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Posted By: <b>peter chao</b><p>Scott,<br /><br />Right now the ultimate in bragging rights is owning the New York Yankees or some other sports franchise. As a business, sports is very profitable but it is not as profitable as many other businesses.<br /><br />But it has the advantage of being a high profile business. So some really rich people that want the spotlight decide to buy franchises just so that others know how wealthy they are and are not necessarily making the purchase because they have found the most profitable business.<br /><br />The same dynamic works in an auction to some degree. If a wealthy individual bought the Gretzky T-206 Wagner you can bet the spotlight will shine on them, and certainly they might brag that they have something that Barry Halper doesn't have.<br /><br />Peter

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Posted By: <b>davidcycleback</b><p>Sotheby's uses the convaluded and rather bizarre technique of having make believe bidders because it does cause bidders to bid more and more often. If it didn't make Sotheby's and the consignors more money, they wouldn't use the technique. <br /><br />If Sotheby's thought an auctioneer dressed up as Snoopy and yelling "Fore!" after every bid would raise bidding, the auctioneer would wearing a Snoopy suit.

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Posted By: <b>barrysloate</b><p>A live auction moves briskly, and does not allow bidders much time to think about what they are doing. And a skilled auctioneer will often coax an extra bid or two if he has the right kind of charisma. I've seen it happen many times. Add to that the book bids, and a lot of it is smoke and mirrors. But it works.

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Posted By: <b>peter chao</b><p>Absolutely, this book bidding works...that's why a modicum of discipline will help you to remain within your budget. Either that or you can do what I do...I hide my credit card statement from my wife. <img src="/images/happy.gif" height=14 width=14><br /><br />Peter

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Posted By: <b>mr. moses</b><p>the people who say just bid what you want and go no further as the way to deal with the subject. I feel they are missing the point. This is not a sealed bid format. It's an open forum AUCTION where one bid's against someone else for the right to own something. Why can't I know if I am going against a real bid/bidder? I don't participate in an auction to bid against THE SELLER (or house which represents the seller). Obfiscate and confuse..... tools of dishonesty.

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Posted By: <b>Corey R. Shanus</b><p>These definitions of fraud comes straight out of a law dictionary:<br /><br />"A false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury."<br /><br />"A generic term, embracing all multifarious means which human ingenuity can devise, and which are resorted to by one individual to get advantage over another by false suggestions or by suppression of truth, and includes all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated."<br /><br />Given that the rationale for book bidding is to attempt to persuade prospective bidders that the bids signify genuine interest in the lot by a real bidder (i.e., someone other than the consignor), when in fact they do not, can someone please explain to me why book bidding does not fall within the definition of fraud.

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Posted By: <b>peter chao</b><p>Corey,<br /><br />Here's the problem, the law assumes that you will act like an adult.<br /><br />Suppose that there's a long lease document, and you think the details of the lease are boring, so you simply don't bother to read it and sign it. You know very well the fact that you didn't read the document is not a very good excuse and that a judge will hold you responsible.<br /><br />The same thing happens at an auction if you make a bid a judge will assume that you are an adult and that you wanted the item. You can argue all you want that the auction house exaggerated the number of bidders or that when they said the item was rare it wasn't really that rare.<br /><br />Peter

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Posted By: <b>barrysloate</b><p>It does fall under the definition of fraud, but Sotheby's and Christie's are so powerful they can get away with it...bidders beware!

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Posted By: <b>JimB</b><p>Corey,<br />I think the catch is that they do disclose this practice in their auction rules. I agree with a lot what you have been saying, but (though I am not a lawyer) I do not think they would be on the hook for fraud from a legal perspective.<br />JimB

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Posted By: <b>peter chao</b><p>Guys,<br /><br />The fact that it's disclosed is not the only problem. Another major problem is causation. The person with the perfect test case would have to be the sole bidder, he could then say that the practice of book bidding caused him to make his bid.<br /><br />If there were 3 or 4 other bidders involved then you couldn't make that argument because if you won the bidding then your higher bid was caused by your need to exceed the bids of others.<br /><br />Peter

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Posted By: <b>David Smith</b><p>JimB,<br /><br />The problem, as I see it, is that no matter if the book bidding is legal and disclosed in the rules section, NO ONE KNOWS WHEN IT IS BEING APPLIED!!<br /><br />I think there should be a change in the laws which makes the auction house or cmpany TELL who has the highest bid. Something like a large LED display board which says, "BOOK", "PHONE", "WEB" and "FLOOR" after each bid is placed. This way bidders will know where the bid is coming from.<br /><br />David

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Posted By: <b>Joann</b><p>I don't necessarily think that a sell price at auction is the market price even for that day. It may be literally true, but if the price is way low compared to normal, then it is still below market price. All systems have noise in them, and having a low price on a given day can be considered the market price that day or, more precisely, the fact that on that day there was downward noise in the overall market price.<br /><br />Negative noise can (and noise does, by definition) come from random and unpredictable factors. Maybe it was tax day or maybe the banks closed early or maybe someone got a flat tire and missed the auction or maybe some stock went nuts that day and people put their money there instead. Who knows? <br /><br />If T206 Cobb Reds PSA 4 sell 6 times in the BST in two months and they go for between $1350 and $1600, then the market price is probably somewhere around $1450 give or take. Put a PSA 4 Cobb Red on ebay at about the same time, and it might go for $950 because of the noise in the system.<br /><br />In general sellers would like to avoid being caught by this noise. If something is generally worth around $3mm, the seller would probably insist on being protected from having it accidentally go for $1.8mm. The bigger the dollar value on the item, the more important it becomes.<br /><br />So I really can see why sellers would insist on, and auction houses would provide, some guarantee against getting socked by random noise on a given day.<br /><br />BUT - I am completely in agreement that the practice should be disclosed. David RC hit it right on the nose. Sometimes valuations are not that clear, and a bidder may have a price in mind. But in the heat of the moment in an auction, when someone has many factors to simultaneously consider in a matter of moments, believing that at least one other person has valued the object near or slightly higher than the bidder's preconceived maximum almost certainly is part of the quick mental equation.<br /><br />If someone is thinking $3mm max on something, and has been bidding and getting outbid through the $2mm's, if the "other bidder" bids $3mm I can easily see the bidder deciding in that moment that maybe $3.3mm is also reasonable and raising a paddle. Now he's $300K over his predetermined maximum even though the only other person that valued it that high was, in fact, the seller.<br /><br />It's not easy either way. At some levels, sellers need to be protected from the randomness of noise (not at my level mind you - I seem to get caught by it every time I list something on ebay!). But the practice should be disclosed so that any given bidder clearly knows whether his mental valuation is his alone, or is shared by one or more other people. It's part of his mental juggling, and that point should be clear.<br /><br />Joann

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Posted By: <b>barrysloate</b><p>There are pretty much two ways a collectible or work of art can be sold- by auction or by direct sale.<br /><br />In the spirit of an auction, the seller allows the object to start at a minimal level and sell for whatever the highest bidder is willing to pay. This works best for an item of great rarity that is in high demand.<br /><br />A direct sale works best if the seller doesn't want to take any risk. Perhaps he fears some volatility in the market, or doesn't think the piece will catch the imagination of the buyers. In that system he sets a price, and if there are no takers he can either haggle a little or put it away for another day.<br /><br />But what Sotheby's does is incorporate both systems at the same time. They try to attain the highest possible price and use any method possible to remove all the risk. This amalgamation clearly does not sit well with many bidders, but the auction house has been able to use it to their great advantage.

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Posted By: <b>davidcycleback</b><p>The process is legal I'm sure, but involves dishonesty. The dictionary definition of dishonest being 'not being honest.'

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Posted By: <b>peter chao</b><p>David,<br /><br />I would say the practice is not courteous but honest. If the auction house says that they are going to use book bidding and then they use it, it is difficult to say they are dishonest.<br /><br />But they are surely taking advantage of buyers and the fervor of the bidders.<br /><br />Peter

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Posted By: <b>davidcycleback</b><p>If someone says to you "The next sentence I'm going to tell you is a lie," that doesn't make the next sentence the truth.<br /><br />Sotheby's fake bidder process involves dishonesty. Notice I didn't say dishonest, but involves dishonesty. Whether the dishonesty is reasonable and fair are a separate questions. Dishonesty isn't always an undesirable thing. I understand the movie plot is made up for my entertainment, and that sit com actor isn't playing himself. Perhaps Sotheby's would say the fake bidders is a bit of playing acting, and the live audience, even those who have read all the rules, enjoy the game.

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Posted By: <b>mr. moses</b><p>"Dishonesty isn't always an undesirable thing. I understand the movie plot is made up for my entertainment, and that sit com actor isn't playing himself. Perhaps Sotheby's would say the fake bidders is a bit of playing acting, and the live audience, even those who have read all the rules, enjoy the game."<br /><br />as a departed friend of mine (RIP) used to say: "That was good one"....

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Posted By: <b>peter chao</b><p>We're basically "splitting hairs." I agree with you that there is deception here.<br /><br />The problem is there is a very small group of people that are being effected. Now if there was a large group of people effected, I would think there's a potential class action (shameless plug, drop me an e-mail).<br /><br />The only people that would have a chance of winning in this type of situation would be an individual who was the lone bidder for a particular item and made his bid because of the auction house's use of book bidding.<br /><br />Peter<br /><br />Edited to add that the bidder would also have to be the winning bid.

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Posted By: <b>Paul</b><p>I've now read this whole lengthy thread, and I don't see how anyone can disagree with what Corey has said. If a seller has a minimum price at which he will sell, the HONEST way to deal with that situation is to set a reserve. Book bids serve no purpose except to create the false impression that there is interest in the lot up to the reserve price. The level of genuine interest is valuable information to all bidders, and the book bids are simply false information created by the auction house.<br /><br />It's also true, as many have said, that the practice is less horrible when it is disclosed than when it is not disclosed. But it is still a horrible practice. <br /><br />It may also be true that some consignors will not consign their lots unless the auction house agrees to publicize this sort of false information about the level of interest in the lots. But it's also true that some consignors will not consign their lots unless the auction house agrees to conceal restoration, lie about the item's rarity, or lie about the item's provenance. The fact that some consignors are dishonest is no reason for the auction houses to facilitate and perpetuate their dishonesty.

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Posted By: <b>davidcycleback</b><p>The key is to buy your Mark Rothko from Sotheby's for your wall, not to flip on eBay.

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Posted By: <b>peter chao</b><p>Guys,<br /><br />The last 3 times I went to Las Vegas, I won money at the craps table. But if you asked me whether I would win the next time I go up I would say probably not. Why. Because Vegas casinos were built based upon the simple fact that it is more likely that you will lose than win.<br /><br />The auction houses were built on the simple fact that they make money from the sale. Their reputation is based upon the high prices they obtain for consignors. If they continously returned items unsold to consignors they would be out of business pretty quickly. So why are you surprised that they would use deceptive practices in order to make a sale.<br /><br />That's like being surprised that casinos give away free drinks so that you would lose more. And all this time I thought they gave away free drinks because they were just being courteous...yeah right...and I have this bridge for sale.<br /><br />Grow up, people.<br /><br />Peter

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Posted By: <b>Jeff Lichtman</b><p>Peter, my mouth is agape at that attempt at an analogy. Literally agape.

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Posted By: <b>JimB</b><p>If meeting the reserve is the issue, why not eliminate book bidding and if the bidding stops short of the reserve, tell the high bidder what the reserve is at that point and ask if s/he wants to meet that reserve. If not, it goes unsold. It seems like a more straightforward way of doing it considering some bidders consider the activity of other bidders into their considerations of the value of an item.<br />JimB

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Posted By: <b>Dave G</b><p>"...considering some bidders consider the activity of other bidders into their considerations of the value of an item."<br /><br />I think this statement is the key to the whole process......its not how much an item is really worth, it's who else is interested in it and why. Sadly in some major card auctions it clearly is not a truely knowledgable person bidding, but someone with money who will have it at all cost - especially if he doesn't want other specific people to have it.

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Posted By: <b>JimB</b><p>Dave,<br />That is not what I meant, but it may be a factor. I was thinking about other auction houses where let's say I have bid $1000 on an item that I think is worth $1400. I am sitting on the siding waiting aand watching. While I am watching bids (on the internet - not a live auction), I see that it is bid up to $1600 by at least two other bidders going at it. No I may decide to place one more bid at $1700 with knowlege that at least two other real people are right under me, so I am not out of the ballpark in going for it at that price (since it is a tough card that I really want). So my consideration of value is based in part on what others are bidding as well. That does not imply ignorance or willingness to do whatever it takes because I have limitless money. It just is one factor that can be added to the consideration equation if I choose. But that cannot be added if the auction house engages in book bidding which can be deceptive in such a situation.<br />JimB

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Posted By: <b>mr. moses</b><p>I too am a bit surprised at that er ah um stretch <img src="/images/happy.gif" height=14 width=14><br />In fact as a degenerate gambler I am insulted. I wouldn't even go into an auction house......

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Posted By: <b>davidcycleback</b><p>In the end, no one here likes the process but the process is stated.<br /><br />Obviously, if it wasn't stated then everyone would be mad. As it is stated, only some are mad. I would put myself in the don't like process/not mad camp.<br /><br />For live auctions, with bidders in one room chatting with each other, I wonder if some of they auctioneer techniques are intended in part to counter bidder collusion. If you leave bidders in a room for a long enough time, secret alliances will be made.<br />

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Posted By: <b>mr. moses</b><p>not mad. Just resolute. I'm also usually not affected by book bidding as I am but a small fish..... and the bigger fish don't seem to care.

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Posted By: <b>davidcycleback</b><p>I was just rounding my numbers for simplicity's sake. The official raw numbers tally is:<br /><br />7 mad<br />5 not mad, not happy<br />1 resolute<br />1 sleepy<br />1 itchy<br /><br />If the bottom three united, they'd hold a strong minority

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Posted By: <b>barrysloate</b><p>Sounds like Peter is comparing bidding at Sotheby's to shooting a game of craps.<br /><br />Given the potential risks of each, he may be on to something.

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Posted By: <b>davidcycleback</b><p>Of course, there was a Seinfeld episode where Elaine bid in a live Sotheby's auction. Someone's going to have to study that episode to see how the bidding was performed .... Interestingly, the lot she fictitiously won (JFK's golf clubs) was soon after won in the real Sotheby's auction by Arnold Schwarzenegger. Elaine's bid was portrayed as ridiculously high, yet Schwarzenegger paid many times more in real life.

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Posted By: <b>barrysloate</b><p>David- I actually brought that up in a recent thread...Elaine spent about 20K after a heated battle with Sue Ellen Mishkie, the braless wonder.<br /><br />The actual clubs sold for over a million dollars.

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Posted By: <b>John</b><p>Jeff, you might owe Peter an apology did anyone else get the same flyer in the mail???? <img src="http://photos.imageevent.com/piojohn3/smileys/77.gif"><br /><br /><img src="http://photos.imageevent.com/piojohn3/junkforumimages/huge/vegas%20copy.jpg"><br /><br /><br />All joking aside Peter your analogy doesn’t work for me either….<br />

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Posted By: <b>davidcycleback</b><p>I'm not as high end as you, Barry. My favorite Sit Com is "The Bob Newhart Show," where the closest they came to a Sotheby's auction was was when Bob won a frozen turkey in the office raffle.

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Posted By: <b>mr. moses</b><p>Do I love that magic pic of Festie's old assistant and NYC wonderkind holding up cards. Brian is da man (as he's said many times before <img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>Jeff Lichtman</b><p>John, your art has been missed.

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Posted By: <b>leon</b><p>Very nicely done.....I am honored. BTW, at one of the Net54 dinners a waitress spilled ketchup on me and in return I got to be a beauty pageant judge that night.....This kind of goes hand in hand with that.. (or hand in something else if I don't watch out)......Those babes are babe-alicious.....regards

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Posted By: <b>barrysloate</b><p>All those platinum blondes are beautiful...but that one in the back with glasses who looks like she needs a shave isn't so hot!

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Posted By: <b>mr. moses</b><p>that night I paid twice AND we paid an extra tip as all were too bombed to notice that the gratuity had already been added to the bill. Of course looking at breasts er ah beauties after spending a day on the floor at the National even Patrick Ewing would look good in a bathing suit....

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Posted By: <b>peter chao</b><p>Guys,<br /><br />I'm not really comparing casinos with auction houses. Casinos are for dummies like me...although I have won as much as $20,000 in one day...I won't tell you about the times I lost. Those days were not particularily fun.<br /><br />Going to an auction house is a more sophisticated form of gambling...but nevertheless it is a form of gambling. Let's say you bought the Gretzky T206 Wagner at an auction. There's no guarantee that the price of the card will go up in the future.<br /><br />Who knows a stupid book might come out and people will get disgusted with the hobby and the price of baseball cards will drop like a rock who knows.<br /><br />I'm not trying to discourage people from going to auctions. I'm just saying be disciplined when your at an auction. I certainly don't want my friends to feel ripped off when they walk out of the auction. <img src="/images/happy.gif" height=14 width=14><br /><br />Peter

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Posted By: <b>boxingcardman</b><p>"at one of the Net54 dinners a waitress spilled ketchup on me and in return I got to be a beauty pageant judge that night"<br /><br />Yeah, but it was a beauty pageant where they hold the National ... that's like being the toughest man in France. <img src="/images/happy.gif" height=14 width=14>