We wrote about absentee bids at auction back a few months ago. The issue of whether or not absentee bids needed to be (or should be) maximized by the auctioneer was discussed briefly. However, let’s explore here if the action of bidding for the absentee bidder in this fashion is unethical and/or illegal.
Here’s a typical example of what we’re addressing here: Terrell’s Auction House has an auction coming up Monday night and has a 1955 Bowman Mickey Mantle baseball card in the auction. Bobby is very interested in this card, but cannot attend the auction Monday night as he will be out of town. Bobby checks with Roy Terrell of Terrell’s Auction House about leaving an absentee bid on the Mickey Mantle card.
Roy tells Bobby he would be glad to accept an absentee bid from Bobby. Bobby decides he would pay as much as $600 for the card, and leaves a $600 absentee bid with Roy. Bobby has left other absentee bids with numerous auctioneers, and is familiar with the process. Typically, the auctioneer will bid “on behalf” of the absentee bidder, as if he was present bidding for himself.
In the case of this Mickey Mantle card, Bobby is hoping he gets it for far less than $600, but is prepared to pay as much as $600 if the bidding reaches that level. Bobby thinks to himself, “If the bidding at the auction house reaches only $200, I might get the card for $210, or $225 … that would be great!”
Monday arrives and the auction is that evening. Bobby is in a hotel bar about 1,000 miles away with his cell phone in hand. Bobby is awaiting a call from Roy Terrell about his success (or failure) to purchase this 1955 Bowman Mickey Mantle card.
About an hour passes when Bobby’s cell phone rings, and Bobby answers: “Bobby? This is Roy Terrell and I have great news … you are the proud owner of a 1955 Bowman Mickey Mantle baseball card.” “That’s great,” Bobby replies, “How much do I owe you?” “$600,” replies Roy Terrell … We started the bidding out at your $600 bid, and no one else bid any more, so you were the winner.
Is Bobby the “winner” as Roy Terrell notes? I don’t think so. Yes, Bobby has won (as in, being the highest bidder), but has Roy Terrell acted unethically or illegally in regard to Bobby’s absentee bid?
Absentee bid policies are set by the auctioneers responsible for the auction. If Roy Terrell’s absentee bid policies include that absentee bids are started at their maximum, then fine; Roy Terrell could have such a policy. Or, Roy Terrell could have another policy — such as absentee bids are not started at all, and only are executed after a floor bidder bids first. Or, Roy Terrell’s policy could be that absentee bids are started at 1/2 of their full amount. For that matter, Roy Terrell can have any absentee bid policy he desires.
However, what else must accompany Roy Terrell’s absentee bid policy? First, and foremost, his client (the seller or sellers) who have hired him must have knowledge of — and consent to — whatever policy he is implementing. Secondly, all his customers placing absentee bids must also have knowledge of — and consent to — those terms at the time they place their absentee bids.
In our story here, Bobby placed a bid of “as much as $600” with Terrell’s Auction House. He didn’t leave “a starting bid of $600,” nor “a bid of $600.” Bobby placed this bid with the assumption that his bid would be executed competitively, just as the live bids would be executed. At that moment, Roy Terrell had a duty to inform Bobby of his absentee bid policy so Bobby would have knowledge of it, and await Bobby’s consent of that policy before Bobby’s absentee bid is accepted.
Acting on behalf of someone — acting as their agent — requires duties including loyalty, honesty and disclosure. Is Roy Terrell’s behavior constitute unethical behavior, in that he maximized Bobby’s absentee bid without his knowledge and/or consent? Yes — no doubt about it. Secondly, is Roy Terrell’s behavior constitute illegal behavior?
All across the United States, state laws make clear — and courts have uniformly ruled — that it is illegal to act unethically. I think it’s fair to say that Roy Terrell acted illegally when he maximized Bobby’s absentee bid without his knowledge and/or consent.
The argument many auctioneers have used for 100’s of years in this regard is:
- The absentee bid must be maximized because it is my duty to maximize bids, and I’m working for the seller and must do all I can to maximize my client’s position.
Despite this widespread argument, this simply does not align with state law, nor the view of the courts in the United States. Is maximizing the absentee bid proper? Yes, if both the client and any absentee bidders have knowledge that the absentee bids will be executed in this fashion and the auctioneer has the consent of his client and any absentee bidders. However, the answer is, “No” lacking either.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.