction houses not so much. >>

I agree

MikeInFL · December 19, 2012 9:59AM

<< I have told this story before, but it bears repeating.

Many years ago I went to a sparsely attended, Saturday session of an auction that was conducted by a major firm that is no longer in business. The lots consisted of a collection of California fractional gold pieces.

As the bidding began, people in the front of the rooms were offering amounts like $300, $400 or $500. Then in the back of the room this guy shouts out in a loud voice, "$5,000!!" That immediately ended the bidding, and he won the lot. When the next lot came up, the same thing happened. People in front were bidding a few hundred dollars, and this guy in the back would suddenly shout out "$5,000!!" or "$6,500!!!" The same bidder did this over forty times. Why would a sane person apparently pay WAY MORE than they had to pay to buy the lots they wanted?

A few weeks later I got my answer. The same firm published a fixed price list of California fractional gold tokens at prices that seemed very high for the time, but not as high as these types of items had sold for "at auction." The game was establish a high "public auction" price for something when there were few witnesses so that you could justify the prices to your "retail clients." >>

I can see how what you describe could be a huge moneymaker for someone sitting on a hoard of coins, and I wonder just how prevalent this behavior truly is.

I've had my suspicions about a few instances of similar behavior, but it wasn't as cut and dried as your example in that I could not tie the hoarder to the bidder.

jayPem · December 19, 2012 10:07AM

These tales do not give me a very warm and fuzzy feeling about our hobby.....

DeliaBug · December 19, 2012 10:07AM

<< Unfortunately, I've had bad experiences with major firms:

1. Very recently, I bid "live" on the Internet. I could see and hear one person on the floor bidding against me. Every time I raised my bid, she bid one increment higher. When I suddenly stopped, she was the high bidder. To my surprise, she was allowed to retract her high bid on the coin, and, suddenly, I won the coin. I guess that they forgot that I could see what was happening.

2. With another firm, I noticed that, every time I won a coin with an Internet "maximum bid", I won it at my maximum bid. I never won a coin with this firm below my maximum bid. It didn't pass the smell test.

Here is what I learned:

1. Don't use Internet "live" bidding.
2. Don't use maximum bidding.
3. Don't trust auction companies >>

I thought that if this happened on the floor all that bidders bids were voided, not just one bid gets retracted. That's just wrong.

tradedollarnut · December 19, 2012 10:08AM

I can't count the number of high priced coins that sell at auction - and are immediately offered to the underbidder at their last bid. Did the potted palm in the back of the room have buyer's regret?

DeliaBug · December 19, 2012 10:08AM

Also like to add that this all pales in comparison to the shenanigans that went on behind the scenes of mail bid sales.

DoubleEagle59 · December 19, 2012 10:25AM

<< Also like to add that this all pales in comparison to the shenanigans that went on behind the scenes of mail bid sales. >>

I agree.

'Transparency' Scale of Honesty:

Ebay.....somewhat transparent.

Auctions....translucent.

Mail Bids......totally opaque.

jpcienkus · December 19, 2012 10:29AM

And as a new arrival to the world of coin collecting, imagine how I feel reading this thread!

TheRegulator · December 19, 2012 10:42AM

<< It isn't unusual to... find that the underbidder is the consignor. >>

Although I was not the winner of the lot, I am pretty sure this happened on an item of interest from a major auction house last month. The item was a dream piece I've been chasing for about 20 years. The consignor is pretty much the market maker, and I figured with him out of the way I would have a pretty good chance at winning at a good price. I got blown out of the water. An accompanying piece which I did not chase after sold for $500 on eBay less than two years ago and hammered at $3000.

I still would have been the underbidder, but these prices coupled with a few other pieces of information paint a very shady picture.

DoubleEagle59 · December 19, 2012 10:47AM

Let's face it, owning and operating an auction house is the best of both worlds.

First of all, if the item is not yours, you still make a profit regardless at what price the item sells for. Actually, your profit is two-fold, a buyer's fee and a seller's fee.

Secondly, if you own the piece, you still make the two-fold profit pointed out above, but additionally, you can also sell your item and run up your selling price in a clandestine manner.

Life is truly wonderful!!

DeliaBug · December 19, 2012 10:48AM

<< And as a new arrival to the world of coin collecting, imagine how I feel reading this thread! >>

You are in one of the best places there is to learn.

And welcome!

MarkBen · December 19, 2012 10:49AM

I can't count the number of high priced coins that sell at auction - and are immediately offered to the underbidder at their last bid. Did the potted palm in the back of the room have buyer's regret?

I experienced this once. In that situation, the president of the auction company called me to say: the coin didn't sell because it hadn't reached its reserve price, but he personally knows the consigner, and he can get it for me at the price that I bid. He also said that it's a really great deal on a terrific coin. In my opinion, auctions are stacked against the individual collector.

tradedollarnut · December 19, 2012 10:53AM

<< I can't count the number of high priced coins that sell at auction - and are immediately offered to the underbidder at their last bid. Did the potted palm in the back of the room have buyer's regret?

I experienced this once. In that situation, the president of the auction company called me to say: the coin didn't sell because it hadn't reached its reserve price, but he personally knows the consigner, and he can get it for me at the price that I bid. He also said that it's a really great deal on a terrific coin. In my opinion, auctions are stacked against the individual collector. >>

This *does* happen quite a bit. Auction companies don't have time to contact their consignors during the sale nor make a decision to eat a few points of their fee to let a sale occur. In the hours after the auction, however, it can be assessed and deals made. I don't find this nefarious, only when they make it appear there are real bids coming when there aren't.

Justacommeman · December 19, 2012 11:05AM

<< I can't count the number of high priced coins that sell at auction - and are immediately offered to the underbidder at their last bid. Did the potted palm in the back of the room have buyer's regret?

>>

The lamp that outbid me had the auction house contact me later to see if I was still interested in the item. I asked how much? The auction house stated a price. I said, go back and ask the lamp for a better price.

MJ

roadrunner · December 19, 2012 11:09AM

First of all, if the item is not yours, you still make a profit regardless at what price the item sells for. Actually, your profit is two-fold, a buyer's fee and a seller's fee.

I doubt that any large consignors (ie >$20K consignment) ever pay a seller's fee. They negotiate from hammer price and often get hammer + (2% to 5%). Hence, no seller's fees.
What did Leona Helmsley say? "Only the little people pay a seller's fee." .

To put things more simply. A consignor netting 88-92% of the lot's final all-in sale price is pretty routine. Even back when I consigned in the late 1980's I was netting out at 87-89%
on $20K consignments. Things really aren't all that much different today.

DoubleEagle59 · December 19, 2012 11:15AM

<< 

<< I can't count the number of high priced coins that sell at auction - and are immediately offered to the underbidder at their last bid. Did the potted palm in the back of the room have buyer's regret?

>>

The lamp that outbid me had the auction house contact me later to see if I was still interested in the item. I asked how much? The auction house stated a price. I said, go back and ask the lamp for a better price.

MJ >>

I love your 'lamp' story.

I'm looking forward to your next installment.

razzle · December 19, 2012 11:23AM

As a counterpoint I must add that my best coin purchases ever came at a local public auction that was poorly attended and honestly run. 1916D Merc, 1885 nickel, and 1953 proof set all for under $200. This occured back in the 90's but the deals were sensational even then. I got the nickel for a very low opening bid (maybe $5). After that, the auction was terminated in fairness to the consignor. I still have all three coins and treasure the memory as well.
Other auctions have not gone so well but, fortunately for me, involved much less money. One really has to know the auction operators.

razzle · December 19, 2012 11:35AM

Then, again, could be that auctioneers are econ dropouts... Love this stuff.
Liars

Coinosaurus · December 19, 2012 1:34PM

I once consigned a coin and got some consignor's regret....so I put in what I thought was a strong bid during the live bidding, but the coin ended up going for about 4x what I bid - it was that dream scenario where two people really had to have it. At that multiple, the consignor's regret goes away real fast.

scoobydeux · December 20, 2012 4:42AM

<< These tales do not give me a very warm and fuzzy feeling about our hobby.....

>>

Knowledge is power.

Frankcoins · December 20, 2012 5:53AM

<< I can't count the number of high priced coins that sell at auction - and are immediately offered to the underbidder at their last bid. Did the potted palm in the back of the room have buyer's regret?

>>

That's actually a courtesy to the bidders. An auction house - particularly if they have a retail division - will often place advance bids on coins at least what they normally would pay for such material. They will often offer it to the last underbidder. Two reasons - both good. First - they would prefer first to sell to an outside bidder since they will get a buyer's fee. But second, it the underbidder does not want it ( and he has no REQUIREMENT to buy it) it establishes proof that the auction house's bid was higher than anyone attending was willing to pay.

Unknown · December 20, 2012 5:55AM

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Frankcoins · December 20, 2012 6:05AM

<< It isn't unusual to... find that the underbidder is the consignor. >>

A consignor places a reserve (a consignor's bid is another term for reserve). A bidder places a bid. The auctioneer raises the bid on behalf of the
consignor. If the reserve is met, the auctioneer stops bidding on behalf of the consignor. The consignor was the underbidder...by ONE INCREMENT --
ALWAYS -- It's not fishy -- it's how the process and the math works.

BillJones · December 20, 2012 6:09AM

<< 

<< It isn't unusual to... find that the underbidder is the consignor. >>

A consignor places a reserve (a consignor's bid is another term for reserve). A bidder places a bid. The auctioneer raises the bid on behalf of the
consignor. If the reserve is met, the auctioneer stops bidding on behalf of the consignor. The consignor was the underbidder...by ONE INCREMENT --
ALWAYS -- It's not fishy -- it's how the process and the math works. >>

The consignor should ONE BID, their reserve, which is executed at the opening or up front before the auction on the Internet if the net is involved. The rest of this shilling, plain and simple.

jt88 · December 20, 2012 6:20AM

I am sure all the auction houses do that. It is the matter how bad they do it. You can see auction houses try to push the price up and if it did not sell then they will put the coins back on next auction. I saw this many times on major auction houses. For the bidder it is very important that you set your max price. Don't let them suck you in. If you over paid a coin it will take a long time to show green.

mbogoman · December 20, 2012 6:23AM

<< << It isn't unusual to... find that the underbidder is the consignor. >>

A consignor places a reserve (a consignor's bid is another term for reserve). A bidder places a bid. The auctioneer raises the bid on behalf of the consignor. If the reserve is met, the auctioneer stops bidding on behalf of the consignor. The consignor was the underbidder...by ONE INCREMENT -- ALWAYS -- It's not fishy -- it's how the process and the math works. >>

Does this mean that if I consign a coin with a reserve of $10,000 and it doesn't sell, I have re-bought my coin? Basically paying myself, plus the house's 17.5%? That seems like a can't win situation...

Price manipulation at auctions

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