At an auction, nobody makes (requires) a bidder to bid, although some auctioneers are known to be pretty persuasive. Given bidding is a voluntary act, can auctioneers merely take bogus bids and cite that, “Well, they chose to bid more, so what’s the harm?”
We would suggest not, and cite that the Supreme Court of the United States stated such in 1850. In what is the first substantive court case in the United States regarding an auction/auctioneer (Veazie v. Williams 49 U.S. 134 (1850),) the Court was clear that, “Auctioneers cannot take fictitious bids.”
As we have consistently held, bidding an auction is not only competitive, but collaborative. Accordingly, when a bidder is bidding one more bid than someone else has already bid — that bidder has the right to know that bid was not fictitious. We eluded to this principle in this prior writing: https://mikebrandlyauctioneer.wordpress.com/2016/12/12/auctioneer-discretion-and-control-in-registering-bidders/.
Importantly, that other bidder could be the seller as in any type of forced sale, or a with reserve auction (with disclosure) the seller may place a bid on his own property. And of course, knowing who the seller is, and is not, is paramount for auctioneers to manage. We noted that here: https://mikebrandlyauctioneer.wordpress.com/2017/02/16/at-an-auction-whos-not-the-seller/.
“But the other [real] bidder chose to bid. He must have felt that next bid was reasonable. He must have been willing to pay …” is often the defense to accusations concerning taking bids which aren’t there. However, in this collective bidding effort, this bidder has a right to base his bid on the fact a real bid was placed just prior.
Maybe this thought has arisen out of the traditional real estate market, where multiple offers are independent, and not necessarily collaborative? Certainly here, one offeror could be told there is another offer pending, and “You are running second …” Ultimately with this offeror making another offer, there is no assurance it’s not significantly higher than the other.
But auctions are different — we as auctioneers hold the advantage of being able to take competitive bids, and the small cost of this luxury is that the other bids are open, transparent and real (outside of sealed bids, which we spoke about here not constituting an auction: https://mikebrandlyauctioneer.wordpress.com/2017/03/07/is-accepting-sealed-bids-an-auction/.)
If you are an auctioneer just taking bids from … wherever, and then a legitimate bidder bids thereafter only to take legal action against you for taking fictitious bids, I would recommend a more robust defense than, “Well, you didn’t have to bid again …” In fact, a much better practice would be to avoid this type of dispute altogether.
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, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College of Business, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.