In December, 2009, Harold French, a licensed auctioneer attended an auction conducted by Stephen Bennett, another licensed auctioneer.
Mr. Bennett discussed with Mr. French that a certain painting in the auction belonging to William Noonan had a $10,000 reserve and Mr. Bennett wanted Mr. French to bid on the painting if the bidding didn’t reach the reserve.
When the bidding price for the painting reached $9,000, Mr. French bid $9,500. He later testified before the Board [of Auctioneers] that he did not intend to actually purchase the painting, but sought only to protect the reserve and ensure that the painting was sold.
There were no further bids on the painting. Mr. Bennett indicated to the gallery that the painting was sold and attached French’s tag number to the painting.
Mr. Noonan believed that his painting had been sold because he thought that he had waived the reserve by gesturing to Bennett following French’s bid.
Basically, the State of New Hampshire has alleged that Mr. French and Mr. Bennett engaged in collusive bidding which is defined in New Hampshire as:
- “A practice whereby the auctioneer, the seller, or anyone acting on behalf of the auctioneer or seller, causes, employs any person to engage in, or knowingly allows, fictitious bidding during an auction for the purpose of bidding up the price of any goods in competition with bona fide bidders, or for the purpose of encouraging or enticing bona fide bidders to purchase, or for the purpose of stimulating competitive bidding to purchase. Collusive bidding shall include any use of false bidders, cappers, shills, or by-bidders.”
Inclusive in the counter argument by the defendants, and our subject here today, is that:
- “The law allows one bid to be placed during the auction of an item with a reserve price.”
Our questions were:
- One bid?
- Only one bid?
- What law allows this?
Without addressing this particular case further, one must go back to 1851 and look at the case known as Towle v. Leavitt, 23 N.H. 360 (N.H. 1851). In that New Hampshire Supreme Court Case [Superior Court of Judicature,] the Court commented in regard to sacrificing [property] for the want of bidders:
- “In sound policy, no person ought, in any case, to be employed secretly to bid for the owner against the bona fide bidder at a public auction. . . . And after the best consideration which we have been able to give the subject, it appears to us, that this is the true doctrine, and that sound morals and good faith between man and man, evidently require that by-bidding should receive no countenance from any legal tribunal. Fair, open-handed honesty ought to pervade all dealings, and all parties should, so far as may be, meet on equal terms in their bargains and sales . . . . If it be said that the property may be sacrificed for the want of bidders, as is declared in some of the cases in equity; the answer is that the owner may withdraw it before the sale commences, or he may set it up at a specified sum, or he will announce that he will reserve the right to make one bid himself . . . . The owner of the property has no right to complain at such a course, because it is the only course that comports with the truth.”
Yes — the Court in 1851 said that among other options for the seller to protect his property, he may make one bid himself.
We wrote about a bid calling practice known as Unethical Bid Calling #7, The Drop Off. It seems this case closely resembles this practice.
This makes for an interesting case for all auctioneers to watch. On the one hand, apparently the New Hampshire Supreme Court ruled this one bid is legal. On the other hand, New Hampshire has other, subsequent laws, which tend to say otherwise.
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.