How the auction industry lost at least one bidder

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I testify in many auction-related cases across the United States — including in Ohio, Indiana, West Virginia, Illinois, Tennessee, Louisiana, New York, Texas, Oklahoma, Pennsylvania, California, Virginia, Florida and Georgia … thus far.

If there is one single consistent theme running through the minds of plaintiffs in these cases, it might be: Auctioneers “running the bids” (taking fictitious bids) makes people both distrust and detest the auction method of marketing.

Further, you might imagine that such anger causes these people to pursue damages in court, especially when the subject assets are of substantial value.

We use the term “fictitious” because in the United States, the Supreme Court of the United States has stated that auctioneers cannot take fictitious bids and bidders/buyers have recourse when they do.

Relatedly, even legal and ethical disclosed bidding for the seller in a with reserve auction is seen as abhorrent — mostly because such bidding rights are typically disclosed in the smallest of typefaces on page 39 of 42 pages of terms and conditions.

One such (former) auction bidder of considerable net worth (over 1 billion) confided in me in regard to her lawsuit that she was upset about our subject auctioneer running the bid against her, but …

Mike, I thought maybe this was the exception to the rule, so I attended another auction last week. I suspected the auctioneers there were doing the same thing, so I asked one of the women I knew working the ring if they could enlighten me.

She told me that indeed not only was the auctioneer running the bid, but that the ring persons had hand signals to alert the other ring persons to ‘yep’ to simulate a real bid if the other ring person knew their bidder would bid again … I decided then, this would be my last auction.

Of course, certainly not all auctioneers run the bid, but too many do and bidders are understandably disturbed by this practice. For instance, running the bid (taking fictitious bids) was the main cause of action in this aforementioned $20 million lawsuit in which I was asked to testify.

Auctioneers who regularly run the bid seem to hold such proficiency as a badge of honor. As such, other auctioneers are encouraged to run the bid in order to join their club — and if you don’t run the bid then you aren’t quite a professional auctioneer.

During my most recent court testimony, I was asked to demonstrate taking fictitious bids. I called bids in that fashion, and the sitting federal judge asked me, “How prevalent is this practice?” I responded that it was quite prevalent in this subject auction, and all too common otherwise in the United States.

We in the auction business are losing bidders to quicker, easier methods of purchase; we’ve also lost at least one due to her seeking more honesty, transparency and truthfulness — a lesson for all auctioneers in the United States.

Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.