In other words, can an auctioneer have Julie on at $500 and ask (demand) Rachel bid $525 to outbid Julie, and when Rachel bids $525, then ask (demand) Julie bid $575?
In this example, Rachel is asked (required) to only bid $25 more than the previous high bid, where Julie is asked (required) to bid $50 more than the previous bid.
Our question is, can an auctioneer conduct such an auction with this practice?
This question was probably never asked until the advent of Internet bidding. Before computer-controlled bidding, there were no certain increments auctioneers were forced to utilize — it was done pretty much “on the fly” and customarily in a fairly uniform fashion.
However, with Internet bidding, some programs require certain fixed increments from the Internet bidders, where the live bidders are not subject to those same fixed increases.
In our above example, a computer-controlled bidding platform might require a minimum raise of $50 for any bids between $500 and $1,000, where the auctioneer and the live bidders would be not subject to the same.
Yet, we wish to discuss this subject generally, with or without the use of Internet bidding.
First, auctioneers invite offers, and do not offer property to the bidders, other than to collaterally offer to sell to the highest bidder in a without reserve (absolute) auction.
In this spirit of inviting offers rather than offering specifically, bidders offer and the auctioneer has only the option to accept or reject that offer. Presumably, the rejection of a higher offer is done while keeping in mind that the auctioneer is an agent for his client, the seller.
Could an auctioneer ever reject a higher bid and still be acting in his seller’s best interest? Certainly. For example, if the bid on an oil painting was at $5,000 and another bidder offered $5,001 to the auctioneer — it may well be in the auctioneer’s client’s best interest to decline the $1.00 increase in the interest of time and not angering the $5,000 bidder.
However, it is thought that no certain higher offer can be declined in a “without reserve” auction as the rejection itself would be viewed as a reserve. We wrote previously and extensively about bid increments in regard to an auctioneer selling a 2009 Case IH Magnum 335 tractor selling at auction.
So, to re-frame our study here:
- In a “with reserve” auction can the auctioneer demand different increments from different bidders?
- Or, specifically can an auctioneer in a with reserve auction require Rachel to bid only $25 more than Julie, but require Julie to bid $50 more than Rachel …?
The answer to both those questions is, “Yes.”
However, if we pose a slightly different set of questions:
- In a “with reserve” auction should the auctioneer demand different increments from different bidders?
- Or, specifically should an auctioneer in a with reserve auction require Rachel to bid only $25 more than Julie, but require Julie to bid $50 more than Rachel …?
Our answer to both these questions is, “No.”
While it does seem reasonable to increase the bid increments as the bidding increases, it seems equally reasonable to remain in the same increments for a sustained range of bids, and treat bidders equally within those ranges.
If the computer is requiring $50 increases between $500 and $1,000 then the auctioneer should demand from both Julie and Rachel $50 increases once the bidding reaches $500 in the spirit of treating bidders fairly (equally.)
And, if the argument is that a $25 increase from a live bidder should be accepted because of the benefit to the auctioneer’s client — the seller — then a $25 increase from the other bidder, computer or not, should be accepted as well.
This begs the question: Do auctioneers have to treat bidders equally? Fairly?
We wrote about if auctioneers can treat bidders differently with the conclusion that a court would likely rule (and has ruled) that auctioneers cannot treat bidders differently other than to sell to the higher, and different bid increments may well be viewed as a material difference in treatment.
Asking one bidder (Julie) to bid more to outbid the other (Rachel,) than the other (Rachel) to outbid the other (Julie) seems a precarious practice.
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 adjunct faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.