Group purchases in REA, Mastro

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Posted By: barrysloate

Dan- I have heard stories like that many times. The big auction houses get great prices for top drawer material, but they are not the right venue for less expensive items. Unfortunately, many collectors don't realize this. They think the bigger the auction house, the higher the prices. But they don't think through the whole process, and end up disappointed.

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Posted By: JK

Corey - perhaps I misread your original post. However, Im still not sure I agree completely. I think if Bill Gates, who obviously has the means, also had the willingness to bid individually on the lot, but nevertheless chose to join the group anyway (be it for convenience, a sense of being part of a team, or any other reason) that there would be nothing illegal about that.

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Posted By: Dan Bretta

Barry, I know I'm not talking T206 Wagner prices, but there were programs in that lot that routinely bring over $1,000 each on ebay - NU v Notre Dame, NU vs Oklahoma (First game), et cetera. It was definitely the wrong venue, but the consignor was powerless to do anything about how they lotted up the auction. I'm not sure there is anyone at Mastro that would even know what kind of prices those items would bring anyway.

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Posted By: SC

You can consider that what the buyer/leader of the group (whomever actually places the bid and writes the check to the auction house) - he is basically preselling the other items on an if. "OK guys, if I win this lot, will you buy x y and z cards for $$xx or xx% of the final bid price, up to a maximum amount."

So much of our legal system depends on the intent of the individual. From capital crimes, the difference between murder and manslaughter. In many tort cases, the difference in assessment of punitive and treble damages is based on the mindset and knowledge of the company.

In this case, I would think, from a legal standpoint, the difference is going to be whether the intent of the group/partnership was an honest effort to form a conglomorate to purchase a group of items, or an effort to depress the price on the lot. If it's the former, it's fine. The latter is not. The shade of gray inbetween is what a court would decide.

I also don't think a means test is relevent. If you have a lot of 10 items, each "worth" $1000, and I only want one of them - I don't think it's important whether I can write a check for $10k or not.

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Posted By: CoreyRS.hanus

JK,

My Bill Gates example was not meant to be exclusive. I used it to describe a scenario that would be okay. However, I didn't mean to imply that there could not be other fact patterns I also would have no problem with. You had interpreted my earlier post to say that a means test is all that is necessary to find illegal collusion. I gave the Gates example to rebut that interpretation.

With that said, though, from your posts I do get the sense that at some point our views might diverge as to when forming a group would constitute illegal collusion. For example, if the sole motivation for the members to join is simply to save money by not going head-to-head, and indeed in the absence of the group each member would bid aggressively on the lot with the intent to keep all or most of the cards in it, I think that could be a legal no no. And, correct me if I'm wrong, but I think you're saying it would be okay.

EDITED for spelling

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Posted By: Anonymous

OK - let's change the fact pattern a little bit. Five of us from this board get together and agree that rather than bid against each other for a lot we know that we all want- we agree to let one of us be the high bidder at an agreed price. Now, let's assume our chosen high bidder wins the lot- but we have not made a previous arrangement as to how we will divide up the lot between the five of us. Instead we meet once the lot has been received and we "re-auction" each card individually between ourselves letting the high bidder take each card- with any profit beyond the original investment being split between all of us. That sounds pretty bad- right? So how do we know when a grounp forms- despite their stated good inentions- that this could not actually be what is occuring?

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Posted By: CoreyRS.hanus

Phil-NY,

A couple of thoughts.

First, in the example you give, there is serious question how good the intentions were when the group was formed. You describe each member as being interested in the lot. So presuming each member had the financial means to acquire the lot and, in the absence of the group forming, would have bid aggressively to win, IMO the group's agreement to designate one member to bid on the lot constitutes illegal collusion.

Second, in regard to what I think you're asking -- how do you really know if the group's intention upon formation was sufficiently benign so as to not constitute illegal collusion -- that is a terrific question. Proving intent is an issue of fact, and many factors can be considered. For example, if it could be shown that each member simply doesn't have the means to afford what the lot would reasonably be expected to fetch, then that should be adequate to rebut an allegation of illegal collusion. If, though, AFTER THE FACT (i.e., a month after the auction), the group took actions inconsistent with initial benign intent (e.g., sold all the items which constituted the lot and divided up the profits), then I would think the presumption would be the intent behind the formation of the group constituted illegal collusion. Or, to put it another way, intent could be inferred from subsequent actions. And should that happen, the burden of proof would shift to the group to rebut that presumption.

I might add that the group could still successfully rebut the negative inference caused by its subsequent actions. For example, showing that (1) the sale of the lot after the auction came about through an unsolicited and unanticipated offer, and (2) there exists a sequence of emails among the members prior to the group forming which evidences their benign intent, could suffice to successfully defend against an allegation of illegal collusion when forming the group.

Third, I think once its been established that the group's formation did not constitute illegal collusion, then after-the-fact suspicious actions will not suffice to make illegal what was at the time legal.

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Posted By: Bob

Any prosecuting attorney/district attorney who even contemplated charging someone with criminal fraud or conspiracy who participates in a "group" buying baseball cards in an auction needs to go back to law school and also develop a thick skin because he will be the laughingstock of his peers and ridiculed by anyone with a triple digit IQ.

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Posted By: Anthony S.

Bob,

How about those of us with IQ's in the mid-to-high(ish) two digits? Can we ridicule too?

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Posted By: Bob

LOL.

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Posted By: Jim VB

Hey, as that seller of the "Coligan Wanger" said the other day "Don't Think Hundreds Think Thousands! Or At Least Mid Hundreds To A Thousand Maybe A Little More!

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Posted By: CoreyRS.hanus

Bob,

Question -- Can an aggrieved auction house or seller bring a civil action?

I agree with you from the governmental perspective nobody is going to bring an action. However, what about private actions? If in fact there is no legal basis to bring such an action, then group members would have little to fear by publicly bragging how they suppressed competitive bidding and "stole" lots for below their market value. Would you as an attorney advise your client that he has no practical legal risk from bragging, or, more usefully, openly soliciting his group as a great profit-making opportunity?

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Posted By: JK

Corey - Im not an antitrust lawyer, but my understanding is that private parties have the right to bring civil actions for antitrust violations under the Clayton Act. I believe any such party would have to be able to show a violation of the Sherman Antitrust Act to succeed on such a claim - a difficult task in my opinion.

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Posted By: JK

By the way, I dont think there is anything wrong with openly soliciting a group for purposes of making a profit on a lot. Now, if you somehow were to get your hands on an auction company's bidder list and actively conspired to include every interested bidder on a particular lot in your group for the explicit purpose of restraining trade - then maybe you got something to work with. Short of that, I cant see how a group of bidders hoping to pick up a lot for as cheap a price as possible could amount to illegal activity.

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Posted By: CoreyRS.hanus

JK

I'm not an antitrust lawyer either but I agree with what you said about private parties bringing civil actions. Assuming that is correct, and given that treble damages can be awarded in antitrust actions, I'd be very careful about any public solicitations I make to get members, or for any post-auction congratulatory messages. Yes, as we've discussed, many/most groups are perfectly fine. But (IMO -- and I know you have a different view on this), some might be crossing into the gray area. And for those that do they might want to take a low profile so as not to be a target for some pissed off auction house/seller.

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Posted By: Phil B.

Corey- I think your advice is correct. It only takes one annoyed consignor or auction house to see posts of such planning and gloating and have a closer look taken at the goings on. It is sometimes said that the "appearance of impropriety is as bad as impropriety itself". Well, I sometimes say that anyway. To summarize this thread there are certainly gray areas and it can definitely be a slippery slope. What may start out as innocent "joint venturing" could, with a certain set of facts, fall into illegal conduct.

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Posted By: Matt

Phil - on the positive side, there are also areas (I would suggest most cases) where there is no problem at all of forming groups to bid on lots.

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Posted By: Elm

I'm hoping to assemble a group to bid on a 1989 Topps lot. Any interest? I get the Strawberry. : ]

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Posted By: boxingcardman

Assuming for the sake of argument that a group of customers can combine in restraint of trade, how would you even begin to establish that there had been an actual loss from the combination? It doesn't seem reasonable to me to assume that a group could realistically target a lot for a purchase and profitable break-up. The group doesn't bid in a vacuum. Everyone else who can smell a bargain would be in there too. To get the lot and break it up for profit they would have to win it, which would require them to outbid everyone else targeting the lot for a break-up. If you could get the auctioneer to release the data on the bidders and you took their depositions and asked why they bid what they did, I would expect that most would tell you they didn't think the lot was worth more. You would then be left to argue that the group somehow damaged the seller despite the fact that none of the underbidders was willing to pay as much as the group decided to bid.

Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: Ricky Y

So now that this has been discussed and brought out in the open forum, does that mean that the auction houses will investigate the nature of each auction lot to see if one individual truely bid on the item or if there are mysterious conglomorate of shadow bidders that lurks beneath the face of one?

Not sure how they could prove it unless we brag about it on an open message board like this.

Btw...how about bidding on the T206 Wagner as a group? Then we can rotate the ownership!

Ricky Y

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Posted By: CoreyRS.hanus

boxingcardman,

I think you make a great point. As a practical matter, proving damages could be an insurmountable hurdle for collecting meaningful damages in actions involving multi-card lots. Where I can see an action against collusion having a potentially more profitable application would be a single card lot consisting of a condition rarity targeted to a high-profile registry member, or a high-grade rare set targeted to a set collector. There, there may be a few whales who are the target buyers for such offerings. If they banded together and allocated this particular offering to one of them, with (1) the understanding the next would go to another, or (2) payments to the others as compensation for withdrawing from the bidding, then you could conceivably establish real damages.

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Posted By: boxingcardman

From what I've seen of the behavior of registry freaks, they don't play well with others. I think the chances of one of them telling the other "go ahead, take this 10, I'll get the next one" is about as likely as Osama Bin Laden being invited for tea in the Rose Garden.

Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: CoreyRS.hanus

boxingcardman,

Not surprised to hear that. We get along better on the memorabilia side of the board.