As we have been discussing around the state of Indiana in a class for the Indiana Auctioneers Association titled “Auction Best Practices,” it is rare that we can disclose specific details about any of the cases in which we’ve been hired as an expert witness and/or consultant.
In one case some time ago, we were contacted by the plaintiff (our client) who discussed with us her disappointment in the auction industry. She asked if I could express her dispiritedness in a more or less hypothetical treatise, keeping exact details in their settlement confidential. I told her I thought I could do that for her given the gravity of this case.
So today, “let’s just say” we were granted permission from the parties (and attorneys) in one particular case sans the party names and exact location. In other words, “What if …” the plaintiff asked that I write about this in hopes auctioneers would pay attention — and in her words, “behave better.” Thus, today we disclose the steps we probably took to show an auctioneer was running the bid in all kinds of ways.
There are in fact three basic scenarios where auctioneers sometimes take fictitious bids:
- During a live auction where they believe the live bidder will bid again or won’t notice he is essentially bidding against himself.
- When an absentee bid is placed and the bidder is not present when it is executed.
- In an online auction where the bidder has provided the software his maximum bid.
Here is how we (easily) caught an auctioneer running the bid:
- I attended an auction with an attorney who had hired me investigating a sizable claim of auctioneers running the bid. It was easy to find a $1,000 or so item, ask one of the auction staff for help, tell the staff member I really wanted this and was willing to pay as much as $2,500 if necessary.
- About an hour later, this lot came up and the auctioneer set it in at $1,000 — much to the surprise of everyone else there. I raised my hand at $1,100 and the bidding continued to $1,900 and the auctioneer said he had $2,000 and asked me for $2,100 … where I declined to bid any more.
- What was the issue here? There were no other genuine bidders at $1,200, $1,400, $1,600, $1,800 nor $2,000. It was just me and a fictitious bidder. When I didn’t bid $2,100 the auctioneer stuttered a bit and said, “I’m sorry, I have you at $1,900, right?” I replied “No, I was outbid at $2,000 … you were asking me to bid $2,100,” as I turned and walked away.
- Later, I left an absentee bid of $3,000 on an item which I found otherwise online for about $800. I told the cashier that I had to leave and my bid number, and that I would be back later. When I returned, my total bill was not surprisingly $3,000 as my absentee bid had been maximized.
- The next day I placed a maximum bid in this auctioneer’s online-only auction for $2,700 for an item I could easily buy elsewhere for $500. Bidding started at $1.00 and after seven days, I was deemed the buyer at exactly $2,700.
- I purchased the two items for $3,000 and $2,700 — with the attorney’s money provided me — and later negotiated with the auctioneer regarding my “misunderstanding” on the $1,900 item and paid for that too.
In court, to say that it didn’t go well for this auctioneer would be an gross understatement. We demonstrated to a judge how easy maximizing an absentee (and online) bid was, and how much more difficult (but not impossible) it was to maximize my live real-time bid.
The online-only auction showed consistently that runner-up bidders were named “Chester,” “Grover” and “Benjamin.” These three bidders had not actually purchased anything online in 3 years, but had been the runner-up bidder over 1,000 times. So far as the live and absentee items, the auctioneer was unable (unwilling) to identify any other bidders. The judge was not pleased.
Damages in this case far exceeded $1 million dollars plus attorney fees. What had been a sustained pattern of running the bid for years culminated in paying back all gains and enduring almost twice the monetary damages which all the buyers had suffered.
If you are an auctioneer who routinely or sporadically runs the bid (takes bids which are fictitious,) here’s a heads-up — these are not good ways to do it. And, if you think you are really good at running the bid — where you do it without people noticing, you might think again as the public is likely not as ignorant as you think they are.
Importantly, this was not bidding for the seller which is not actionable if that right is reserved in the terms of the auction. Further, this was not a forced sale, where anyone can bid. As well, these were not bids from the auctioneer. What this was … was a big win for the plaintiff.
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.