Auction House Conflict of Interest

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Posted By: JimCrandell

Sorry to disappoint you Larry but I am not doing this.

Actually I thought Mastro's prices for a fair amount of their material was somewhat disappointing.

Jim

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Posted By: Larry

I really do not blame you Jim, that would be a tough battle, I was being very hypothetical here...unfortunately, that is the ultimate stand that will really prove your point, which I do understand and respect, ethics vs. logic, it is hard to be totally efficient and pragmatic at the same time.

The #'s of mastro last auction were for the majority....awesome...1949 Bowman set $120K...1933 Goudey mid grade set $60K, T206 set mid grade $95K..etc.......they did very well Jim.

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Posted By: joe

Sorry to see all this negative print about Mastros's auctions. I have known
Bill Mastro since the late 70's and he was always a stand-up guy with me. I purchased many cards from Bill and Frank Nagy at the earlier shows. This was before his auction house was developed and when he set-up tables at the shows with Frank Nagy. I have bought and consigned items with his auction house and was always satisfied with the results. I am not a fan of his $100.00 minimum bid auction catalogs but they do serve a purpose. As far as his employees bidding on items, not sure if it matters, there are some strong bidders out there for premium items and the majority of them don't even know this board exists.
I have known Josh Evans about the same amount of time, and this was before he started his auction house. He is a stand-up guy also. Of course his auctions lean towards memorabilia and New York items, so not much there for me.
Believe it or not there are probably many bidders out there bidding on friends or relatives consigned items with their knowledge. I see no way to stop this practice.
Not sure if any of this means anything, but these posts remind me of trying to take down a a Popular athlete, Successful Company or Major movie star. That seems to be the American way lately.

Joe

Ty Cobb, Spikes flying!

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Posted By: Marty

As a buyer, how many people have had to pay more than they actually bid?
As a consigner, how many people would rather take a lower price than have an employee buy the lot?

If you are concerned about being shilled, stay up and place one bid at a time, and do not alow anyone to know what you are interested in.

Maybe we could demand that auction houses do not allow any employee to sell anything except through another auction house. Maybe the employees could not have any collection. Maybe they could not have friends that collected. How about if they did not have knowledge about what the auction house sold, that way they would not be tempted.

For me, I do not care who owns what I am buying as long as it is described and represented correctly and I am not chaged more than I bid. When I am selling, I want to get the most for my items, I do not care if a Mastro employee or Doug Allen or Barry buys the item, as long as I get paid.

No, I do not want to be shilled, but if I am, I will not pay more than the highest bid that I put in. If someone is trying to run up the price and I do not bid again, someone else will be the proud owner. I do not care who is selling. Not everyone want to take the risk of selling through auctions so the house buys rather than another collector or dealer. There are probably some that sell there own stuff to round out the auctions.

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Posted By: barrysloate

For all those who are so aware of possible auction house shilling, a policy which I of course have no interest in defending, how many people on this board have formed groups to buy large lots in order to keep the price down and not have to go head to head? You know what- there's a word for that and it is called collusion. And it is illegal. And I've been a part of a few of these groups, so in that respect I am no better than the next guy.

What happens to a consigner when bidders collude? He gets screwed, that's what. I know people in this hobby, good friends of mine, who when they see something they have to have they will call their likely competition and ask them as a favor to please not bid on this lot, and I will do the same favor for you down the line. That's collusion, and it is illegal. And the consignor loses a lot of money as a result.

For all the shilling that may or may not go on, colluding on a lot to keep the price down is just the mirror image of it. So in a sense, bidders are guilty of the same transgressions as the auction houses. As I said earlier in this thread, this hobby is not about honesty and integrity. It's about stuff. When good stuff comes around, nothing else really matters.

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Posted By: Jeff Lichtman

Barry, you're suggesting that bidders and auction houses are on the same footing in auctions; it's simply not true. Somehow I suspect the auction houses more than make up for the occasional "collusion" that goes on. Do you think the ratio of shill bidding + false authentication + undisclosed conflicts of interest v. "collusion" is about 100 to 1? More?

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Posted By: barrysloate

It's impossible for me to speculate the ratio of bidding collusion vs. auction house shilling. You may be entirely correct but I have no data.

But I will say this: shilling is an artificial attempt to keep prices high. Collusion is an artificial attempt to keep prices low.

Please explain the difference to me.

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Posted By: Alan

As Barry would say, "What have I missed ?"
I have a feeling this tread is going to get ugly.

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Posted By: Jeff Lichtman

How about this for a start: the FBI is purportedly investigating one but not the other?

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Posted By: barrysloate

That's a fair distinction, and it's possible collusion isn't even on their radar. But I have read stories of criminal cases brought against bidders in major auctions for colluding to keep prices down.

However you look at it, it's illegal and there is a victim involved, and that's the owner of the lot (and to a lesser extent the auction house).

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Posted By: Jeff Lichtman

Perhaps JP Cohen and Bill Mastro can come into our forum and tell us some of their sad tales of being victims of 'collusion.'

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Posted By: barrysloate

Ain't gonna happen.

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Posted By: Peter Thomas

I'm don't think it is as simple as that. I think groups forming to go after sets, may actually increase competition and lead to higher prices as often as not. It is true that when some people who might go head to head team up, competition may be decreased, but by teaming up they frequently go after a set that otherwise the individuals would not bid on at all. I think that this is frequently the case with small E sets in low to middle grade. On items like this you get 3 groups of bidders. Someone look to acquire a set that they do not have; someone looking to buy the set a break it up to make a profit; and groups working on sets that need a few cards or upgrades that agree how to split the set in advance and how much they are willing their total bid to be. I don't think this is collusion in anyway.

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Posted By: barrysloate

I think it is collusion in some way.

I agree that if a collector only needs a few cards he might not want to bid on a whole set. If there's a group of 100 E107's and you need two, you probably don't have the six-figure budget to buy the whole lot. Point well taken.

But the fact is if it takes out some of the competition it can lead to a lower price for the lot.

And while I will not name names I know people who make phone calls during auctions to their likely competition and ask them to please not bid on a piece they really want. Is that collusion?

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Posted By: Tim Newcomb

I'm sure that bidding collusion is illegal in some situations, but I don't see how you can claim it is on the same footing as bid shilling. For a group of people to say, "you bid on this lot and if you win, I'll pay you X for this card and Y for that card" doesn't seem any different to me from somebody winning the lot on his own and offering some of the cards to friends at a proportional price.

To put it another way, I don't see how you can equate refraining from an action (not bidding) with a positive action (shilling). No one has any obligation to bid on anything in any auction. But auction houses, according to their own "max bid" policies, incur an obligation not to bump up the price of a lot to a bidder's max unless it is through other legitimate bids.

That to me is the ethical difference. And it sounds like the FBI understands the distinction quite clearly.

Seeing Peter's post, I see there is another good argument. The only way I have ever "bought" in a Mastro auction is as part of a bidding group. On my own I could not compete for their lots. I'm sure there are many others like this. It makes sense to me that if we band together, we may well increase rather than decrease the number of bidders who are capable of actually placing a winning bid.


Tim

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Posted By: Peter_Spaeth

I agree with the above. If two or more people who otherwise would not have bid form a purchasing group, that is not collusion. Buyer collusion is when people agree not to bid against each other, or agree among themselves not to pay more than a certain price.

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Posted By: barrysloate

Yes Peter, but people join groups for two reasons: 1) because they only need a handful of cards; 2) and it will cost them less money to join the group rather than bid against the it. Part of their goal is to keep costs down.

If everyone feels shilling is a greater crime, I have no problem with that. I just like to examine the situation from all angles, that's all.

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Posted By: Peter_Spaeth

Barry you are correct it all depends on what would have happened "but for" the formation of the group. If the members would not have bid, it is a buyer's cooperative, not collusion. If they would have bid against each other, it is collusion.

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Posted By: barrysloate

But it's difficult to determine the intent of the group.

Since Peter Thomas had a strong opinion on this matter, let me pose a direct question to him:

Suppose you decided it was finally time to sell your T204 set, and you had the option either of going to auction or selling it privately. Since you do have the #1 set on the registry, you decide that the potential upside is so great that the only way to go is auction. You give it to one of the major players and then sit back and wait for the fireworks.

Then halfway through you find out that the collectors with the #2, #3, and #4 sets on the registry have spoken with each other and decided that it would be just crazy for them to all go head to head. So they decide to pool their resources, pick a designated bidder, and then split the cards three ways.

And at the end of the auction you look at the final bid and frankly, you're a little disappointed. You thought it would go higher.

What is your reaction?

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Posted By: Peter_Spaeth

"But it's difficult to determine the intent of the group."

That's why we have lawyers.

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Posted By: Peter Thomas

I hope this a question for my heirs, but you never know. My T204 set is a higher grade set than the sets that I was discussing, but the issue is still there. I think that what you outline could happen, but I think there is just about as good a chance that it would help competition. I think that because the set is quite high grade and includes a Johnson 8, that it would attract bidders with deep pockets and by grouping the existing set collectors you might make them competitive with hopefully at least 2 deep pocketed bidders and that would leave me smiling on the beach.

I think that your auction format with mostly single cards lots, with a few small card lots is about as open and competitive as possible. If you really want to talk about collusion, look at DOD private contractor overseas bidding, but don't get me going, lets stick to cards.

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Posted By: barrysloate

Peter- I agree with you that the pool of bidders is large enough that the set would still reach its level, but I was looking for an example that would prove my point and that is the best I could come up with.

Since I am one of the few fulltime dealers who comes on this board and actively participates, I guess I have a different view of the hobby than the others. I am inside the auction business looking out; the rest of the board is on the other side of the fence. And I understand that.

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Posted By: Cobby33

I understand and agree with the collusion theory. However, more times than not, as Peter points out, these groups are seen as co-ops, which actually drive the prices up.

Take, for example, the recent Mastro Pirate horde. One buyer ended up winning that lot. However, had there been an organized co-op, the likelihood of, say, 100 bidders paying $10K each (~1 card per)- would have actually driven the price up. The same analogy could be used for any grouping of cards. I think that benefits the majority of buyers AND the consigner AND the auctioneer and makes these cards available to the general population, as opposed to a handful of buyers who can afford to spend close to $1M on cards. I cannot think of an example, in this business, of co-ops driving prices down.

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Posted By: Dave

I was under the impression that collusion meant that there had to be an intentional plan to defraud or deceive an entity.....

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Posted By: barrysloate

That may be the technical definition of it, but I was using it in the context of bidders making secret pacts or forming groups to eliminate competition and keep down the cost of a lot.

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Posted By: Peter_Spaeth

Collusion requires an agreement to do something unlawful, i.e. fix prices, allocate markets, etc. Decpetion has nothing to do with it.

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Posted By: peter chao

Peter S., Barry, Guys

There are federal laws against collusion, but none that apply with regard to auctions, so whether auction houses are colluding to jack up prices or buyers colluding, there's no law against it.

However, using collusion in its' general definition, it would include buyer's cooperating in any auction. It even includes buying partnerships. Look at it this way, who's losing out when buyer's collude. That's right, other buyers are losing out. They end up paying more than they should have in order to obtain the cards they wanted.

Believe it or using the general definition of collusion, it even covers the situation when you stop bidding to allow a friend to win at a lower bid.

So guys like Barry need to stay in business so don't make it too difficult on him. But Barry are all those lots are yours? Wow, no wonder you've given up on collecting, you're making too much money. How do I get into your line of work. Working your auctions at night and Seinfeld jokes during the day, sounds like the life to me.

Peter C.

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Posted By: barrysloate

It's not as great as it appears to be, but why complain.

Nobody would listen.

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Posted By: Cobby33

col·lu·sion

–noun 1. a secret agreement, esp. for fraudulent or treacherous purposes; conspiracy: Some of his employees were acting in collusion to rob him.

2. Law. a secret understanding between two or more persons to gain something illegally, to defraud another of his or her rights, or to appear as adversaries though in agreement: collusion of husband and wife to obtain a divorce.

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Posted By: PAS

You said: "There are federal laws against collusion, but none that apply with regard to auctions, so whether auction houses are colluding to jack up prices or buyers colluding, there's no law against it."

Ever hear of the federal antitrust laws, specifically the Sherman Act? If auction houses conspired to fix prices why wouldn't it apply?

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Posted By: PAS

brief excerpt from Wikipedia:

In 2000, allegations surfaced of a price-fixing arrangement between Christie's and Sotheby's, another major auction house. Executives from Christie's subsequently alerted the Department of Justice of their suspicions of commission-fixing collusion. Christie's gained immunity from prosecution in the United States after a longtime employee of Christie's confessed and cooperated with the U.S. Federal Bureau of Investigation. Numerous members of Sotheby's senior management were fired soon thereafter, and A. Alfred Taubman, the largest shareholder of Sotheby's at the time, took most of the blame and he and Dede Brooks (the COO) were given jail sentences.[1][2]

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Posted By: Max Weder

Peter C

Sotheby's and Christies have had numerous legal problems in relation to price fixing. Here is but one of many links http://www.usdoj.gov/atr/public/press_releases/2000/6639.htm in which Sotheby's agreed to pay a $45 million criminal fine in a prosecution by the federal Department of Justice

Max

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Posted By: Jeff Lichtman

Peter C, it is exhausting keeping up with the mountain of misinformation which flows from your keyboard.

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Posted By: PAS

Maybe as part of the plea bargain Congess amended the Sherman Act to carve out an exemption for auction houses. Then again....

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Posted By: Jeff Lichtman

Yeah, I'm afraid Alfred Taubman and the 10 months he spent in jail might disagree with Peter's legal conclusion.

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Posted By: Peck

Barry is 100% right. A group formed to go after one or more lots in an auction with the intent to resell to members of the "pool" is against Federal Law and the punishment is prison time. The Federal Government busted Antique Dealers in Pennsylvania for pooling a few years back and it was well reported in the Maine Antiques Digest and other antiques trade papers. I remember some of the first threads I read here as a lurker were people looking for others to join them in spliting up auction lots. I thought these guys are crazy. That's a Federal offense that could draw prison time and they are right out in the open with it.

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Posted By: PAS

Perhaps Mr. Taubman's legal counsel was not sophisticated enough to realize no federal laws applied to the alleged price-fixing activities.