It does happen at live auctions, but it happens much more in online auctions, because bidders sometimes put their maximum bid in place, and hope (to no avail) that their bid will be executed competitively. However, a bidder leaves a $1,300 bid (by mistake) and says this:
I saw this one person bidding just below $1,300 not to go over my bid — like this person knew how much my max bid amount was …
It’s not just “like this person knew how much my max bid amount was” … the auction company did indeed know the maximum bid and pushed the high bid up to that amount. When this happens over and over, we would deem this a habitual (fictitious) backup bidder.
It’s easy to be the backup bidder when you know the high bidder’s maximum bid. If the high bid is $5,000 I can safely bid $4,900. If the high bid is $50 I can safely bid $49. If the high bid is $300,000 I can bid $295,000 … and so forth.
Here’s the issue. When a certain person is consistently the backup bidder, or the backup bid is routinely one-two bid increments below the highest bid left by someone else — particularly online where bid records exist, this is actionable.
We previously (and otherwise) have written about fraudulent inducement: https://mikebrandlyauctioneer.wordpress.com/2019/06/27/is-it-fraudulent-inducement-or-not/. Where a high bidder routinely wins lots for his maximum bid, and another (or several) fake bidders are habitually backup bidders — that’s simply fraud.
Further, we wrote about Chester, Grover and Benjamin (we’re told a reference to the 21st, 22nd, 23rd and 24th Presidents) in a previous story where they were the backup bidder over 1,000 times and not once the buyer: https://mikebrandlyauctioneer.wordpress.com/2019/10/02/how-easily-could-an-auctioneer-got-caught-running-the-bid/. What are the odds of that happening another 1,000 times? We would guess pretty good.
Here’s maybe a good rule to remember: If you as a buyer are winning items routinely for the highest bid you left prior online, there’s likely a problem. If further, there’s a runner up bidder (backup bidder) who is routinely not buying but running second almost all the time — there’s almost a guarantee of a problem.
Maybe instead of Chester, Grover or Benjamin, the online program should have used “Jasper” as the shill bidder as in Jasper McLevy? He made a habit of running second in his political career.
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.