Posted By:
kevin MActually, Collusion between two parties not to bid is illegal in many states (at least it is in New Hampshire), as well as many European Countries. I have been to more than a few auction houses were it is posted on the wall.
But, Lets stay away from what is illegal and legal and stick with ethics. Just because something is illegal, does not always mean that it is wrong. I am sure that everybody here has driven over the speed limit, but didn't let the ethics of thier actions keep them awake at night.
In terms of ethics, shill bidding and collusion are both equally as bad, actually collusion may be worse as I will explain below.
I think that auction houses often feel the need to shill, because they know that people are out there colluding.
People often shill just to hit a reserve price, but colluding between parties not to bid is only done to keep the price down. In the first scenerio, nobody is getting screwed because you were not going to win the item in the first place, however in the 2nd scenerio, both the auction house and consignor are getting screwed.