Vince and Harold attend many auctions. Vince is retired from General Electric and Harold from farming. Vince and Harold don’t work together, nor necessarily know each other very well — but they frequently see each other at auctions in and around their homes in Bellevue, Kentucky.
Vince arrives to a restaurant auction on Saturday and finds several palettes of new coffee filters. He estimates that there are about 1,800 boxes of coffee filters, with each box having 100 filters. Vince thinks, “I can buy these and take them down to the flea market and sell them by the box … I might get as much as $3.00 per box.”
Just then, Harold arrives and too notices the palettes of coffee filters. He thinks maybe he can buy them and then “resell” (more likely “give”) them to his son who owns a coffee shop in nearby Cincinnati, Ohio. Harold’s son uses about 50 coffee filters a day and these seem to be the right size. Harold’s son has a warehouse next door so he could store the excess filters there until he needed them. Harold thinks his son pays nearly $2.00 per box of filters.
The auctioneer begins with some of the other restaurant equipment, and works down a row of kitchen smalls, heading toward the palettes of coffee filters. Vince and Harold both position themselves nearby the coffee filters, and await the auctioneer.
When the auctioneer’s ringman gets to the coffee filters, he announces, “Folks, we’ve got these palettes of #4 coffee filters — looks like maybe 2,000 boxes of filters altogether.” The auctioneers says, “Okay, you’re buying them all! Who’ll give me $2,500?”
Harold bids $500 and then other bidders bid, pushing the bid quickly to $900. Then, Vince bids $1,000 and Harold bids $1,100. As the bidding continues past $1,500, the other bidders move slowly towards the other equipment to be sold, leaving essentially Vince, Harold and the auctioneer to finish the sale of the coffee filters.
Harold looks at Vince, and Vince looks at Harold and then they both look at the auctioneer. Vince is the high bidder at $1,800 and the auctioneer is asking Harold to bid $1,900. Harold says, “I really don’t need them all.” Vince then says, “I don’t really want that many either.” The auctioneer again asks Harold to bid $1,900 when Vince and Harold being to discuss … maybe going in on the deal together.
The auctioneer continues to ask Harold for $1,900 as Vince and Harold being to discuss “going in together” on this deal — they think maybe they could buy the lot together, and split the boxes of coffee filters, one-half for Harold and one-half for Vince. Why keep bidding against each other when neither wants that many? … they contemplate.
The auctioneer then says, “Guys, how about you give me $2,000 and you can split the lot between you two?” Harold and Vince both think about that and decide that would be fair, and agree. “Sold! for $2,000 to …” the auctioneer pauses, “You want this on number 211 (Harold) or 149 (Vince)?” Harold looks at Vince and says, “It probably doesn’t matter, put it on 211.” Vince agrees.
It seems clear that these bidders, Vince and Harold, considered price fixing and collusion. We have previously wrote about both those topics, and concluded: Price fixing is illegal, per the Sherman Antitrust Act. and
Bidder collusion is illegal, per the Sherman Antitrust Act.
In this case, however, there are additional facts which are worthy of consideration:
- The $2,000 bid was in excess of the $1,800 (or $1,900) bids, thus benefiting the seller.
- The auctioneer suggested (and/or sanctioned) the “going together” plan, not the bidders.
From a contract formation standpoint, this starts with the seller and Vince in contract for $1,800. One might argue that at the point the auctioneer said, “Guys, how about you … ” and Vince and Harold agreed, Vince exercised his right to retract his bid.
At that point, there would be no contract in place between the seller and any bidder. Then, the auctioneer invited Harold and Vince to bid $2,000 together. Once they indicated their assent, the auctioneer accepted their offer on behalf of the seller — and seeing no other (higher) bids — said, “Sold!”
Other bidders may argue that they didn’t have the same opportunity, as Vince and Harold did, to bid with this arrangement, but they were the ones that walked away, thus not participating. Maybe other coffee filter distributors could argue that this arrangement adversely affected their pricing of coffee filters somehow, but that’s probably a difficult argument as well.
No question a somewhat unorthodox way of handling bidding and bidders. However, maybe it all worked out fine?
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 is Executive Director of The Ohio Auction School.