Shill Bidding

[ullmandds]

In light of constant talks of shill bidding in the hobby...in addition to me being sick and laid up at home...I've been giving the cincept of "shill bidding" more thought.

Shilling is rampant and in many cases allowed in the auction world. Whether its antiques, collectibles, art or real estate...shilling seems to be a commonly used strategy to ensure the hammer price ends up close to or above sellers "reserve" so as to avoid a higher % of "no sales" which is bad for everyone.

So why should this hobby be immune? I'm in no way advocating this in any way. I think the key is the "reserve." And the problem is that most of the time the reserve is only known to the actually consigner and sometimes the auctioneer...but not revealed to the public.

And the purpose is obviously to encourage spirited bidding. And how boring would an auction be if every card had a published reserve around the retail value.

I recently won a card from PWCC...and there was what appeared to me to be very suspicious...likely shill bidding. I questioned brent and he agreed the bidding was unusual...but he had seen this type of very small incremental bidding to reveal the winning bid before.

And...he said that he knew for sure the next highest bid was legitimate...sooooo. While I appreciated his time and thought I still was a little buggered thinking as we all do...I could have likely gotten the card cheaper.

But maybe this just isn't realistic in this day and age with information and data everywhere. It seems as of the last 10-15 years many have come onto this board asking what a psa 3 cobb(red)...for example is worth...expecting there to be a "market" price for one as if it were an oz. of gold or something.

And we all know there are many other factors that go into the equation than just grade.

So will shill bidding always be around and might it even propogate further?

Sure seems so...unless auctioneers intervene.

I stumbled upon this scientific analysis of shill bidding and possible ways to combat it. IT's very interesting although I skipped all of the calculus...it made my head spin. Maybe frank can explain it to us.

http://oz.stern.nyu.edu/seminar/fa01/1108.pdf

[Pilot172000]

There were several cards last night in particular that I was incrementally bid up on only to lose at the very last second or because I quit bidding thinking it was suspicious. When you lose 7 auctions by the combined price of $8, you wonder a little. I mean it didn't matter if I quit bidding an hour before or at the last minute all of them were my minimal amounts.

[botn]

Originally Posted by ullmandds

So why should this hobby be immune? I'm in no way advocating this in any way. I think the key is the "reserve." And the problem is that most of the time the reserve is only known to the actually consigner and sometimes the auctioneer...but not revealed to the public.

And the purpose is obviously to encourage spirited bidding. And how boring would an auction be if every card had a published reserve around the retail value.

Using a reserve ends up being great for the consignor but as you point out takes on the flavor of more of an asking price which is not in the spirit of an auction where buyers want to feel they set the prices on their own. I tend to think bids protecting the consignment happen more often than we know.

I recently won a card from PWCC...and there was what appeared to me to be very suspicious...likely shill bidding. I questioned brent and he agreed the bidding was unusual...but he had seen this type of very small incremental bidding to reveal the winning bid before.

And...he said that he knew for sure the next highest bid was legitimate...sooooo. While I appreciated his time and thought I still was a little buggered thinking as we all do...I could have likely gotten the card cheaper.

From what I understand as well as my memory of Brent's posts on forums, bidding and bidders have always been legit even if they seem odd. Maybe they are sometimes but he cannot possibly know in your case if a friend of the consignor was placing those small bid increments so to write it off as such is simply his sweeping it under the table.

[Sean1125]

Gixen.com

[Peter_Spaeth]

Originally Posted by Sean1125

Gixen.com

LOL. Too easy I guess.

[Yoda]

I am really naïve about the nuances of shill bidding, not that I really want to know too many details, but am curious about the end game with a major card
in a major auction with a major auction house. (Harvard Business School has assuredly already picked up on the Mastro debacle as a good case study.) Presumably, a shill bidder if his bid won the auction would be held harmless by the consignor and be reimbursed for winning. Some kind of side agreement, I suppose. If there are more things more egregious than paying more for a long coveted card because the price has been driven up by greedy, unfair means, then I can't think of it at the moment.

[swarmee]

Not every time has Brent said that his bidding patterns were irregular but honest. He has agreed that there have been instances of shill bidding revealed to him and he has cancelled them and claimed that he blocked the consignor/bidder from making any additional bids in his auctions.

[Brian Van Horn]

Originally Posted by swarmee

Not every time has Brent said that his bidding patterns were irregular but honest. He has agreed that there have been instances of shill bidding revealed to him and he has cancelled them and claimed that he blocked the consignor/bidder from making any additional bids in his auctions.

If the shill bidding is going on with Brent's auctions, then it is a highly risky procedure. It would also not be the brightest move in the world. Mastro and its spinoff Legendary were caught. Doing it on eBay, although traffic may help to hide the procedure, any entity that would be investigating the behavior would be able to see patterns of behavior and would be able to build a case from that end. The harder part would be linking actions on PWCC's end to the alleged shill bidding. If that happens, then........

[jhs5120]

Is there any industry other than sports memorabilia that frowns upon shill bidding? I have witnessed hundreds of auctions that openly are shilled by the auctioneer (up to a hidden reserve) to garner interest and favorable outcome to the seller. It seems like sports collectors have turned a bogey man out of an otherwise unanimously accepted positive influence on auction house experiences. Just my two cents.

[MetsBaseball1973]

One thing I personally believe is there is a direct correlation among not having the funds to win a desired item, losing an auction, and ranting about shill bidding and rising prices.

[Peter_Spaeth]

Originally Posted by jhs5120

Is there any industry other than sports memorabilia that frowns upon shill bidding? I have witnessed hundreds of auctions that openly are shilled by the auctioneer (up to a hidden reserve) to garner interest and favorable outcome to the seller. It seems like sports collectors have turned a bogey man out of an otherwise unanimously accepted positive influence on auction house experiences. Just my two cents.

Prepare to be vilified.

[Jeffrompa]

Originally Posted by jhs5120

Is there any industry other than sports memorabilia that frowns upon shill bidding? I have witnessed hundreds of auctions that openly are shilled by the auctioneer (up to a hidden reserve) to garner interest and favorable outcome to the seller. It seems like sports collectors have turned a bogey man out of an otherwise unanimously accepted positive influence on auction house experiences. Just my two cents.

That's what Bill Mastro said .

[ullmandds]

Originally Posted by MetsBaseball1973

One thing I personally believe is there is a direct correlation among not having the funds to win a desired item, losing an auction, and ranting about shill bidding and rising prices.

well I started this thread and I have been winning everything in sight lately!

[nat]

So there are a few different things you might be trying to do with shill bids:

(1) You might be trying to ensure that your item sells for your minimally acceptable price.

(2) You might be trying to squeeze every dollar out of bidders.

If (1), it seems to be unnecessary. Just start bidding at the lowest price that you'd take. It'll knock out some bidders, but those bidders wouldn't have stuck around in a shilled auction either.

It's (2) where shilling plays a role, and is pretty unambiguously ethically problematic. One reason that it's ethically problematic is that it sends a signal to bidders that there is a market for this card, when, in fact, there isn't. It's a kind of deception. Another related reason is that bidders are participating in what they reasonably believe to be an honest auction, when it's not that at all. (Both problems could be fixed if the auction house announced ahead of time that shill bidders are going to participate in this auction. But of course that's not going to happen.)

In any case, I sure hope that auction houses make shillers who win their own items pay the full price (including BP), and send them a check for their share of the sale, which then needs to be reported in income taxes. If shilling could cost you 30-60% of the value of the item (depending on your tax bracket and local and state tax rates), that at least is some incentive to not do it.

EBay is a different animal, because the seller can just cancel the auction if it looks like they are likely to win their own card. Is there any mechanism to discourage this? Can the high bidder leave negative feedback if an auction they participate in is canceled?

[jhs5120]

Originally Posted by Jeffrompa

That's what Bill Mastro said .

Bill Mastro broke the rules of his own auctions. If Mastro had put in language in the terms and conditions that stated certain lots have pre-established reserves and will be subject to house bids up to the reserve, than Mastro would not be in jail. (Assuming he only bid up to the reserve).

Christie's, Sotheby's, Phillips and most every big and small auction house in the world has similar language. I believe sports memorabilia is the only industry that frowns upon the practice.

[Exhibitman]

This is really simple, guys:

reserve = legal
shilling = illegal.

No moral judgment, no excuses, just simple criminal conduct.

You want to use a reserve, use a reserve. Don't pretend there is a market auction going on if there isn't.

As for why shill, it is a long con: create an inflated market price then sell into it later on. I saw the same thing done to jack up the prices of real estate in the 1980s-1990s: fake sales with straw man buyers to inflate comparable sales prices, followed by real sales at inflated prices.

[jhs5120]

Originally Posted by Exhibitman

This is really simple, guys:

reserve = legal
shilling = illegal.

Simple as that.

I agree, but does our hobby differentiate? If PWCC included in their auction description that there is a hidden reserve on some lots and may be bid up to that amount by the house, will our hobby accept this?

I don't believe the use of hidden reserves (even though legal) is ever an acceptable practice with sports auctions.

[Jeffrompa]

Everyone is bored with this subject . I am too . I guess its a fact of life people are lying cheaters .

[Leon]

Originally Posted by jhs5120

I agree, but does our hobby differentiate? If PWCC included in their auction description that there is a hidden reserve on some lots and may be bid up to that amount by the house, will our hobby accept this?

I don't believe the use of hidden reserves (even though legal) is ever an acceptable practice with sports auctions.

I think as the hobby matures it is a sad but true fact that if you don't know the hobby market you can get taken by a shill. Of course they can and do happen anyway, and collectors get taken, but knowledge is always key. There are several auction houses that have that practice of bidding in their own auctions. I don't agree with any of them personally but if I want to bid then I accept the rule. As Adam said, shilling is illegal and setting reserves isn't. And for some reason, if an AH says they bid on their own lots it's ok. So as long as you say you are shilling (house bidding) then it's all A-OK. (just not to me)

[Snapolit1]

I suspect that the guy who gives the Mantle card to PWCC tells his best friends to run it up till it gets to a realistic number and then see what happens. No shiller with an empty wallet really wants to end up holding that size bag when the music ends. Maybe it has more to do with the insanity of PWCC starting a $75,000 Mantle card at a penny.

I like PWCC. They seem to run a very professional gig. Customer servive and shipping is excellent. If you feel otherwise there are other places to buy cards. I doubt Brent needs to worry where any of these items really end up. He must have a warehouse half the size of Washington (or wherever he is.)

[jmb]

I've posted this before but I prefer BIN auctions. If it's within a reasonable window pricewise and the card has eye appeal I'll buy it.

I did however, recently bid in a PWCC auction (1st time) and only bid once in the last 5 seconds live. I ended up winning the card for a lot less than the bid I entered.

[Snapolit1]

I always feel a lot better putting my ultimate high bid on ebay than on a website controlled by the auction house. I've had the same experience with PWCC on eBay where my final price was not reached and I won the item.

[botn]

Originally Posted by jmb

I've posted this before but I prefer BIN auctions. If it's within a reasonable window pricewise and the card has eye appeal I'll buy it.

I did however, recently bid in a PWCC auction (1st time) and only bid once in the last 5 seconds live. I ended up winning the card for a lot less than the bid I entered.

I too have gotten some fair deals on PWCC auctions. He lists 10,000 or more auctions a month. Even if there is shilling or artificial price setting going on it does not mean every consignor is participating. I think it is safe to say that legit consignors are wanting to get their share of these world record prices and might be coming up short but won't know that until after the auctions conclude.

[jbbama]

One thing I know for certain... ebay doesn't give a damn about shill bidding or even a constant pattern of shill bidding. I have reported many instances, as long as they get their fees, who cares , right?

[Rich Klein]

And of course, there is always the example of "Bid what you are comfortable with" and if you win at that price wonderful and if not, so be it.

That way you don't worry about "shill" bidding and you are fine with your bids as they are.

And frankly, since there is no real way to stop shill bidding, then accept the issue and move on.

I know that means you might spend more money than you hoped, but in that case, revert back to the 1st sentence of this post. What a "shiller" wants you to do, is get caught up in the auction and go past your max bid.

That's why, in at least certain auctions, it behooves one to make their bids and then if they win or lose at their prices. That is also true for some catalog auctions -- some close lots individually if you are the only bidder going into extended time and others open up the whole auction if you have bid.

Look at those auction rules and again figure it out. As for EBay, if your bid comes in early and it holds, wonderful -- and if not well keep looking and you will find items at your price eventually.

Of course there is always an option of outright purchases as well if you feel the price is fair.

MOO

Rich

[Pilot172000]

I prefer BIN and have mixed results at auctions. I will say that I have had good experiences with PWCC lately and can't complain too much. I think Shill bidding is a negative on the hobby, but also acknowledge that its nearly impossible to police these mega auctions. Like in anything we take the good with the bad.

[frankbmd]

Originally Posted by ullmandds

In light of constant talks of shill bidding in the hobby...in addition to me being sick and laid up at home...I've been giving the cincept of "shill bidding" more thought.

Shilling is rampant and in many cases allowed in the auction world. Whether its antiques, collectibles, art or real estate...shilling seems to be a commonly used strategy to ensure the hammer price ends up close to or above sellers "reserve" so as to avoid a higher % of "no sales" which is bad for everyone.

So why should this hobby be immune? I'm in no way advocating this in any way. I think the key is the "reserve." And the problem is that most of the time the reserve is only known to the actually consigner and sometimes the auctioneer...but not revealed to the public.

And the purpose is obviously to encourage spirited bidding. And how boring would an auction be if every card had a published reserve around the retail value.

I recently won a card from PWCC...and there was what appeared to me to be very suspicious...likely shill bidding. I questioned brent and he agreed the bidding was unusual...but he had seen this type of very small incremental bidding to reveal the winning bid before.

And...he said that he knew for sure the next highest bid was legitimate...sooooo. While I appreciated his time and thought I still was a little buggered thinking as we all do...I could have likely gotten the card cheaper.

But maybe this just isn't realistic in this day and age with information and data everywhere. It seems as of the last 10-15 years many have come onto this board asking what a psa 3 cobb(red)...for example is worth...expecting there to be a "market" price for one as if it were an oz. of gold or something.

And we all know there are many other factors that go into the equation than just grade.

So will shill bidding always be around and might it even propogate further?

Sure seems so...unless auctioneers intervene.

I stumbled upon this scientific analysis of shill bidding and possible ways to combat it. IT's very interesting although I skipped all of the calculus...it made my head spin. Maybe frank can explain it to us.

http://oz.stern.nyu.edu/seminar/fa01/1108.pdf

The paper referenced above is quite limited in scope and addresses only seller shilling, which, with the author's solution, benefits the "auctioneer" greatly. The system described by all the formulae assumes that the auctioneer is "honest" and would not shill to benefit himself. It also fails to address the "new" market value that could occur as the result of a shilled auction and its impact on future auctions. I would not recommend spending too much time trying to understand what the authors are promoting. The real world is more complicated and unfortunately this paper does not address real world issues. Ask Mastro.

[ullmandds]

Thank you for the executive summary Frank! But it is an interesting proposal .