Posted By:
Corey R. ShanusBook bidding, bids by the auction house on behalf of the consignor to bring the bidding up to the secret reserve, is nothing less than legalized fraud. It's whole premise is to induce prospective bidders to believe that there is real interest at those bids, in the hope that human nature will take over and somebody will want something even more by believing others want it. Like so many things in our society, what is legal often depends on who has the most powerful lobby, not the merits of the position.
Shill bidding, on the other hand, is something much different. Those are bids placed on behalf of the consignor (usually by his/her friend(s)) EVEN AFTER the reserve has been met (in contrast to book bidding which I believe stops at the bid increment before the secret reserve). Shill bidding, blatantly fruadulent (and to my knowledge illegal in all jurisdictions) because there is no good faith buyer placing those bids, is commonly used when the auction house and/or consignor has reason to believe there is someone out there who will pay much above the next highest bidder, and they are prepared to use all measures (even though illegal) to get every last nickel out of that person. Shill bidding is also used when the auction itself is a sham; there the auction house would be in cahoots with the shill bidder and the consignor. An instance of this would be when the auction house/consignor want to give the impression an item sold at some stupid number, when in fact it did not. The auction house benefits because it can then brag how it realizes higher prices than its competition. The consignor benefits by establishing a higher market price for his item, typically realized a year or two later when the item magically reappears at the same auction house (with of course a story how the guy who bought it a year or two earlier suddenly decided to sell it).