Live From Sothebys

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Posted By: Corey R. Shanus

Exactly what does the auction house disclose that makes it fair? They don't tell you the reserve, only that by law that it cannot be higher than the low-end estimate. They don't announce when reciting a book bid on behalf of the consignor words to the effect -- "Hey everyone, this is not a bid from a real bidder, only a bid on behalf of the consignor". If they disclosed that, then I would agree that proper disclosure was made.

Also, what does this practice have to do with the issue of a consignor refusing to put his/her piece in an auction unless it has a reasonable reserve? Of course there is nothing wrong with refusing to sell your item for less than a reasonable price, and I agree it would be stupid to do otherwise. But why then cannot the reserve be announced and the bidding begun at the reserve price? Answer -- to try to give the impression to some prospective bidders (and remember that phone bidders could find it very difficult to know if a bid is a book bid on behalf of the consignor or a real bid) that there is real interest at those levels (when there is not) and thus try to create additional interest in the lot. So, to answer the question, by my ethics I find it unfair to try to create a false impression that there is real bid when in fact there is not.

And why do auction houses do this? Because in some cases it works. If they felt all the prospective bidders would never be fooled, why then would they feel the need to recite ficticious book bids?