Collusion in the OA Market - Right or Wrong?

[delekkerste]

So, we're having a discussion in The Water Cooler forum about the rights and wrongs about collusion (in light of the death of ex-Chesapeake Energy CEO Aubrey McClendon, who had been indicted on charges that he conspired to collude with another firm in the sale of various oil & gas leases). The conversation moved over to the topic of collusion in the original art market, which, frankly, I think is a very different animal than shilling (explained below). And, frankly, which I think is not even wrong. Here is what I said:

 

Collusion is rampant in the original art hobby. A couple years ago, a near-Grail piece for me turned up at auction, and I asked some friends/potential bidders for the piece if they could find it in their hearts to not run the price up on me. Was that wrong? I don't think so, not in the least. A friend of mine with an impeccable reputation in the hobby asked if I would not run the price up on him on a piece recently at auction that he'd been trying to find for a decade. Is there anything wrong with that? If collusion is a crime, then just about everyone in the hobby who has friends that collect similar stuff is probably guilty to some extent. Even the dealers openly colluding together - how wrong really is it? Do these guys comprise the entirety of the market? Does the seller have some birthright to get the price that would prevail if friends compete against each other? I personally don't think there's ANYTHING wrong with any of the situations described above.

 

Sure, when you're a duopoly (like Sotheby's and Christie's who were charged with collusion a while ago and the CEO of Sotheby's did jail time) or oligopoly and you can effectively control the market through your collusion, that's arguably a beast of a different color. But, two friends, even if they're dealers, who agree not to run up the price on something one of them wants at auction...I really don't see where that's wrong. How is the seller entitled to that maximum price? I sure wish I could be entitled to the maximum price when I sell something, but that rarely turns out to be the case.

 

Shilling is something else entirely - that's blatant market manipulation that does effect everyone. In the case of collusion, one or more people refrain from bidding, but that doesn't mean that one or more non-colluders can't bid (at least when the colluders don't effectively comprise the market) the price up. In the case of shilling, the shiller raises the floor for everyone. It's totally different.

 

Which led to this exchange:

 

So, you and your buddies screwed the guy selling his artwork and you admitted you did. Wow. Greed is good as you avatar hero said. If the shoe was on the other foot and a bunch of guys decided to artificially keep the price of a cover you owned low so one of them could buy it cheaper would you be happy? I'm gonna bet you'd be pissed.

 

Have you by chance had the opportunity to let the guy whose near-grail peice you purchased know what you and your buddies did? Using the logic you've laid out it shouldn't be an issue to you. After all, in your ethical opinion, what you did wasn't wrong and you "don't think so, not in the least". I wonder how the seller might view it though?

 

I don't think there is anything wrong with asking a friend to step aside on a piece. I have a friend who wants the cover to the first comic he ever read if it shows up at auction. Am I obligated to run the price up on him if it comes to auction? Where is my obligation to bid? What do I owe the seller? "Screwing the seller"? What about screwing my friend?

There is absolutely nothing wrong with asking a friend to refrain from bidding in a situation like this IMO.

 

Let the outrage begin! Or not...

[malvin]

I agree with you Gene, not sure of the legalities but I don't see why I should bid when I know someone else will bid higher and he is a friend to boot.

 

Malvin

[jaybuck43]

The time when I can see it is wrong is when you tell everyone you are planning on going after the piece, people stand aside to let you get it (since you've said you are going all in on it and it is a grail piece for you) and then you don't even bid on the piece.

 

But yea, If i tell a friend "Hey I really want the cover for TMNT #1, could you not bid on it because I plan on spending up to a million on it" and my friend says well I was only going to go to $650,000 so I will not bother to bid, is not an issue. Like Gene said, all I did is remove one person (or 5 or 10) people from the possible pool, i didn't raise the floor for everyone else.

[suspense39]

I have a few friends who collect similar things so we generally check in with each other before auctions and call dibs.

[Bronty]

I'm in your camp.

 

A collector asking another collector to lay off (he can always say no...) I don't see anything wrong with.

 

A dealer asking another dealer not to list any Starlin in the auction because the first dealer has several big Starlins in the sale, I also don't see anything wrong with.

 

I don't see anything wrong with, say, Mike actively bidding on Romita ASM to protect the market, nor Albert on Jim Lee, or what have you. As long as the bids are real, and the pieces *owned by someone else*.

 

Shill bidding - outright manipulation; I don't know how anyone defends that. The key difference is that you are both buyer and seller.

[delekkerste]

I'll also add that collusion is very open in the hobby - a group of dealers was spotted at a Heritage (live) auction last year sitting next to each other and openly discussing who might be bidding on what. I actually don't see the harm. I know one dealer threw in a bid on a piece I was going for; I ended up bidding higher and then the winner outbid me. They may have colluded, but it didn't affect the outcome of that lot, because Dealers A, B and C colluding is not the same as Sotheby's, Christie's and Phillips all colluding together.

[rotembk]

I'll also add that collusion is very open in the hobby - a group of dealers was spotted at a Heritage (live) auction last year sitting next to each other and openly discussing who might be bidding on what. I actually don't see the harm. I know one dealer threw in a bid on a piece I was going for; I ended up bidding higher and then the winner outbid me. They may have colluded, but it didn't affect the outcome of that lot, because Dealers A, B and C colluding is not the same as Sotheby's, Christie's and Phillips all colluding together.

 

Agree completely. Just to reiterate, the very choice of using the term collusion is problematic as it begs and question and presupposes potential wrong doing. As Gene said before, unless the group in question comprises the entirety of the market I don't think there can be collusion.

 

Second, an auction is a tool to get the fair market price at the time, not the maximum possible price, and I won't even go into the question of whether there can truly be an expectation for a particular FMV based on previous auctions when we're talking about one of a kind items. In any event, although a lot of the time we talk about potential bidders having to learn the market and do their due diligence, the same is true of the potential seller. For example, let's say I have a piece to sell that only two people are interested in (A and B) and A just got a similar piece very recently, so A isn't currently in the market to buy another one. If I didn't do the legwork (or did but still haven't uncovered these facts) and put my piece up for auction and only B participates, I'm arguably going to get a much lower price then if I tried to sell the piece to B privately for a negotiated price.

 

 

[buttock]

So what is the number of participants necessary to designate collusion as right vs. wrong. Evidently, as long as it's just you and a buddy it's ok. If it's a few dealers (do dealers come in flocks, gaggles, murders... ?) then it's ok. I would imagine if everyone except one person decided to lay off and you got it at opening bid, that might generate a scowl or two, so at what point does collusion become right or wrong?

[buyatari]

I'm in your camp.

 

A collector asking another collector to lay off (he can always say no...) I don't see anything wrong with.

 

A dealer asking another dealer not to list any Starlin in the auction because the first dealer has several big Starlins in the sale, I also don't see anything wrong with.

 

I don't see anything wrong with, say, Mike actively bidding on Romita ASM to protect the market, nor Albert on Jim Lee, or what have you. As long as the bids are real, and the pieces *owned by someone else*.

 

Shill bidding - outright manipulation; I don't know how anyone defends that. The key difference is that you are both buyer and seller.

 

Good points.

Collectors or dealers working together isn't always wrong unless deception is in play. Collecting at the highest levels of any hobby is a team sport. Naturally, some players not picked up by a team will have some resentment because they feel that they are at a disadvantage. They either lack an understanding of how the game is played or refuse to participate.

[rotembk]

And just to add another thing I said before, nothing prevents a group of collectors to band together and form a joint venture to invest together in the art they like, which would eliminate all incremental bids that could have otherwise resulted from the members of the joint venture. And given that original comic book art is not a required resource, I don't think that this situation could ever become subject to anti-trust regulation, but someone else can correct me if I'm wrong.

[comix4fun]

So what is the number of participants necessary to designate collusion as right vs. wrong. Evidently, as long as it's just you and a buddy it's ok. If it's a few dealers (do dealers come in flocks, gaggles, murders... ?) then it's ok. I would imagine if everyone except one person decided to lay off and you got it at opening bid, that might generate a scowl or two, so at what point does collusion become right or wrong?

 

 

 

The missing variables in this analysis would be the total number of bidders, their bidding level, and how many people are sharing information/deciding to refrain or bid.

 

In a closed bidding scenario with, for example, 5 bidders....if 4 bidders enter into an agreement where only one of them bids, they still may not have impacted the final value of the piece depending on the bidding level of the one left standing and the independent bidder outside the group of 4.

 

In order to be true collusion, and impactful to a statistical certainty, you'd need ALL the bidders to be involved. Anything less and it is simply probable or potentially likely that the agreement had an impact but not certain.

 

So the size of the bidding pool, the size of the group of bidders refraining from bidding, and where they were in personal valuation or bid level before you can answer if the actions have crossed from "friendly abstention" and into "market altering collusion".

[Lucky Baru]

Just to get some definitions out of the way:

 

Collusion is an agreement, usually illegal and therefore secretive, which occurs between two or more persons to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair advantage.

 

Bid Suppression: In bid suppression schemes, one or more competitors who otherwise would be expected to bid, or who have previously bid, agree to refrain from bidding or withdraw a previously submitted bid so that the designated winning competitor's bid will be accepted.

 

(I am going to make the assumption that the NG wasn’t a piece that was at the middle or lower end of the pricing structure of the hobby based upon all the other items you share that you own).

 

As with any niche hobby the amount of people who are bidding on items is limited. The higher the price the more limited the pool. If a party starts taking people out of that pool we end up with fewer and fewer people who are bidding upon an item and pushing it towards the FMV of the piece. Whose to say that the friends of party a or several of them might have wanted the same piece? By taking them out of the picture and eliminating their bids we will never know what the FMV of the piece would have been if they were bidding. If the price on the item is keep from reaching the FMV by limiting and/or shrinking the pool then the auction house is also harmed. They don’t collect fees that would have been generated if the FMV of the item would have been reached. Lastly, the person who put the item up for auction was harmed as their item never reached the FMV that it would have reached if all bidders within a pool had been available.

 

With the above in mind, two different entities can be harmed by colluding in an auction – The seller and the auction house.

 

I don't think there is anything wrong with asking a friend to step aside on a piece. I have a friend who wants the cover to the first comic he ever read if it shows up at auction. Am I obligated to run the price up on him if it comes to auction? Where is my obligation to bid? What do I owe the seller? "Screwing the seller"? What about screwing my friend?

 

There is absolutely nothing wrong with asking a friend to refrain from bidding in a situation like this IMO.

 

Since you have nothing to hide Gene:

 

1) How about you allow us to know the names of those whom you asked to stay out of your bidding on this near grail piece?

2) How about you post a picture of the NG?

 

[Terry Doyle]

Something along these lines happened to me about twenty years ago when Christies of London was holding an auction of comic-book OA that I'd been gearing-up to attend. A handful of pieces were high on my list of grail-like items to pursue.

 

About a week before the auction I was approached by a so-called friend asking me if I could find it in my heart not to bid against him on one of those pieces I was especially keen on landing that he was also desperate to acquire.

 

My response was limited to a two key points:

 

1. Who's to say that my friend's need to acquire the art was greater than mine?

 

2. The guy who is willing to pay the most for the art deserves to own it and that we should let the natural progression of the bidding decide that.

 

Needless to say, no collusion took place.

 

[J.Sid]

A lot of this doesn't apply to most of us. The people it does matter with are the "top of the market" guys.

 

Agreeing not to bid on a random small art Kirby FF page? Probably not going to have much effect, but to steal a couple of examples from the Felix podcasts, if Albert agrees not to bid on a certain Neal Adams piece or Dave agrees not to bid on a certain Frank Miller piece, it can matter a lot, because they are at or near the top of the market.

 

[rotembk]

From Black's Law Dictionary (free online version):

 

Collusion (cites ommited):

A deceitful agreement or compact between two or more persons, for the one party to bring an action against the other for some evil purpose, as to defraud a third party of his right.

A secret arrangement between two or more persons, whose interests are apparently conflicting, to make use of the forms and proceedings of law in order to defraud a third person, or to obtain that which justice would not give them, by deceiving a court or it officers.

In divorce proceedings collusion is an agreement between husband and wife that one of them shall commit, or appear to have committed, or be represented in court as having committed, acts constituting a cause of divorce, for the purpose of enabling the other to obtain a divorce.

 

Price collusion:

The illegal process that is deemed a criminal offence wherein a number of companies raise the price of a good to make larger profits. This is undertaken so that external competitors do not enter the said market.

[comix4fun]

A lot of this doesn't apply to most of us. The people it does matter with are the "top of the market" guys.

 

Agreeing not to bid on a random small art Kirby FF page? Probably not going to have much effect, but to steal a couple of examples from the Felix podcasts, if Albert agrees not to bid on a certain Neal Adams piece or Dave agrees not to bid on a certain Frank Miller piece, it can matter a lot, because they are at or near the top of the market.

 

 

Exactly right.

 

A bunch of guys, huddled in an abandoned warehouse in the dead of night agreeing that they are going to not bid on a Killing Joke page so that one of them can bid and win with his max of $500 isn't going to work out very well.

[Terry Doyle]

A lot of this doesn't apply to most of us. The people it does matter with are the "top of the market" guys.

 

Agreeing not to bid on a random small art Kirby FF page? Probably not going to have much effect, but to steal a couple of examples from the Felix podcasts, if Albert agrees not to bid on a certain Neal Adams piece or Dave agrees not to bid on a certain Frank Miller piece, it can matter a lot, because they are at or near the top of the market.

 

 

Exactly right.

 

A bunch of guys, huddled in an abandoned warehouse in the dead of night agreeing that they are going to not bid on a Killing Joke page so that one of them can bid and win with his max of $500 isn't going to work out very well.

 

[Lucky Baru]

From Black's Law Dictionary (free online version):

 

Collusion (cites ommited):

A deceitful agreement or compact between two or more persons, for the one party to bring an action against the other for some evil purpose, as to defraud a third party of his right.

A secret arrangement between two or more persons, whose interests are apparently conflicting, to make use of the forms and proceedings of law in order to defraud a third person, or to obtain that which justice would not give them, by deceiving a court or it officers.

In divorce proceedings collusion is an agreement between husband and wife that one of them shall commit, or appear to have committed, or be represented in court as having committed, acts constituting a cause of divorce, for the purpose of enabling the other to obtain a divorce.

 

Price collusion:

The illegal process that is deemed a criminal offence wherein a number of companies raise the price of a good to make larger profits. This is undertaken so that external competitors do not enter the said market.

 

OK, not sure why you posted it.

[Lucky Baru]

A lot of this doesn't apply to most of us. The people it does matter with are the "top of the market" guys.

 

Agreeing not to bid on a random small art Kirby FF page? Probably not going to have much effect, but to steal a couple of examples from the Felix podcasts, if Albert agrees not to bid on a certain Neal Adams piece or Dave agrees not to bid on a certain Frank Miller piece, it can matter a lot, because they are at or near the top of the market.

 

The conversation began out of the Aubrey K. McClendon indictment thread in the WC.

[Lucky Baru]

A lot of this doesn't apply to most of us. The people it does matter with are the "top of the market" guys.

 

Agreeing not to bid on a random small art Kirby FF page? Probably not going to have much effect, but to steal a couple of examples from the Felix podcasts, if Albert agrees not to bid on a certain Neal Adams piece or Dave agrees not to bid on a certain Frank Miller piece, it can matter a lot, because they are at or near the top of the market.

 

 

Exactly right.

 

A bunch of guys, huddled in an abandoned warehouse in the dead of night agreeing that they are going to not bid on a Killing Joke page so that one of them can bid and win with his max of $500 isn't going to work out very well.

 

Depends on the NG we are chatting about.