Collusion in the OA Market - Right or Wrong?

[Meeley Man]

What if the suppression bidder isn't doing so to obtain something on the cheap for themselves, but to hurt or harm the seller offering it, by costing them potential bids on the item?

 

 

James, your scenario is highly unlikely because it can happen only if that person either (i) can actually prevent everybody else from bidding or (ii) is the only other interested bidder (out of a pool of two) but then you presuppose that they were required to bid to begin with, which, sorry to sound like a broken record, has no moral or legal basis even if the person has malicious intent.

 

But I will agree that if somehow (i) were to happen, that could rise to the level of fraud.

 

Bidder A has a personality conflict with Seller X, so Bidder A goes to his friends Bidders B, C, D, and E and asks them to not bid on Seller X's item, because they really want it. He gets them to relent. Then he does not bid on it. Seller X has lost out, because Bidder A used bid suppression to "punish" them and cost them much better value from their item.

 

Or

 

Bidder A has a personality conflict with Seller X, so he tells Bidders B, C, D, and E not to bid on Seller X's item, to help them punish him with lost potential revenue on their item. They all agree to support Bidder A's plan and Seller X loses out on said potential revenue, because of Bidder A's bid suppression tactics.

 

It could happen and probably a lot more easier than you might want to think.

[Bronty]

Here's a concrete example. This is a book I recently won:

 

http://www.ebay.com/itm/HEADLINE-COMICS-11-CGC-7-5-Scarce-High-Grade-Japanese-War-Cover-3rd-highest-/361469500309

 

It went for roughly 30X guide. However, if you look at the bidding history, had I been asked not to bid and stepped out it would have gone for about $1000 less, a reduction of about 30%. How do you think Ted would feel if I cost him $1000 on the sale? How can you rationalize this as ok to do because we're all good-hearted collectors? Do you think Ted would laugh it off because I was doing a buddy a favor?

 

Two things:

 

1. I think you picked a bad example. Unless I'm misreading the bidding history, the underbid was $50 lower not $1,000.

 

2. When you say that the auction ended at 30X guide, where arguably the guide is FMV, who's to say Ted had an expectation, let alone right, to get a dime above the guide? This goes back to an earlier point I made: the potential seller needs to know their market. If there are only two potentially serious bidders, an action may not be the most prudent course of action for them to maximize profits.

 

Yes, the underbid was $50 less, but the second underbidder was almost $1000 less. Had (the winner) not bid, the underbidder doesn't win at his max bid, only the increment above the next underbidder.

 

As to your second point... Jesus Christ man.

 

No that's a misconception. There can be and often are all sorts of snipes in that $1000 dead space that didn't even register as bids due to the snipe being insufficient to place.

 

I'm not interested in ifs and buts. His bid came in 15 seconds AFTER mine, immediately before the auction ended. I can toss out hypotheticals all day also, but the facts are, had I not bid, the auction would have been 30% lower.

 

I suggest you look into the definition of the word 'fact'

[rotembk]

Bidder A has a personality conflict with Seller X, so Bidder A goes to his friends Bidders B, C, D, and E and asks them to not bid on Seller X's item, because they really want it. He gets them to relent. Then he does not bid on it. Seller X has lost out, because Bidder A used bid suppression to "punish" them and cost them much better value from their item.

 

Or

 

Bidder A has a personality conflict with Seller X, so he tells Bidders B, C, D, and E not to bid on Seller X's item, to help them punish him with lost potential revenue on their item. They all agree to support Bidder A's plan and Seller X loses out on said potential revenue, because of Bidder A's bid suppression tactics.

 

It could happen and probably a lot more easier than you might want to think.

 

But only if Bidders A through E comprise the entirety of the bidder pool. And it seems to me that in the day and age of the internet, with dealers and bargain hunting collectors constantly on the look-out, although this is possible, it is highly unlikely.

[delekkerste]

To all who think agreeing before an auction not to bid on a lot I ask the following:

 

If you had a “near-grail cover” that you secretly owned and you placed it at of one the auction houses to be auctioned off would you say anything or do anything if one of the parties in your example called you and advised you not to bid on the piece because either they or one of the other parties in your group was asking everyone not to bid on it to keep the price from being jacked-up?

 

Everyone reading this knows that they would say or do something to change what they were just told in the above example. You would either let the party calling you know that the cover was yours and try to sell it to them outside of the auction (if you could get out of the auction house contract) or you would advise them that you owned it and that what they advised you of wasn’t appreciated. If you couldn’t change their minds would you advise the auction house of the situation or just let it go?

 

After all the only thing different in the above is that YOU OWN the item in question.

 

I'd probably inform the person who asked me that it was my cover, sure - as far as I'm concerned, if I've consigned a piece to auction, I don't have any reason not to let people know that I'm the owner. For me, at least, all the reasons for keeping something I own on the DL goes out the window once I've put a piece out for sale in the public domain, whether at auction or elsewhere.

 

Would I do anything more than that? No, why should or would I? If people are spreading lies or misinformation about a piece, that would be one thing, but I know that people talk with each other all the time and sometimes coordinate with each other on certain types of pieces. And yet, the market is what the market is, because two people coordinating bidding strategies does not necessarily affect the final outcome (in fact, I suspect it rarely does). Unlike shilling, where the shiller raises the floor price for every potential bidder, just because people coordinate strategies and one or more persons doesn't bid, that doesn't mean that the rest of the market can't/won't bid the page up to where people think it belongs.

 

 

But to continue with your argument, you wouldn't be upset if you consigned a piece you valued at $50K, it finishes at $35K, and you find out later that bidders you anticipated bidding it up higher declined to bid so that one of their buddies could get it on the cheap? That seems unlikely.

 

First, the whole scenario seems unlikely. A piece that is legitimately worth $50K is probably going to be sought after enough that it's unlikely that anyone could somehow persuade all the rival bidders at/near that level to stand down. Not only that, but the hobby is big enough whereby if a solid $50K-all-day-long piece is only bid at $35K, dealers, flippers and people outside anyone's sphere of influence will likely come in and bid it higher for the profit potential. The exception is that if it's a niche piece, but that is a situation where, collusion or not, you might consider putting in a reserve if the range of possible outcomes is very wide and where the absence of even 1 bidder can make a huge difference in price.

 

Of course I would be upset that I didn't get the price I wanted on something, though I would find it highly implausible that anyone would be able to keep all the sharks in the hobby at bay so that a $50K-all-day-long piece would only fetch $35K. I mean, remember that FF #286 cover which a lot of people backed off of because they wanted to see a certain Boardie win it? He didn't, but, regardless, it's not like all the people who backed off caused the piece to sell in the gutter - it still sold for what was considered to be a very healthy price. I mean, here was a case where loads of people backed off - maybe more than for any other single piece that I can recall - and even then somebody else was still out there to bid more and win it.

[delekkerste]

Let me throw out another scenario. Bidders A and B are both well-to-do collectors and both grew up loving Stupid-Man drawn by Joe Schmoe. Let's say that Stupid-Man covers sell for around $10K each. And that, in the absence of collusion, these guys would bid the price of these covers up to $25K each. But, Bidders A and B are friends so, they, in turn, decide to coordinate bidding strategies, with each standing down on every other Stupid-Man cover that shows up at auction.

 

As a result, Stupid-Man covers consistently sell for around $10K instead of $25K each. Is this wrong? Have Bidders A & B taken $15K per cover out of the mouths of the consignors' children? Are the consignors entitled to $25K per cover just because that's what the covers would theoretically go for in the absence of Bidders A & B being friends and coordinating bidding strategies? Even though in the absence of both Bidders A & B entirely they'd still only be getting the same $10K from other collectors?

 

Even though Bidders A & B's actions are dramatically affecting the public sale price of Stupid-Man's art, I still don't see anything wrong with this. Two friends who are willing to pay above what the rest of the market will pay (and thus set a new market level) decide to coordinate so that prices stay closer to the prevailing market level. The alternative being that they both go at it every time and cost themselves a lot of money. I get it that two friends who are heads of firms in an oligopolistic industry shouldn't be allowed to fix prices or squeeze a mutual supplier or otherwise do something that leaves people with no alternative. But, two friends deciding to coordinate bidding strategy in a comic art auction does not prevent others from paying more if they want something.

 

If Bidders A & B decided that, not only would they not compete for the same cover, but that neither of them would pay more than $8K for any of them, it doesn't mean that Stupid-Man covers are going to $8K, because others will bid them up to $10K. And, if somebody else other than Bidders A & B wants to win a cover, well, then they've got to step up and bid more. But, in the absence of that, I don't see how the sellers are entitled to the $25K per cover that would only prevail if Bidders A & B competed against each other and paid 150% higher than the prevailing FMV. I would argue that FMV is still $10K even though two individuals in a competitive environment would be willing to pay $25K.

[Meeley Man]

Bidder A has a personality conflict with Seller X, so Bidder A goes to his friends Bidders B, C, D, and E and asks them to not bid on Seller X's item, because they really want it. He gets them to relent. Then he does not bid on it. Seller X has lost out, because Bidder A used bid suppression to "punish" them and cost them much better value from their item.

 

Or

 

Bidder A has a personality conflict with Seller X, so he tells Bidders B, C, D, and E not to bid on Seller X's item, to help them punish him with lost potential revenue on their item. They all agree to support Bidder A's plan and Seller X loses out on said potential revenue, because of Bidder A's bid suppression tactics.

 

It could happen and probably a lot more easier than you might want to think.

 

But only if Bidders A through E comprise the entirety of the bidder pool. And it seems to me that in the day and age of the internet, with dealers and bargain hunting collectors constantly on the look-out, although this is possible, it is highly unlikely.

 

I'll grant you, the second theory is much more conspiratorial and so, much harder to prove. Thus, making likelihood much less probable.

 

But the first example lines right up with what others have said about standing down for a friend. If someone wanted to hurt a seller, they could use such relationships and influence, to talk certain people, especially ones with known "deep pockets," from bidding. After all, it's all about "doing a friend a good turn," right? And how would one even know if that person bid? I don't know how HA or Clink do things, since I've never bought or sold with them, but on eBay you can't tell who a buyer is anymore. They have made it impossible for other bidders to know who is bidding. So, you could do the first example fairly easily and never get caught.

 

Or is price manipulation and lost revenues only viable when it is the buyer who will suffer? That certainly seems to be a lot of what I'm reading on this thread. Maybe it shouldn't be "buyer beware, " but more "seller beware!"

[rotembk]

Bidder A has a personality conflict with Seller X, so Bidder A goes to his friends Bidders B, C, D, and E and asks them to not bid on Seller X's item, because they really want it. He gets them to relent. Then he does not bid on it. Seller X has lost out, because Bidder A used bid suppression to "punish" them and cost them much better value from their item.

 

Or

 

Bidder A has a personality conflict with Seller X, so he tells Bidders B, C, D, and E not to bid on Seller X's item, to help them punish him with lost potential revenue on their item. They all agree to support Bidder A's plan and Seller X loses out on said potential revenue, because of Bidder A's bid suppression tactics.

 

It could happen and probably a lot more easier than you might want to think.

 

But only if Bidders A through E comprise the entirety of the bidder pool. And it seems to me that in the day and age of the internet, with dealers and bargain hunting collectors constantly on the look-out, although this is possible, it is highly unlikely.

 

I'll grant you, the second theory is much more conspiratorial and so, much harder to prove. Thus, making likelihood much less probable.

 

But the first example lines right up with what others have said about standing down for a friend. If someone wanted to hurt a seller, they could use such relationships and influence, to talk certain people, especially ones with known "deep pockets," from bidding. After all, it's all about "doing a friend a good turn," right? And how would one even know if that person bid? I don't know how HA or Clink do things, since I've never bought or sold with them, but on eBay you can't tell who a buyer is anymore. They have made it impossible for other bidders to know who is bidding. So, you could do the first example fairly easily and never get caught.

 

Or is price manipulation and lost revenues only viable when it is the buyer who will suffer? That certainly seems to be a lot of what I'm reading on this thread. Maybe it shouldn't be "buyer beware, " but more "seller beware!"

 

Gene pretty much summarized my views on this issue (and in a much better way than I did) in his message right above yours, so I guess we'll see what others think on this subject soon enough.

[tth2]

Lucky Baru is both an insufficiently_thoughtful_person and seemingly angry at everything in the world, so why even get into a debate with him?

[Mmehdy]

Folks...the comic book and art auction system is seriously broken...maybe it never was what it is advertised to be.

That is "anything goes" everybody on the honor system.

 

Well, whether an items is bid up or held down...anything that games the system might be considered to be unfair. But in reality..with or without a reserve, you must look at the current state of affairs. Whoever pays the most wins. With or without shilling or bid repression

You pay you win...as long as we are not in LA LA LAND...every item you buy and sell runs the risk of being overpaid or underbid. SO BE IT.

 

In todays market of of Scam-Bay, or other auction houses, the only way to survive is to ask yourself what is a fair price in your opinion...and don't pay more.

 

You pay the price knowing that it might not be real...but as long as you can live with it and enjoy it then it is safe to play the auction house game.

 

Fixed pricing is not always the best pricing,however the larger the auction the better the chance of less shilling or bid repression.

 

If you ask me what I dislike the most it would be shilling which creates an artificially high market value..that is what is gonna do the most damage when things come crashing down..underbidding does not destroy the market value as much.

 

The real issue here is..what do you as collectors expect to happen when you bid....these last few months have opened a lot of eyes toward what is going on.....in the real auction world.

[Ironmandrd]

I have never heard of even a whiff of a suggestion of a scenario of several bidders getting together to not bid ("punish") a legitimate seller (ie, one not suspected of selling fraudulent items). That scenario is pure speculation in the extreme.

[Lucky Baru]

Lucky Baru is both an insufficiently_thoughtful_person and seemingly angry at everything in the world, so why even get into a debate with him?

 

In an ethical debate you have chosen to attack the person who has brought forth the question.

 

It is interesting that while many people don't have an issue with collusion; it appears that some see the activity as "a different side of the same coin" as shill bidding.

 

A thought/request to you and others that have no issues with collusion (any auction house rep that wants to chime in please do so):

 

Contact the action house that you use regularly and ask them what happens if they are confronted with evidence that collusion is taking place in an auction with lets say 2 to 5 bidders? Please feel free to phrase the question using Gene's example of contacting friends to step aside on a piece so only one person of party is bidding on the item or any other example you might want to use.

 

 

Once you have been given an answer how about you report back what they advise you of and what actions they would take.

 

 

 

 

[Terry Doyle]

Lucky Baru is both an insufficiently_thoughtful_person and seemingly angry at everything in the world, so why even get into a debate with him?

 

In an ethical debate you have chosen to attack the person who has brought forth the question.

 

 

Personal attacks such as this are bad form.

[Lucky Baru]

I find it interesting that with all the math that has been provide showing that collusion could never effect the outcome of the auction, the thread was started because a member here advised that he contacted "friends" and asked them to step aside on a piece. If the math is correct in all of the responses that have attempted to marginalized the activity, I have to ask the following:

 

If the actions requested didn't effect the outcome, or the belief that the outcome of an auction could be effected, then why was the request made?

[vodou]

...then why was the request made?

I wasn't involved, but playing devil's advocate: so that nobody would find out after the fact that they had bid up a friend that was going to win anyway? Some people would feel bad about that, whether or not it would have changed their actual bidding (or event the result, they may not have been the underbidder). Some people would want their friends to be more fully informed and decide for themselves whether or not they wold be okay with the effect their actions (or non-actions) would have monetarily but also emotionally.

 

It's not really as cut 'n dried as a cabal (twirling their Fu Manchu's) getting together in a smokey back room to decide the fate of every HA result over $2,500

 

As to Terry's comments about keeping interests/bidding strategies to one's self...I'll tell you the rewards* of camaraderie in this hobby far exceed the possible risk of self-screwing. But like you would in any social circle, keep your friends close and your enemies closer...and know the difference (of course!)

 

*Not gaming the system but sharing, being told (in the friendliest way) that you just posted something totally ridiculous (yes, that's me!), bouncing ideas back 'n forth, extra sets of eyes looking out there 'for' you, etc...all great

[Claudio]

If a friend contacted me and said he was really interested in a piece that I was planning on bidding on, that piece would probably lose value to me. It is new information that has caused me to change my mind about bidding. It happens all the time..

 

For example, I wanted to bid on a piece and then found out the seller was make mine marvel... Not interested anymore.

 

I wanted to bid on a piece and then I found out it was a stat. Not interested in it anymore.

 

I wanted to bid on a piece and then I found out there was severe yellowing... Not interested anymore.

 

I wanted to bid on a piece and then I found out it was really meaningful to a friend. Not interested anymore.

 

But let's just say I was still interested and I wanted to bid but I decided not to because I wanted to not have any awkwardness in my friendship. Is that wrong? I have allegiance to my friend much more than some anonymous seller.

[Terry Doyle]

 

As to Terry's comments about keeping interests/bidding strategies to one's self...I'll tell you the rewards* of camaraderie in this hobby far exceed the possible risk of self-screwing. But like you would in any social circle, keep your friends close and your enemies closer...and know the difference (of course!)

 

 

Oh, sure, camaraderie/networking in the hobby certainly has rewards - no argument there.

 

I was specifically thinking about playing my cards closer to my chest in an auction scenario.

 

That stance really came about as a result of a bad experience with, shall I say, a 'casual acquaintance' (I'll refrain from saying 'so-called friend' as that sweeping generalisation is open to probable misinterpretation by posters on this thread with opposing viewpoints looking to aid their own arguments).

 

Look, I've been in this hobby a long time and have experienced less-than-honourable actions at the hands of others. Lots of collectors out there making out to be your best-buddy, but actually operating with self-interest/selfishness at heart.

 

One time I had a casual acquaintance pump me about my interests in a (then) forthcoming UK auction. This guy then outbid me on something I'd said I was pursuing with no actual clash of interests in the piece on offer. After he won it, he then wanted me to trade something from my collection (that he wanted) for it.

 

I lost out, sure, but the other guy ended-up with something he wasn't really wanting for his collection in the first place (as I effectively told him to go swivel).

[Changer]

Isn't it true if you actually have collusion in bidding you encourage sellers to protect bids by fake bids against the possible falsely low bids. So In fact both secretive acts falsely manipulate market place. Yes understand only for friends, but that was an argument I heard before. Seems hypocritical to embrace one without the other.

[Changer]

For the record I like clarity in the market on both sides. But then again perhaps I'm not playing the game right?

[Bill C]

I think it's pretty obvious for most everyone rational that shill bidding is bad and that there is nothing wrong with friends deciding to back off a piece because someone else wants it. Clearly by the posts most people here see that those 2 scenarios are light years apart.

 

I think the fact that this conversation is even taking place is due to a number of factors:

1) People like to chat about OA

2) The topic started creeping up a couple months ago or whenever the shilling fiasco came out, as a bit of pushback in defense of shillers

3) These boards (although I don't see it anywhere near as much in the OA section) seem to have a really weird number of people who act "ultra moral" (at least in their mind), and attack everyone else who doesn't share their beliefs. Getting offended when people don't share your specific life rules/beliefs is a sure fire way to be upset a good portion of the time btw.

[Bronty]

Those halos get heavy, Bill