ok Lawyers- Is shill bidding illegal?

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Posted By: leon

I just had a nice conversation with a friend concerning shill bidding. He steadfastly thinks it is NOT against the law and I say it is. Understanding it might be different per state but I still think it's fraudulent and a crime. Am I wrong?

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Posted By: Matt

from wiki:
"Shill bidding may be a common practice on eBay. In his book Fake: Forgery, Lies, & eBay, Kenneth Walton describes how he and his cohorts placed shill bids on hundreds of eBay auctions over the course of a year. While many sellers consider shill bidding a harmless act, some believe that it may violate federal or state laws. Walton and his associates were charged and convicted of fraud by the United States Attorney for their eBay shill bidding. "

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Posted By: Jeff

Simply put, its fraud, whether prosecutable criminally or civilly, its fraud....

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Posted By: Matt

Shill bidding was included in the definition of criminal fraud in the 2006 Fraud Act.
http://www.addleshawgoddard.com/www/view.asp?content_id=2448&parent_id=2439

Specifically:
"The Fraud Act could be used to criminalise(sic) conduct which may previously only have amounted to a breach of contract or other civil law or moral obligation. Examples may include:
(SNIP)
'Shill bidding' on online auction sites. This is where sellers bid up the price of their own items using a second identity."

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Posted By: Jimmy

Its complete fraud and one of the worst actions you can do on eBay. There have been cases in the past and most of time eBay wins if there is evidence to prove it through computer connections and servers.

Jimmy

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Posted By: Jay

A more interesting question is whether there a difference between shill bidding and undisclosed auction house reserves.

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Posted By: Anonymous

I understand shill bidding is a terrible thing to do and should be punishable or be fined by the law. I dont understand why that same person wont sell for price that he oe she is looking to get for that item they are putting bogus bids on.

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Posted By: Peter_Spaeth

Not in substance, in my opinion.

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Posted By: Chris Nerat

Here's a question... Is it worse if the shill was done by someone who knows what the max bid is, as opposed to an eBay auction where the seller doesn't know what the current bidder's max bid is? Or are both actions equally as bad?

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Posted By: Alan U

Chris,

I think they are equally bad, the shiller, if that's a word, just has more risk in maybe over shilling, if that's a word, in the latter case.

-Alan

edited for spelling

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Posted By: Chris Nerat

Yeah, but as a potential bidder, to me at least, the shiller is scarier if they can see the max bid... for instance, if joe bids on a ball for a max of $100 and it is only pushed initially to $10, if the seller can see what the max is, they could push it all the way to $99 and Joe would be out that extra cash. Both shills are wrong, but this is worse IMO.

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Posted By: Alan U

I agree it's worse for the guy getting shilled, and easier for the shiller, but imho morally I think they are equally bad.

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Posted By: T206Collector

...that shilling is bad, but theoretically, if you were willing to pay $X for a card, how the bidding got to your high number really shouldn't matter. It really is just a fixed price auction, only the bidder didn't know it.

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Posted By: Chris Nerat

Yeah, but a "fixed price auction" really isn't an "auction." That would just be a standard sale or fixed sale, not an auction. An "auction" consists of a bidding process, no?

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Posted By: JP

I'm looking at these CardTarget auctions and am wondering if any of the "shareholders" are bidding on any of these cards. If they are, wouldn't that be shill bidding since they are technically the owner whether or not they are the seller? My opinion would be that it is...so I will be keeping my eye on those auctions. Hopefully they are being honest and avoiding their own auctions.

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Posted By: CoreyRS.hanus

"....but theoretically, if you were willing to pay $X for a card, how the bidding got to your high number really shouldn't matter."

Just because I'm willing to pay $X for it, doesn't mean I wouldn't want to get it for less than that if I could. So to the extent the shilling made me pay a price higher than I would have had to than without the shilling, it sure would matter to me.

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Posted By: Steve

...that shilling is bad, but theoretically, if you were willing to pay $X for a card, how the bidding got to your high number really shouldn't matter. It really is just a fixed price auction, only the bidder didn't know it.



I have to respectfully disagree with that statement.


Steve

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Posted By: Jim Dale

It nearly ruined collecting online....I think the fraud is rampant on ebay with multiple ID's and the like. In many cases it goes beyond shilling but to showing closed auctions at ridiculous prices until others decide to pony in thinking that is the "market" for the card now. I don't recall this happening to vintage, but its happening in other card markets - only a time before they start with graded T206 and other active cards.

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Posted By: T206Collector

...shilling is considered fraud and is an illegal practice: people are entering into a buying agreement based on false pretenses.

Why it doesn't bother me as a bidder is because I have never paid more for a card than I was willing to pay at that time. Would I have liked to have a shilled card cheaper than I was willing to pay? You bet. But that goes for anything I pay money for.

Ask yourself this question -- if you saw a card you were willing to pay $500 for on ebay, and you knew it was going to be shilled up from $300 to $495, would you still buy that card?

Maybe you change your mind because the value is really closer to $300. But, again, theoretically you are still making a transaction you were willing to make voluntarily.


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Posted By: leon

Your last post is certainly one way of thinking. I would guess less than a few percent of folks would think the same but hey....you are certainly entitled to your opinion. I completely disagree with it myself. If I knew I was going to be shilled I would probably not bid on a card even if I need it. Unfortunately it doesn't seem like any lawyers want to weigh in on the law but it does look to be illegal, as it should be. Fraud is fraud. I also don't agree with the statement about "isn't a hidden reserve similar?" No, I don't think it is. best regards

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Posted By: Matt

Does "hidden reserve" mean that the bidder knows there is a reserve, but the price of that reserve is hidden or does it mean that the bidder doesn't even know that the auction house has a reserve on the item?

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Posted By: Mike Mccullough

Sorry in advance if only lawyers can reply.... But,,,,,while were on the subject, shill bidding happens all the time in real life auctions and it seems that this practice is accepted.. Call it a hidden reserve, call it a pump to test the market... Whatever the case,, it is flat ass wrong and the people who do it are knowingly doing this to maximize there holding / interest in said auctioned item.. It is 100% fraud and ought to be illegal IMHO..

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Posted By: Peter_Spaeth

Paul isn't saying it's right, only that it is a fact of life that frequently sellers and consignors are not going to let their items go unless they reach a certain level. One can quibble about ethical distinctions but functionally it is no different than an undisclosed reserve. Personally, it doesn't really bother me for the reasons Paul stated, if I am willing to buy a card at a price I don't agonize about whether I could have paid less.

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Posted By: T206Collector

...I can see to not bid in an auction that is being shilled is if I wanted a free and fair market to determine the value of the item I am bidding on.

However, if card X is worth $500 to me, regardless of current market conditions, I am not going to let a little thing like seller fraud to disuade me from my purchase. It is identical to a hidden reserve that the buyer is not aware of.


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Posted By: Matt

Paul - I wouldn't bid if I knew shilling was going on because I wouldn't want to support fraudulent dealers. I want them to go out of business and not give the rest of the hobby a bad name.

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Posted By: T206Collector

...in order to avoid giving money to a fraudulent seller. Or even just not wanting to bid on the cards of an arse-hole dealer.

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Posted By: davidcycleback

An answer is that a dishonest person isn't dishonest about just one thing, and a fraudulent person isn't fraudulent in only one way. If you identify a seller who shills you, you've identified a seller who is willing to cheat you out of money in other ways as well. If you want to find out what other ways, keep on purchasing from the seller.

For example, if a seller is dishonest about the bidding, what makes you so confident he's honest about describing the auction lots you're bidding on?

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Posted By: Michael Steele

Fact of life? Our society should not accept the pharse "Fact of Life" when fraud is prevalent. Shill bidding is fraud period (IMHO).

If a seller or consignor wants to reach a certain dollar level, start the auction at that level or state that there is a reserve that needs to be reached. Anything else with the intent to only raise the ending price in an open market is deceit. Plain and simple.

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Posted By: Mike Mccullough

The Dr says:
"An answer is that a dishonest person isn't dishonest about just one thing, and a fraudulent person isn't fraudulent in only one way. If you identify a seller who shills you, you've identified a seller who is willing to cheat you out of money in other ways as well. If you want to find out what other ways, keep on purchasing from the seller.

For example, if a seller is dishonest about the bidding, what makes you so confident he's honest about describing the auction lots you're bidding on?"

I couldn't agree more. Its like having integrity, either you have it or you don't. You cant have just a little of it.

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Posted By: CoreyRS,hanus

".....functionally it is no different than an undisclosed reserve. Personally, it doesn't really bother me for the reasons Paul stated, if I am willing to buy a card at a price I don't agonize about whether I could have paid less."

Haven't we agreed that in substance house/shill bidding up to an undisclosed reserve is fraud? It sure does piss me off that I could have gotten it for less.

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Posted By: Hagar Henderson

While I knew it has happened, I was completely ignorant that it apparently happens so frequently. I must be more careful in the future and avoid those last minute bidding wars. I would prefer to simply use "Buy it Now" except that sellers seem to think that cards should sell for a minimum of double book value for buy it now.

Does anyone else remember the good old days when there were actual "stores" that sold cards? You could go inside and sit at a table flipping through an endless number of albums picking out the cards you wanted. You could usually pick out a stack of cards and make an offer to the dealer and the dealer would make a counter offer and then you'd make the purchase.

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Posted By: Nick G

Not that anyone wants to be shilled... but.. A lot of the time MAJOR auctions houses have lots that consignors themselves bid on for one reason or another. While those consignors aren't technically selling the item, they are driving up the price regardless. This happens ALL the time. Yet people dont say a word about it. Ebay gets the rap because... well its ebay. I dont know how many ebay auctions are shilled but feedback would suggest that way over 99% of the people are happy.

I personally never got shilling as it seems to be a risky business. If you shill to high and "win" the item.. well then what was the point? A lot of items are so "special" that if it appeared in there listings again, it would be quite obvious.

As far as is it illegal? yes it is fraud. Perhaps im too lenient but in the grand scale of things its very low on my list of things to lock up people for and spend tax payers money on.

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Posted By: Matt

"I dont know how many ebay auctions are shilled but feedback would suggest that way over 99% of the people are happy."

People who get bilked out of their life savings by a con artist are usually happy at the time as well. The question is, would ebay buyers still be happy once all the facts came out?

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Posted By: leon

"People who get bilked out of their life savings by a con artist are usually happy at the time as well."

nice....

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Posted By: Red

When consignors are considering what auction house to give their cards to, do you think that "rumors of possible shilling" have any influence on which auction house they choose to go with?

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Posted By: Glenn

I have many times seen high dollar/high profile cards listed at auction, completed with an apparent winning bid, then re-listed within a couple of weeks. The seller usually either makes no mention of this in the re-listing or claims that the high bidder backed out (about which s/he is often quite indignant). One wonders about the relative frequency of non-paying bidders versus accidental high-bid shills.

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Posted By: leon

Unfortunately those rumors might lead to more consignments.......ie protection for the sellers.....it sucks but it's probably reality....

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Posted By: T206Collector

"People who get bilked out of their life savings by a con artist are usually happy at the time as well. The question is, would ebay buyers still be happy once all the facts came out?"

Fortunately this is not the standard for most purchases in our economy. Let's say you sell a card, but didn't know it had a rare back. So you sell it for $50. I buy it, because I know it has a rare back. I sell it tomorrow for $5,000. You have absolutely no recourse and I did absolutely nothing wrong. Yet, the seller might be pretty annoyed to later learn that they did not have all the facts about the sale.

Flip it to the buyer. I buy a card for $5,000 because I think it has a rare Sweet Caporal back. I learn the next day that Sweet Caporal is about as common as it gets. I again have absolutely no recourse.

The standard for an acceptable and binding transaction simply cannot be that both sides have perfect information otherwise the sale is void. Again, fraud is fraud -- and, really, I do understand that shilling is fraud. But Shilling is simply not "bad" because one side didn't know what the other side did. It is the false representation of the circumstances of the sale from which liability arises.



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Posted By: Matt

Paul - I agree with what you said; I was discrediting the argument that just because a seller received positive feedback there was nothing wrong with the shilling. Whether the buyer is happy or not is irrelevant to whether shilling is wrong.

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Posted By: T206Collector

"Whether the buyer is happy or not is irrelevant to whether shilling is wrong."

But, again, since I as a buyer have never paid more for a card than it was worth to me at the time, my happiness as a buyer means I am not all that concerned about whether the seller exercised the utmost moralilty in the sale. If I found out he was a shiller -- or a drug dealer, or an abusive drunk, or a car thief -- I might not want to give him my money. But I spend most of my time making my purchases based on whether I am getting the value I expect from a transaction, not the moral compass of the seller.



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Posted By: Matt

"But, again, since I as a buyer have never paid more for a card than it was worth to me at the time, my happiness as a buyer means I am not all that concerned about whether the seller exercised the utmost moralilty in the sale."

That's the point that many of us disagree with you on. Personally I disagree for 2 reasons:

1) If he is dishonest, I don't want anything to do with the transaction out of fear he may be cheating me some other way (the argument above that you can't be only a little dishonest).

2) It's not good for the future of the hobby to support dishonest sellers.

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Posted By: T206Collector

...with both of these points. But we are living in a world of imperfect information, where shillers are the silent dishonest types. If I had hard evidence I was shilled, I'd complain. But in the absence of evidence, I have better things to worry about.

I have had two local pizzarias shut down because one of the owners was dealing drugs to the local kids, and the other owner was running a counterfeiting operation. But you know what, those guys made phenomenal pizza and I ate the pizza before I knew they were crooks. Does this mean I am going to do a background check on the next owner of a pizzeria that opens up in my town? Of course not. Would I have avoided patronage on both of these pizzaria's if I had known then what I know now? Of course. But, again, I'm just looking for a good slice of pizza, man.





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Posted By: pas

OK let's define it as including the following characterisitics:
1. Never shills a card or allows consignors to shill their auctions.
2. Never intentionally misrepresents a card's qualities.
3. Never alters a card or knowingly sells altered cards.

Now, how many dealers or auction houses with "integrity" can you name?

EDITED TO ACCEPT MATT'S SUGGESTION

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Posted By: Matt

Peter - I suggest you change #2 to "never intentionally misrepresents a card's qualities."

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Posted By: Joann

The difference between shilling and reserves is in when the seller makes his pricing decisions.

For reserves - both hidden and not hidden - the seller has to decide ahead of time what he wants to get for the item. It is something he has conceived before any buyer is on the scene. So the deal is basically set from the start.

For shilling, the seller doesn't have to decide or even know until the action is well underway. Shilling is an opportunistic and situational activity - the seller reads the bidding action and responds to bump prices up to whatever level he dares - regardless of what he may have been willing to take when the auction started.

It's fair to allow a seller to pre-set a minimum level at which he is willing to sell, but to allow him to try to bump the price around when there is active bidding underway to whatever he thinks he can get seems less fair. A reserve feels like "get what I think is fair". Shilling feels like "take everything I can from this person".

But despite that, I agree with Paul on this one. If something is worth X to you and you spend X, or X-Y or wherever you end up, there is an argument that you got what you wanted. Suppose someone is selling a certain car for $20K, and I am looking for the same car and willing to pay $30K. If the seller knows I'm coming to look at his car and gets wind that my price is $30K so he tells me the price is $30K and I pay it, there is only a certain extent to which I can hold him responsible for finding out my price and extracting it. There is an instinct to think that he somehow ripped you off - that anyone did when you find something you just bought was available for cheaper somewhere else - but the fact is that your willingness to pay X for it was the cornerstone of the final price.

Don't like it either way, but I understand Paul's point.

J

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Posted By: T206Collector

...perspective -- and, if you have an open mind, putting aside the stated revulsion at the concept of shill bidding for a moment -- I could make a pretty compelling argument that an item that sells with shilling, when done optimally, would actually more accurately reflect the true value of the market for that card.

The way a clean auction works, the winner pays only an increment above the next higher bidder, regardless of what he was willing to ultimately pay. Thus, you have a sale where the seller is not getting the value that is truly available in the market place. If a seller shills up to any point between the second highest legitimate bidder and the winning bid, the card is sold for what is actually closer to the available market value. That is good for the seller (obviously), the buyer would not knowingly be any worse off, and the market reflects the price point of the card more clearly.

Of course, if people understanding or even suspect that shill bidding is going on, most would be less likely to bid in those auctions, and thus the market would not be able to reflect true market value -- since so many bidders would stay home. But if it was done without any suspicion from buyers, and it was never disclosed, it would actually provide a more accurate reflection of the current market for a card.







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Posted By: leon

I disagree with the idea that "I am going to pay what I think is fair and who cares if I get shilled getting up to that point". The reason there is an auction is to set a market price, fairly. When there is shilling, the "auction" is not fairly representative of the market price...and it's fraud which is a crime. Call it what you like...it's still a crime ..regards

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Posted By: pas

When bidding increments are too low, an auction does not necessarily reflect market value

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Posted By: leon

That makes no sense the way I am reading what you said. Increments don't matter...it's the final price that matters...and if your are shilled to that max price then it's fraud.......Or please explain a little more...

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Posted By: T206Collector

Final price in an auction is actually only a set increment above what the SECOND highest bid was. If the FIRST highest bid was higher, a more efficient market would reflect a price as close to or at that bid.



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