First, what is “collusion?” A somewhat common definition goes something like this … “a secret agreement or cooperation especially for an illegal or deceitful purpose.” Is there collusion at auction? There sometimes is indeed.
Bidders sometimes arrange to not bid against each other thus depressing prices. Some bidders engage other bidders to “make sure” their property doesn’t sell below a certain amount. Regardless, our question today is, “Where is auction collusion more prevalent?”
Our observations tell us that is it far more prevalent in online auctions than live auctions. In online auctions, sellers can easily and secretly engage a friend or other associate to bid for them when otherwise prohibited, and online bidders can communicate with each other to allow bid suppression as well.
It’s not that these same illegal tactics don’t take place at live auctions — but it is much more prevalent in the online environment due mostly to one factor — lack of transparency easily allowing all kinds of criminal activity. As such, transparency — more ubiquitous in a live auction — makes collusion much more difficult.
Relatedly, when litigated, online auctions can also provide proof of collusion as so much is recorded — each bidder and each bid — where bidder patterns can be found. I’ve been privy to many such records, and it’s fairly easy to spot collusion in an online auction environment.
Possibly some of us literally see more collusion in the live auction because we can see it, and don’t see it so much where it’s more difficult to see? We hope we’ve shed some light on this confusion.
Mike Brandly, Auctioneer, CAI, CAS, 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, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.