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Few in the antiques and collectible business in the late 1990’s are unfamiliar with the names Russell A. Pritchard III and George Juno. Many remember this case as the “Watermelon Sword” case.

The story goes, in part, that Pritchard and Juno conspired to “appraise” a Confederate Civil War sword on the Antiques Roadshow television program for a high price to bolster their reputation as experts on these types of items.

Their accomplice bringing in the sword, “Steve,” recounted that the sword had been in his family for years and that, as a child he used it to cut a watermelon.

Authorities say Pritchard and Juno used their reputations enhanced by their fraudulent appraisal to defraud others.

Today, we’ll explore if this could happen in the auction business. In fact, it seems it has happened at least once.

Several years ago, I heard tale of a gun dealer in Indiana consigning guns to an auction house in the 1980’s. The gun dealer placed bidders (plants) in the audience to bolster prices beyond market value, often buying the guns back. Then, the gun dealer would price his guns in his shop commensurately citing recent auction prices.

Reportedly, an auction attendee who saw a particular gun he was interested in purchasing — sell for nearly $1,000 — went to the gun dealer’s shop to find the same gun priced $950. He purchased the gun dealer’s gun, only to find out later this same gun was available elsewhere for less than $500.

Similarly, bidders at auction could conspire to not bid against each other, thus lowering prices on items that later they wish to purchase from others at a discount, citing the lower auction prices lately.

Either way — conspiring to increase prices or decrease prices at auction, beyond the genuine intent to purchase, is considered price fixing.

Per the United States Department of Justice, price fixing is an agreement among competitors to raise, fix, or otherwise maintain the price at which their goods or services are sold. The bidding could involve raising prices as our gun dealer in Indiana, or fixing prices (lower) as in our example of bidders agreeing to not bid against each other.

Further, the United States Department of Justice says:

    Enacted in 1890, the Sherman Act is among our country’s most important and enduring pieces of economic legislation. The Sherman Act prohibits any agreement among competitors to fix prices, rig bids, or engage in other anticompetitive activity. Criminal prosecution of Sherman Act violations is the responsibility of the Antitrust Division of the United States Department of Justice.
    Violation of the Sherman Act is a felony punishable by a fine of up to $10 million for corporations, and a fine of up to $350,000 or 3 years imprisonment (or both) for individuals, if the offense was committed before June 22, 2004. If the offense was committed on or after June 22, 2004, the maximum Sherman Act fine is $100 million for corporations and $1 million for individuals, and the maximum Sherman Act jail sentence is 10 years. Under some circumstances, the maximum potential fine may be increased above the Sherman Act maximums to twice the gain or loss involved. In addition, collusion among competitors may constitute violations of the mail or wire fraud statute, the false statements statute, or other federal felony statutes, all of which the Antitrust Division prosecutes.
    In addition to receiving a criminal sentence, a corporation or individual convicted of a Sherman Act violation may be ordered to make restitution to the victims for all overcharges. Victims of bid-rigging and price-fixing conspiracies also may seek civil recovery of up to three times the amount of damages suffered.

Price fixing schemes such as our gun dealer in Indiana are not as prevalent today as they may have once been. With the Internet, the general public is more able to check pricing all over the world. As such, it’s less likely our gun buyer at $950 would be as easily caught in this ruse today, as he could check pricing well beyond his local market, and shop accordingly.

However, for very limited market property, such as few-of-a-kind items, this scheme is likely still employed. For example, if a famous artist only painted a dozen or so paintings, it could be thought by the owners of most of them to “ensure” the market by bidding-up any which came available, thus enhancing their own collection’s perceived value.

Yet, the entire auction industry’s success is dependent upon the legal and ethical behavior of sellers, bidders (buyers) and auctioneers. Bidders who practice price fixing inflict financial harm and damage the auction industry as a whole; this type of behavior should not be endured.

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.