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We have written about who cannot bid at an auction more than once. Today, we hope to write about that same topic, along with who can bid at an auction.

Here’s who can and can’t bid for the two types of auctions (with reserve and without reserve:)

Absolute (without reserve) auctions:

  • Generally anyone with the genuine intent to purchase can bid.
  • The seller cannot bid nor an agent acting as/for the seller.
  • Anyone can bid if the auction is a forced sale.
  • Auctioneers can generally bid with the intent to purchase (except in Pennsylvania) so long as they obtain the client’s knowledge/consent and inform the bidder pool. A few states prohibit auctioneers from bidding due to “dual” or “limited” agency laws.
  • A court can potentially issue an order prohibiting a certain person or business entity from bidding (executor of an estate, for example.)
  • An auction can be private, rather than public, allowing only certain bidders to participate.

With reserve auctions:

  • Generally anyone with the genuine intent to purchase can bid.
  • The seller or an agent acting as/for the seller can bid so long as seller bidding is reserved (disclosed) or buyers have recourse.
  • Anyone can bid if the auction is a forced sale.
  • Auctioneers can generally bid with the intent to purchase (except in Pennsylvania) so long as they obtain the client’s knowledge/consent and inform the bidder pool. A few states prohibit auctioneers from bidding due to “dual” or “limited” agency laws.
  • A court can potentially issue an order prohibiting a certain person or business entity from bidding (executor of an estate, for example.)
  • An auction can be private, rather than public, allowing only certain bidders to participate.

Above is the overview of who can/can’t bid at auction. As can be seen, the lists are the same except for the “Seller bidding” issue. However there is one other matter of significance. No fictitious bids can be placed at all in either type of auction.

What’s a fictitious bid? A bid portrayed as a genuine bid while it actually isn’t a real (genuine) bid at all — and used to falsely (fraudulently) induce others to bid more. We wrote about such fraudulent inducements here: https://mikebrandlyauctioneer.wordpress.com/2019/04/15/death-of-a-salesman/.

The famous (at least we thought) Supreme Court of the United States case Veazie v. Williams, 49 U.S. 134 (1850) created the principle that no fictitious bids can be made at an auction — after an auctioneer named Henry Head had done exactly that at an auction on January 1, 1836.

The Court concluded that fictitious bidding was a “fraud upon the [ultimate] purchaser.” As such, recovery can include voiding the sale or taking property at the last good faith bid — essentially making an auction purchase contract voidable by the buyer.

Further, there is the issue of legal and ethical bids being misrepresented. For instance, a seller reserves the right to bid, but the auctioneer portrays the seller as another disinterested bidder.

We have written (as the State of California now holds) that seller bids should not be disguised in this fashion. We wrote about this principle here https://mikebrandlyauctioneer.wordpress.com/2018/08/08/representing-or-misrepresenting-auction-bidders/ after testifying in the case which lead to this new Golden State law.

There are ways to properly bid for the seller, with either expressed or implied communication: https://mikebrandlyauctioneer.wordpress.com/2019/06/27/is-it-fraudulent-inducement-or-not/. Here again, misrepresentation is actionable.

Auctions are widely open to the public but there are laws and rules in place allowing (and not allowing) certain bidding. If you’re participating in an auction — good for you. If you’re not permitted to participate or see unauthorized (or illegal) bidding, the reason is likely listed above.

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.