Auction House Conflict of Interest

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Posted By: Aaron M.

I wrote a rather impassioned reply to a post that I think was just deleted, but I think what I wrote should be read anyway. My post was in response to a specific mention questioning why REA stresses their anti-shilling bid technology if they weren't aware of shilling going on elsewehere:

I also think your point about Robert Edward Auctions and their "Honest-Auto-Bid" format is well-founded. Why else would Rob stress this so much if he wasn't aware that many auction houses engage in shill bidding?

I mean at the end of the day by allowing his employees and executives to bid on Mastro auctions, Doug Allen cannot prove that in-house shill bidding does not occur. In fact you almost have to be a moron not at least be suspicious because the opportunity and motivation are so strong and obvious for Mastro employees to engage in shilling

Instead of bidding confidently with the knowledge that Mastro employees are forbidden from bidding on Mastro auctions (thus strongly lowering the oppurtunity to shill), you basically have to trust that Mastro employees are all honest, all are completely immune to any sort of financial interest in shilling, and never, ever, ever bid on an item they have in the auction just to see its price increase -- rather they always bid because they have a genuine interest as a collector in that item. How can Doug prove that? And why should we as bidders even be asked to trust them on it?

Think about it: All Mastro employees know that their jobs and reputations and hope for continuing to receive high-level consignments hinge on Mastro receiving strong prices on items. It never enters any of their minds that if they bid up items that it helps secure their own continued financial security by helping to keep the Mastro train rolling?

And what sort of check and balances do they have? Doug knows the bids? So he asks "Employee A" if he bid on a item out of genuine interest or shilling? What's the guy going to say? "Yes, I shilled, please fire me"? Good grief.

Without peering into the minds of Mastro employees we (including Doug Allen) can never know if that employee bid because of genuine interest or to shill. And with the motivation and opportunity to shill so strong and obvious and easy, we should not be asked to make this judgment or worry about it occurring in the first place.

Edited to re-title the thread. As has been fairly pointed out to me, this issue should be addressed with respect to auction houses in general and not single out one in specific.