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Category Icon   Jan 8, 2004, 05:00 PM
Auctions and bidder ethics
Numismatic Topics by Wayne Sayles
by Wayne Sayles

Pages: 1
Words: 788
Views: 12399
This article first appeared in The Celator, Vol. 12, No. 5, May 1998, p. 24.

It seems like auctions always bring out the best—or worst— in people. The latest flap on the internet is over the ethics of bidding in online auctions. Some bidders have become irritated because they have lost coins to last minute snipers who place a bid just before the sale closes. This, say some, is unethical.

What really are the ethics of bidding, not just in an online auction but in any auction? The answer is quite simple. There are no ethics in auctions. Nor should there be. In fact, I have seen good friends go at it in the auction room with great ferocity. An auction is a competition that is governed by very strict and well understood rules. One must adhere to those rules. If one does not adhere to the rules it will usually result in one's bid being rejected and in some cases it could lead to criminal prosecution.

How can it lead to prosecution? Well, in the United States at least, and I suspect in most other countries, it is illegal for bidders to conspire to fix the sale price at an auction—either up or down. For example, it is illegal for Charley to say to John, “If you don't bid on lot 13 I won't bid on lot 17. This seems like a harmless agreement, but it is nevertheless illegal. And, it makes some sense that it should be illegal. After all, auctions are not only for buyers, they are also for sellers. The playing field should be level, and the competition should not be tainted by conspiracy. It is also illegal for an agent to bid up a client's bid. That is, to arrange for another to bid against his own bids. Why would someone do that? To increase the agent's commission. Does it ever happen? It has happened, but that doesn't make it legal. And, if there were any ethics at all in the auction room one would be to adhere to the law and rules.

The bottom line is that the person who bids the most for a coin wins it. It does not matter whether that bidder has a particular strategy, as long as it falls within the rules of the auction house and the laws of the state in which the auction is held.

What we are dealing with here is a situation where someone wants to buy a coin as cheaply as possible, and then gets upset because someone else paid more. In a public auction, the bidder can sit in the room and watch until the final moment and then place a bid before the hammer falls. The difference between that and a mailbid or online auction is that in the latter a bidder may not have the opportunity to respond. This still does not make it unethical for bidders to place a last minute bid. If a collector is willing to pay X dollars for a coin, then that should be the collector's bid. If the bid is exceeded, it should not matter whether it was exceeded on the first day or the last day of the sale. If that same collector is willing to buy a coin, but only if it goes cheaply enough, then there are strategies to accommodate that also. In the latter case, one should realize that there is a risk of losing the coin to another bidder.

If the collector is really a bottom feeder and only wants to buy coins that are selling at much less than market value, then there are different strategies. In fact, there are a lot of strategies, and none of them have anything to do with ethics. It is not unethical, for example to bid $10 on a coin that is estimated at $100. It may be impractical however. If the seller does not want to sell a coin below a certain level, it will not be sold. There are always options for the seller to be safeguarded. It is also very irritating to the auction house to enter a lot of bids that have no chance of winning. Therefore, some houses require minimum bid limits, which are usually a percentage of the estimate. In a “no reserve” auction, any bid is ethical.

In conclusion, the auction venue is one of laws and rules, not of ethics. The bidder in an auction has no responsibility to be gentle to his or her fellow bidders.

-- Wayne Sayles
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