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Posted By: <b>Yankeefan51</b><p><br /><br />We just returned from the Sotheby's auction.<br /><br />The auction, whilst interesting is painfully slow because of the<br />combination of phone bids, floor bids and web bids.<br /><br />Generally, Sotheby's auctioneers can run through 70-80 lots<br />in an hours. This morning they were running at less than 40<br />per hour.<br /><br />Sales result thus far have been mixed.<br /><br />Ted Williams' spikes from his final at bat, Walter Johnson signed<br />ball from the final out of the 1924 World Series and a Ted Williams<br />1955 All Star bat realized stunning prices. The Johnson ball<br />went for $90,000 with the auction house premium and the Wiliams<br />spikes for well over $40,000.<br /><br />At least 15% of the items did not sell- albeit most of those<br />were modestly price.<br /><br />More later<br /><br /><br />Bruce Dorskind<br />America's Toughest Want List

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Posted By: <b>leon</b><p>Thanks for the update. We appreciate it...

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Posted By: <b>Josh Adams</b><p>Cool items.<br /><br />The auction probably took so long because of all of Sothebys' shill bidding. <br /><br /><img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>barrysloate</b><p>Sotheby's is allowed to place book bids on behalf of consignors who request reserves. While I know collectors don't like it, it's not really shilling. It's in the rules. But it's true you don't know whether there's a real body you are bidding against.

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Posted By: <b>Ryan Christoff</b><p>Barry, <br /><br />How is a "book bid" as you described any different than a shill bid???<br /><br />-Ryan<br /><br />

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Posted By: <b>leon</b><p>My belief is a shill is under the table and a "book" bid would be above table....Sothebys and Heritage both allow these above table bids. It's debatable but I am not sure I am opposed to being open about this stuff. Otherwise, how many friends of consignors are bidding on their friends stuff "underhandedly"? Again, not sure which I prefer but I do see the legitimate "it's ok" side...as well as the other side that says "no" it's unacceptable......regards

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Posted By: <b>barrysloate</b><p>Exactly. When you go to Sotheby's you know that they are allowed to place a bid that may be a real bid or may be one that protects the consignor. I'm not saying it's anyone's favorite practice, but they are abiding by New York State auction law.<br /><br />When you shill on ebay you are circumventing the rules.

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Posted By: <b>Jay</b><p>Seems to me that this is a matter of semantics. In either case someone is protecting their interests with undisclosed bids. It should always be legal or always illegal. As long as bidders only bid what they are willing to pay I do not see it as a problem.

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Posted By: <b>barrysloate</b><p>Jay- I agree that on some level it's an odious practice, and it's pretty frustrating when you are sitting there and the auctioneer is crying bids and you don't see anyone's hand raised, but the law allows it. So what can you do?

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Posted By: <b>Tom Boblitt</b><p>.....<br /><br />It's only when you have 'odious' situations that some of these larger auction houses--most commonly high-end art auctioneers--have engaged in over the years that it causes one to wonder.<br /><br />I agree with Jay....always legal or always illegal. Unfortunately, if illegal, there are always ways to get around it.<br /><br />I've not gone to Sotheby's but I have attended all 3 Hunts live auctions in Louisville and a couple in PA and think they were all handled properly. <br /><br />Most of the time, they opened a lot at a certain amount, leading me to believe it was a 'floor' the consignor set or it was the fair bid of all the bidders who might have max bids in at the time. Some of the lots sold at that initial bid and some went higher based on the crowd or the phones. <br /><br />I do remember a few auctions that they had lots that did not sell, prompting me to believe the 'floor' bids by the consignor were above what the market was willing to bear.<br /><br />

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Posted By: <b>barrysloate</b><p>Sotheby's has gotten in enough hot water in the past that I would assume they are careful to play by the rules.

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Posted By: <b>JimB</b><p>Do they make it clear when the house is bidding and when it is an actual customer? This seems quite important to me.<br />JimB

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Posted By: <b>Jay</b><p>Jim--I believe that the answer is no. You see the house bidding but you don't know if it was the highest bid on the book being executed or a reserve bid.

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Posted By: <b>leon</b><p>I have been to Heritage Live auctions and you don't know if it's the house or not. My guess is any auction house wouldn't disclose that info.....though I abslotulely would like to know.....

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Posted By: <b>Corey R. Shanus</b><p>Book 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.<br /><br />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).

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Posted By: <b>barrysloate</b><p>While Corey carried the negative aspects of the reserve book bidding to the next level, it's true that when you are sitting in the audience it all happens so fast that you can never be sure if anybody is bidding, but you still get some sense of whether the bids are real. Also, when the auctioneer bangs the hammer, he then declares "sold" or "pass." Of course, if you get caught up and overpay for the lot it doesn't matter at that point.<br /><br />That's why it is always good to set a limit, but auction houses know all too well how impulsive bidders are, and they take maximum advantage of it.

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Posted By: <b>Richard Masson</b><p>Book bidding to a reserve is not "legalized fraud" if it is properly disclosed. Consigning anything significant to a live auction without a reasonable reserve would be just plain stupid. The auction house bids the reserve against the audience until it is met, then hopes there is more than one bidder. If the price is too high to the buyer, don't bid. If the price is not high enough for the seller, don't sell. How is that unfair? <br /><br />The low reserves we are now used to in our little niche of collectibles is not the norm.<br /><br />

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Posted By: <b>barrysloate</b><p>But despite the low starting bids in our hobby, there are very few bargains and more often than not lots get incredible bidding. So it seems like a pretty good system.

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Posted By: <b>bruce Dorskind</b><p><br /><br />Next time your wife, significant other or generous friend asks what you<br />want for Christmas... tell her a pair of 1957 Yankee Cuff Links owned<br />by Casey Stengal. Then ask her to write a check for $108,000.<br /><br />Two guys (I assume guys) on the phone slugged it out<br /><br />A number of the Stengal signed Yankee balls went through the roof.<br /><br />Several items we bid on (advertising pieces and a great Japan pennant)<br />went for 3x estimate.<br /><br />The Old Professor and Edna must be smiling in heaven. At least someone<br />with a Yankee connection can say he had a winning season<br /><br />Best,<br /><br />Bruce Dorskind<br />America's Toughest Want List

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Posted By: <b>Tom Boblitt</b><p>in our hobby, some auction houses allow bidding on house accounts, even though the auctions are not live. Don't know if thats on behalf of the consignors or what criteria is used.<br />

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Posted By: <b>Ryan Christoff</b><p>Sorry, but a "book bid" is absolute crap. Please explain to me how that could possibly be considered "above table" and different from the consignor having a friend bid on one of his items to drive the price up? The "reserve" price in the book bid system is simply the level at which the consignor tells his friend (in this case the auction house) to stopping artificially driving the price up. <br /><br />I have no problem with reserves, providing they're disclosed. A "book bid" has nothing to do with a reserve. <br /><br />The fact that this is considered acceptable to some says a lot about how shady this hobby really is. Borderline illegal practices are so commonplace that people just accept them as being the way things are. <br /><br />Every day I understand more and more why I always get my ass kicked when I consign items and wind up paying top dollar when I win items. <br /><br />I was both a consignor and a winning bidder in this Sotheby's auction. I'm going to ask if this book bidding crap took place on the lot I won, although I doubt they'd be truthful about it if this is actually happening. If I find out that was the case, they're stuck with the lot I won. That is, unless they want to sell it to me for one bid increment above the 2nd highest legitimate bid. <br /><br />Fun hobby, <br /><br />-Ryan<br />

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Posted By: <b>Corey R. Shanus</b><p>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.<br /><br />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.<br /><br />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?

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Posted By: <b>leon</b><p>Personally I don't care for house bids either but I do have one question for you. You seem upset about house bids. Did you read the rules?

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Posted By: <b>DD</b><p>I have been to many live auctions over the past 30 years. I also used to work for an auction house. I believe I have seen shill bidders in the audience at some auctions, and also know auctioneers that have driven up the price themselves if they have a feeling that the 2 or more bidders will go higher; sometimes they end up buying the item if the audience drops out.<br /><br />Just start the item at the reserve price. If people are scared off by that, then tell the consignors to lower the reserve. The material that Sotheby's and other large houses auction off attract many big spenders. It is unlikely that they won't bid at a higher starting price, as opposed to a lower price with a hidden reserve.

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Posted By: <b>barrysloate</b><p>If you think our hobby is bad, you should see the hoops Sotheby's and Christie's have to jump through to get great art collections.<br /><br />Because of the fierce competition, they typically offer tens of millions of dollars in advance money, sometimes above and beyond a world record for a particular painter, on the hope that an even greater world's record will be set. Knowing the pressure they have to succeed, do you think those auctions are run on the up and up?

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Posted By: <b>bruce Dorskind</b><p><br /><br />Much like the real estate industry, the most important task for world class<br />auction houses like Sotheby's, Christies and a few others is to attract<br />the best quality items they can.<br /><br />Their offering is all about packaging. The "blue box" and the assurance that<br />a 300 year old firm stands behind the authenticity of the item is what<br />attracts wealthy consignors.<br /><br />Whilst we certainly don't care for "book bids" and recognize that they have<br />probably cost us thousands of dollars in the 15 years that we have bid<br />in Christies and Sotheby's auctions, the firms are clear in their auction<br />rules and at the beginning of each auction session that they can place<br />boo bids on behalf of the consignor.<br /><br />As has been pointed out earlier, a high stated reserve discourages<br />people from bidding, whist the book bid leaves the impression that<br />there is a interest from a cadre of different sources.<br /><br />Book bids will only go away if , as Barry Sloate notes, they change the law.<br /><br />We wonder whether there are any states- i.e. California and Illinois and New<br />Jersey (you can guess why) that do not allow the auction house to bid<br />on behalf of the consignor.<br /><br />Best,<br /><br /><br />Bruce Dorskind<br />America's Toughest Want List

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Posted By: <b>Richard Masson</b><p>If Sotheby's auction procedures upset you, then you should see what goes on at thoroughbred racehorse auctions. The consignor can set a low reserve and then sit in the audience and bid, or set a higher reserve and have multiple parties make bids up to the reserve to give the appearance of a spirited auction. Everyone knows the game is played that way. The risk the consignor needs to be aware of is the risk of not selling if he gets stuck with the high bid. <br /><br />The point of an auction is not to guarantee a fair price to the buyer, it is to get items sold at a price acceptable to both the buyer and the seller. <br /><br />As far as Sotheby's goes, if you can't see the bid in the room, assume it is the house bidding to a reserve.

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Posted By: <b>barrysloate</b><p>What is a "blue box?" I've never heard that term before.

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Posted By: <b>barrysloate</b><p>Richard- Sotheby's has a bank of telephones, and a large percentage of bids come in that way. More often than not it pays to watch the people answering the phone to see if real bids are coming in.

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Posted By: <b>MVSNYC</b><p>"Blue Box" is a reference to Tiffany's and their brilliant packaging scheme. <br /><br />every girl wants the "blue box"...great marketing tool.

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Posted By: <b>barrysloate</b><p>Got it. I'm more a "five-and-ten" kind of guy.

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Posted By: <b>Bob</b><p>I'm with Ryan, shill bidding is shill bidding. Period. Just because it goes on all the time doesn't make it right whether it's an auction house or ebay or Moe's card shop. I also agree that you should only bid what you are prepared to pay but it still steams me when the co-signor's "buddies" are screwing around with the bids. I have consigned to numerous auction houses from Mastro on down and never, ever contacted anyone about bidding items up for me. It's just not right. I don't like auctions where the house bids on items for people who may be legit or maybe phantoms but I guess I'll just grumble and bitch because I don't know anyway around it...

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Posted By: <b>Richard Masson</b><p>I find a distinction between shill bidding and the house bidding up to the consignor's reserve. I am primarily a buyer and know that it is not in my best interest; I just don't have a quarrel with the format and the practice if everyone knows how the game works. <br /><br />In our hobby we are lucky. Low or minimal reserves are the norm, internet rather than live auctions are common, and regardless of the closing method, the chances of getting shut out are minimal. Shill bidding, when prohibited by the rules, probably only happens at the lesser auctions. If you buy from Mastro, REA et al (Barry, you are part of et al) I would be very comfortable assuming the cover bid is real.<br /><br />For some, the thrill of this hobby is the hunt, or the history of the game, or acknowledging rarity, or piecing together the issuance history of an ancient group of cards. For others, it is the game of finding cards for "less than they're worth" or selling cards for "more than they're worth." The auction format is part of the fun to those sorts of folks.

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Posted By: <b>Corey R. Shanus</b><p>You say: "I just don't have a quarrel with the format and the practice if everyone knows how the game works."<br /><br />I say: The reason auction houses continue with the format and the practice is because (i) everyone does not know how the game works, and (ii) many/most know but are not always in a position to determine if the bid is real (e.g., a phone bidder) and to be safe assume it's real. Bottom line is auction houses continue with the practice because they feel sometimes it results in either a higher realized price or the item meeting its reserve. If the auction house felt there was no benefit in continuing the practice, presumably they would stop, resulting in a more efficient auction.

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Posted By: <b>barrysloate</b><p>Corey- all your points are well taken but what you are omitting is the consignment perspective. Without all of these built in guarantees, consignors would walk. I know you will respond that if none of the auction houses placed book bids, then every one would be on an even playing field. But if one offers ironclad protection and the other doesn't, then the "honest" auction house will go out of business, and all the great consignments will go elsewhere.

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Posted By: <b>Corey R. Shanus</b><p>The issue is not about offering ironclad protection. That can be done simply by announcing the reserve and starting the bidding at that level. The issue is about a profit-maximizing auction house's perception that book bidding to protect the reserve maximizes profits, both by inducing consignors to consign with them and knowing that however distasteful bidders feel about the practice, they'll still bid. So, yes, you're quite correct that unless and until the practice is outlawed, no auction house will discontinue the practice. But there's your answer, the law should be changed. But I'm not naive enough to believe that is going to happen anytime soon.

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Posted By: <b>bruce Dorskind</b><p><br /><br />Sotheby;s and Christies control well over 75% of the world's rare art market<br />(i.e. paintings that sell in excess of a $ 1million) They, despite past problems,<br />are very powerful organizations with an ultra elite and ulta wealthy customer<br />base.<br /><br />Their primary objective is to satisfy that customer base One of the key <br />elements in that "satisfaction" equation is to ensure that when a wealthy<br />and/or loyal client chooses to sell his collection he or she can count on<br />the Auction House to realize a fair, (if not exceedingly fair price). In other<br />words...the reason Mr or Mrs Hedge Fund sells their Renoir through Sotheby's<br />or Christies is that (a) they have the customers, (b) they have the brand<br />and (c) they have the tools and resources to ensure the vast majority of the <br />consigned items will realize very substantial prices.<br /><br />If we take away the "book bid" there will be far too many unhappy clients<br />and those clients are the very people who control nearly everything that<br />happens in finance in New York...and everything that happens in New York controls<br />America's finances...<br /><br />It is all about money and power... and free markets. We live in an entreprenurial<br />country. When one sells anything of significant value one has only one objective<br />maximize return. The buyers are notified in the catalog and the opening of<br />each and every auction session. No one is putting a gun to their head.<br /><br />As for Sotheby's, their track record with world class collections such as Halper<br />and Copeland and infamous items from player's estates has generally been<br />quite impressive. The book bid, along with the international (out of hobby)<br />client base are key reasons these collections were sold through Sotheby's.<br /><br />Remember Bill Mastro, Rob Lifson, Don Flannagan and Barry Sloate all worked<br />closely with Sotheby's and/or Christies at major sales.<br /><br />Whilst the book bids certainly make it more difficult for the collector, as Barry<br />Sloate correctly points out without the packaging merchandising and protection<br />we would not have the consignors and many great items would not get sold.<br /><br /><br />Bruce Dorskind<br />America's Toughest Want List<br />

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Posted By: <b>mr. moses</b><p>the greatest prices realized are those inflated by a ghost bidder for the betterment of man. A great gesture on their part that speaks to the nature of the beast. They can't protect your consignor with a reserve that is not designed to get a SINGLE bidder to the level of expectation without using a subtle disclaimer that exists in the fine print but often gets lost on someone actively bidding on an item? Two interested parties will presumably bring it to the level necessary. Granted if there is a single bidder willing to surpass the inferred (but actual) limit; the consignor and auction house would benefit from a house bid which is the reason for the contract in the first place. I just think that the auction house should have to disclose it every time they bid for the house. Today's buyer's are tomorrow's sellers. We are as a group becoming more astute and asking more questions. Probably won't make a difference anywhere for now but who knows how people and business begins to respond to anything. Money. Fear of losing it.

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Posted By: <b>Anonymous</b><p>I'm not sure what else can be said. Don't bid more than what you are willing to pay and if you have a need to make sure the underbid is real, don't bid on anything at auction and only buy items later that don't meet their reserves (a perfectly viable alternative).<br /><br />I never studied Latin, so written communication like this imprecise at best. Corey, let's have a chat about this next time we see each other.

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Posted By: <b>David Smith</b><p>To all concerned,<br /><br />How about this, the next time you are at an auction that allows book bids and you are bidding on soemthing that you think NO ONE else (book bid) is bidding on, why don't you just stop the auctioneer and ask who the bidder is?<br /><br />Ask if the person is in the room, on line or on the telephone or if it is just a book bid. If they say book bid, then just tell them to cut the crap and reveal what the Reserve is. Then you can decide if you want to bid that amount or not.<br /><br />This saves time and will REALLY irritate the auctioneer and auction house. It will also alert those in attendance that this crap goes on.<br /><br />David

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Posted By: <b>MVSNYC</b><p>any word on the gehrig jersey? sale price?

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Posted By: <b>Corey R. Shanus</b><p>So what you're saying is that if book bidding to protect the reserve is outlawed, Mr. and Mrs. Hedge Fund will feel the auction process, being now more transparent and less manipulative, will not generate an exceedingly fair enough price for their magnificent works of art, and they therefore will choose not to sell. They will then become very unhappy and, through use of their financial power, take their wrath out on New York City, financial capital of America as well as home to the world's largest auction houses, thus resulting in a nation-wide recession/depression.

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Posted By: <b>Sean C</b><p>Thanks for the update! Live auctions are always a lot of fun. Who did you go with to it?<br><br><br>quote<br>We just returned from the Sotheby's auction.<br><br>The auction, whilst interesting is painfully slow because of the<br>combination of phone bids, floor bids and web bids.<br><br>Generally, Sotheby's auctioneers can run through 70-80 lots<br>in an hours. This morning they were running at less than 40<br>per hour.<br><br>Sales result thus far have been mixed.<br><br>Ted Williams' spikes from his final at bat, Walter Johnson signed<br>ball from the final out of the 1924 World Series and a Ted Williams<br>1955 All Star bat realized stunning prices. The Johnson ball<br>went for $90,000 with the auction house premium and the Wiliams<br>spikes for well over $40,000.<br><br>At least 15% of the items did not sell- albeit most of those<br>were modestly price.<br><br>More later<br><br><br>Bruce Dorskind<br>America's Toughest Want List

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Posted By: <b>Cobby33</b><p>If these people don't want to "scare people away," they need to come to grips with the downside of consigning to an auction house with no minimum bid/reserve and take what they can get, even if it's $.99. There's a reason certain items don't go over $.99. People who participate in these major auctions are sophisticated enough to not be "scared away" by a reasonable minimum bid/reserve.<br /><br />If they're afraid that their crap won't meet the minimum bid, they should sell it at a garage sale.

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Posted By: <b>barrysloate</b><p>This is a very interesting discussion, and I agree with Richard that if every bidder set a maximum and stopped there, the shilling would disappear. But the auction world doesn't work that way.<br /><br />What every major auction house knows all too well is that their best clients are extremely wealthy and have enormous egos, and they use that information to their advantage. Most high end bidders don't set limits, but instead decide they are not going to leave the auction without going home with a specific lot. And the auction houses know this all too well. There are even bidders who will brag to the principals that they are going to win such and such a lot no matter what.<br /><br />Bruce is correct that the money, power, and ego of certain bidders know no bounds. And that, for better or worse, is what makes the auction business tick. And since the law allows them to keep pushing up a bid until it reaches a certain accepted level, they will continue to do so until and unless that law is ever changed.<br />

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Posted By: <b>Alan</b><p>Well said Barry !!!

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Posted By: <b>Jeff Lichtman</b><p>Corey is obviously right -- however, as in any other business, auction houses are concerned with one thing: money. And until the laws change which permit this sort of activity, they will do all that they can to maximize their takes no matter the collateral damage to bidders, society, etc.

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Posted By: <b>Richard Masson</b><p>No, Corey is not obviously right, and of course an AUCTION (where the only thing at issue is price)is only about money. Full disclosure of reserves in advance and no book bidding is better for buyers and worse for consignors. Book bidding with no disclosure is worse for buyers and better for consignors. Who is to say one should be preferred over the other? Auction houses work for consignors, therefore there is book bidding.<br /><br />There is no "right" answer here, unless it is simply that the rules need to be disclosed and understood in advance.

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Posted By: <b>Cobby33</b><p>"There is no "right" answer here, unless it is simply that the rules need to be disclosed and understood in advance. "<br /><br />This is true, however, although auction houses may "work for" consignors, it is the bidders who fund both the consignors and auction houses. No bidders, no auction house.<br /><br />So, again, unless there's a movement to boycott or curtail the bidding in (a) particular auction house(s), these (albeit legal) ethically-questionable tactics will persist.

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Posted By: <b>leon</b><p>Unfortunately we always come back to some things. "Cards" trump almost everything. If xyz Auction House has them it doesn't really matter what xyz has done, to most people. Collectors will bid. Some will have high principles and not do business with a certain company but our addiction overrides most other things....This is certainly debatable but, from experience, this is the way it is....I know there will be a handful that disagree and say "OH, but I would NEVER buy from them for this or that reason". And no doubt there are a few that won't but everyone else will.....How many folks (myself included) bid in the MemoryLane Auctions after all the crap came out about the owners history? As I have said I don't like the house bids but they are what they are. Set a number to go to and don't go farther.... regards

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Posted By: <b>Corey R. Shanus</b><p>I don't look at this issue as what is better for consignors or buyers. Rather I look at it as an issue as what is honest and upfront, and then let the chips fall where they may. If that means buyers benefit (through the elimination of book bidding), then so be it. Book bidding is nothing less than selling something under false pretenses, period. The fact that an auction house discloses the practice in its terms and conditions of sale doesn't change what the practice is. Or to put it another way, just because someone discloses ahead of time that he/she may cheat, and then does it, doesn't change the fact that he/she is cheating. Yes I know the practice is legal. So nobody is breaking any laws. But that doesn't make it right.<br /><br />And let's also be real about another aspect of this. The only reason it is legal is because of the auction house lobby. Contrary to some posted views as to the power of the hedge fund people who control NYC finance and who consign valuable works of art, I seriously doubt they are lobbying Albany to keep book bidding legal. And even if they were, who are buying these expensive works of art? Probably other financial superstars who would find it in their interest to lobby for the elimination of book bidding. I have little doubt that when Sothebys et. al. lobby to maintain the legality of book bidding, they are dropping not-to-subtle hints that if Albany outlaws it, well, there is always New Jersey or Connecticut.

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Posted By: <b>Jeff Lichtman</b><p>What is the problem with letting the market determine what a card is worth? What is the point of artificially lifting bids - except to generate more money for the auction houses (and secondarily to the consignors) under false pretenses? Corey is right in the sense that it is better for a market system to allow complete transparency.

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Posted By: <b>barrysloate</b><p>Cobby- even though it is true that without bidders there would be no auction, I still feel auction houses represent their consignors interests, and as an auctioneer that is my position, too.<br /><br />You can't represent both sides. You wouldn't want to be selling your house and find out your broker is also representing the buyer. So auction houses may wine and dine buyers, but they are legally contracted to the sellers.

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Posted By: <b>Richard Masson</b><p>Sorry, I just can't let this go. I think both Corey and Jeff are focused on this issue solely from the buyers point of view. <br /><br /><br />Jeff, in order for the market to determine a price, you need a willing buyer AND a willing seller. The reserve (and book bidding up to that amount) is only a reflection of the price at which the consignor is willing to sell. If the only bid in the room is too low for the seller, that doesn't make the item "worth" only what the buyer is willing to pay. It takes a buyer and a seller, both, to determine value. <br /><br />As a buyer, would I prefer to know the reserve in advance? Of course.<br />But if not, does it really matter if the auctioneer gets to the reserve by saying it explicitly or by going,"100, now 200, now 3"?<br /><br /><br /><br />

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Posted By: <b>barrysloate</b><p>Richard's point is hard to dispute. However, I think there is a natural wariness that bidders have regarding auction houses, and when that is compounded by the fact that the auctioneer is clearly calling out bids that were never placed, that distrust is magnified.<br /><br />From a purely economic vantage point Richard is correct, but there is a human element that is in play also.

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Posted By: <b>Cat</b><p>I think Richard's point is disputable. I can't think of a precise analogy but it is SOMEWHAT similar to what happened in the stock market...For years, there were willing buyers and willing sellers at certain price levels, but market makers were padding the middle and ARTIFICIALLY driving prices up or down to create greater margins. Eventually, the SEC caught up to the practice and regulated it. We just have a hobby that is largely unregulated and law hasn't caught up to the practices that many of us certainly believe is wrong and even SHOULD BE illegal. Just because it is NOT YET illegal doesn't make it right.<br /><br />I pretty much disagree with anything that is not free-market system.

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Posted By: <b>Jeff Lichtman</b><p>Richard, if there is no buyer willing to pay what a seller thinks his card is worth that means that the seller's view of what his card is 'worth' is wrong. The card may be worth more another day -- but on that given day, the free market determines the card's value. It may be overpriced or underpriced based on historical trends -- but that is what the card is worth that day.

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Posted By: <b>barrysloate</b><p>In a sense if a seller only wants to part with an object at a very aggressive retail price he should bypass the auction route and see if he can make a direct sale. Perhaps even a Sotheby's or a Christie's could provide such a service and bring buyer and seller together. An auction really should be unrestricted, that is the whole purpose of the auction system.<br /><br />But as Richard states it is difficult to get a seller to agree to those terms, whereas a buyer will gladly go for it.

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Posted By: <b>Richard Masson</b><p>Jeff, once again I have to respectfully disagree. If there is no trade, you can't say what an item is worth. <br /><br />I have a unique T206 Joe Jackson. I want $1 million for it. The highest offer is $25,000. What is it worth?<br /><br />The answer is: we don't know. All we can say is that it is worth between $25,000 and $1 million.

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Posted By: <b>Jeff Lichtman</b><p>Richard, I have a new car I just paid 75K for. I haven't picked it up yet from the dealer but I want to sell it now for a million bucks. I suppose my car is worth something between 75K and a million?<br /><br />I own stock in xyz.com; the stock price is 200. The PE is a million. I wish to sell my shares for 4000 a share. My stock is worth somewhere between 200 and 4000 a share?

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Posted By: <b>Cobby33</b><p>With all due respect, I don't think the Law of Economics supports the proposition that something is "worth" what a seller wants for it. I think the market (i.e. a ready and willing buyer) dictates worth.

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Posted By: <b>barrysloate</b><p>The car is worth something between 75K and a million.<br /><br />It's worth 75K, which falls in the low end of the range. <img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>peter chao</b><p>Guys,<br /><br />The price of any item is established by actual market transactions. In the car example, the car is worth $75,000 because there was an actual transaction for $75,000. The one million is just wishful thinking, no different than the fact that I would like to purchase a T206 Wagner for a dollar.<br /><br />Now if somebody actually sold me a T206 Wagner for a dollar, then I would not only be extremely happy, but it would help establish a new price point for the Wagner. <img src="/images/happy.gif" height=14 width=14><br /><br />Peter

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Posted By: <b>Richard Masson</b><p>Thank you, Barry

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Posted By: <b>Josh Adams</b><p>Wait, you mean the price for an item depends on the price paid for said item?<br /><br />Brilliant!<br /><br /><img src="http://img53.imageshack.us/img53/6421/guinessbookthumbnk5.jpg"><br /><br /><br />Josh

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Posted By: <b>peter chao</b><p>Guys,<br /><br />Most of us are just "splitting hairs," we all mean pretty much the same thing.<br /><br />SCP/Sotheby's I've heard are one of the partners in the purchase of the Gretzky T206 Wagner, is that accurate. It seems like so far they haven't made any plans to auction it off.<br /><br />Peter

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Posted By: <b>Corey R. Shanus</b><p>Richard,<br /><br />Sorry for the tardiness of this reply but only now have I seen the most recent posts.<br /><br />Yes. You're quite correct in that what an item sells for is a function of what a seller is willing to sell it for (supply) and what a buyer is willing to pay (demand). But here's my issue. What buyers are willing to pay (the demand curve) is affected by human impulse, which can be materially impacted by erroneous information (e.g., book bids intended to give the impression that there is real interest at those levels when in fact there is not). Here's an analogy. I want to sell my rare baseball card. A buyer offers me $500, not believing the card to be as rare as I claim. I then make up some lie to persuade the buyer the card is rarer than in fact it is. The buyer, believing me, then raises his offer to $800. Is that ethical? In my book, no. I've just induced the buyer to offer more for the item based on a lie. In my view that is precisely the situation with book bidding. In basest terms, book bids are lies by the auction house whose sole purpose is to persuade buyers there is more interest in an item than in fact there is, thereby inducing buyers to value the item higher than they otherwise would.

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Posted By: <b>JimB</b><p>Peter,<br />Yes, SCP holds a minority share in the Wagner. See their press release at the link below.<br />JimB<br /><br /><a href="http://www.scpauctions.com/wagner_press_release.htm" target="_new" rel="nofollow">http://www.scpauctions.com/wagner_press_release.htm</a>

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Posted By: <b>Jay</b><p>The discussion between Richard and Jeff focuses on two different things. Richard's example points out that unique, or almost unique, items are difficult to value. In his example even if the buyer and the seller reached an agreement to purchase the unique T206 Joe Jackson for $500,000 what would the card be worth after the sale was completed. Though it just sold for $500,000 does it mean that the next buyer and seller of the item would agree on this same price, which is really what its worth is. The prior sale is history; the place where the next sale could take place is what it is worth.<br /><br />Jeff's car example is different. The car is basically a commodity and value is easily obtained(assuming it is not a collectors car). Plenty of sellers and plenty of buyers lead to convergence at a pretty specific value. <br /><br />Many cards in these major auctions are scarce/rare and thus as in the first example above determining their value is difficult. It is easy to envision cases where a buyer is willing to pay the seller's reserve but, if there is not a underbidder willing to get close to this reserve, the auction will end with the item unsold unless "house bids" are used. This benefits no one. Richard makes an excellent point, the buyer should only bid what he is willing to pay and if he/she wins the item for that price or less he/she should be happy. So the bottom line is I have no problem with house bids.

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Posted By: <b>mr. moses</b><p>have been tempered and clarified by some expressions made here and a little more thought. I must say at this point that in my mind the practice of book bids whether disclosed or not is actually just dishonest in it's intent and it's implementation. It suggests more interest contemporaneously and infers a future value not established by 2 or more party bidding. Dishonest. It is compounded by allowing the house to make the bids in secret - that is to say that one never knows on what particular items such a practice is being exercised. Dishonest. I don't care if it's in the front of some catalog that the auction employs the use of book bids. Subsequent to the auction they'll be a prices realized. Which prices will that reflect? The higher the value that they can convince a consignor and a buyer that something sold for - the greater the chance they can realize an even higher price the next time on that or a similar items. Obfiscate and confuse. Dishonest. I think someone mentioned ponzi scheme earlier in the thread. Bit of that as well. Agreed that one can chose to bid or not bid in an auction. Doesn't mean I can't speak out against the policy as it may preclude me from getting something I want. All I'm looking for is an even playing field without the smoke and mirrors. Business can be profitable and moral.

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Posted By: <b>Cobby33</b><p>Try convincing an insurance company (for example) to pay on an item (unique or not) which you (the possessor) "hope that" or "think" it's worth. Best of luck.

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Posted By: <b>davidcycleback</b><p>When someone bids in an auction and there are competing bids, the bidder is working under the assumption that one or more people are valuating the item similarly. This is part of how he valuates the lot-- that other agree the lot is worth something. He would likely lower the valuation if he discovered the lot was less popular bidding made it appear.

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Posted By: <b>Scott</b><p>There is a lot of economic theory about auctions and auction behavoir...unfortunately I've lost most of those brain cells over the years.<br /><br />the last post is exactly correct. The auction house placing bids gives the impression that there is at least one other BUYER that is willing to pay something close to what the real bidder is willing to pay. Auctions attempt to reach the highest price on an individual's demand curve. An individual's demand curve is influenced by many things and certainly the perceived fact that someone else is also willing to pay a similar price can influence that curve.<br /><br />The law in essense allows the auction house to use a reserve and create the impression of other buyers...when in fact all the reserve is..is a point on the supply curve that the seller has picked, below which he/she will get more satification from retaining ownership of the item than satifaction from the money they would receive from selling.<br /><br />Its the law, but it is deceiving to individual buyers and it would be a good law to amend to state that reserves can be placed, but must be announced prior to commencing the auction.<br />

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Posted By: <b>peter chao</b><p>Scott,<br /><br />When you go into a casino and go up to a craps table and the dealers tell you the more you bet the more you win. Do you take their statement literally and bet all the money you have.<br /><br />Yes the statement is misleading but it's the casino's business and you protect yourself accordingly. The same goes when you are at an auction. Everything from the auction catalog to the book bidding your complaining about is arguably misleading. <br /><br />If you have difficulties staying within your budget, you decide in advance which items you are going to bid on, and the highest you are willing to bid. The auction house is in the business of selling and you should protect yourself accordingly.<br /><br />Peter

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Posted By: <b>davidcycleback</b><p>It resembles shilling. The consignor/auction house is placing bids to get the real bidders to bid higher.<br /><br />If it isn't shilling because the auction house isn't placing 'real bids,' then it should not appear as if real bids are being placed. eBay also allows reserves, but the difference is the bidder is aware there is a reserve that he clearly has or has not met and, assuming there is no shilling, knows that competing bids are from real buyers. <br /><br />Duly note that some eBay sellers place shill bids to make it appear as if the lot is a popular item. And I'm sure Sotheby's places these pseudo bids, instead of repeatedly saying "Reserve not met," for similar reason.

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Posted By: <b>peter chao</b><p>David,<br /><br />I'll agree with you that far...it is a type of shilling. But as most of us have found in our transactions over E-Bay, if shilling is done discretely it is difficult if not impossible to detect. People need to exert some discipline here. Let me put it this way...Sotheby's did not build their fancy auction houses by losing money on consignments. <img src="/images/happy.gif" height=14 width=14><br /><br />Peter

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Posted By: <b>Scott</b><p>Peter,<br /><br />All markets have rules. IN this case the current rule allows the auctions to do this. All I am saying is that it allows for individuals (or at least some) to be making decisions based on incorrect information. In most markets, over time the market would adjust and the buyers would change behavoir and prices (and practices) would drop as buyers would discount the fact that others might want the same item.<br /><br />Since the items we are discussing are merely items with perceived worth and usually some type of scarcity, it is likely that for top end product this rule can continue to exist and the market won't self correct. The rise of the buyer's premium in this market over the past 20 years is testimate to that (though I personally often choose to not participate in some auctions that I would otherwise due to this but I'm obviously in a minority)<br /><br />I would disagree that auctions are there to sell - though I would agree that this "book bid" is a form of selling rather than auctioning. Auctions are there to gather a group of buyers and execute a transaction at the highest point on the demand curve at a set point in time for an item or group of items. They try to gather those buyers that individually will have demand points higher than the "average buyer". Selling introduces an element of ongoing time, discerning value and discrimination.<br /><br />Your probably right in that Sotheby's has found a way to "sell" while creating the appearance of a true action.

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Posted By: <b>boxingcardman</b><p>A number of comments seem to bypass the personal responsibility element of auction conduct. Perhaps I differ from the typical participant in auctions but I study the catalog in advance and decide what I am willing to spend. I stop if the item gets there. Someone who keeps raising the paddle despite the price spiraling out of control has to bear some of the responsibility for the outcome. Your decision, you live with the consequences, and don't whine that there was a book bid that drove up your price. <br /><br />I also agree with Richard w/r/t valuing unique items. There is no "value" for them other than what deal can be reached. For something readily located, you have a market to reference. I'd be nuts to pay $10K for a nm-mt Hank Aaron rookie because I can locate one any day of the year and buy it for a fraction of that price. If I was pricing mine to sell and I asked that for it, I would not expect to sell it. If I am selling a very rare card that has only a few known examples and might not come up for sale but once every decade, I can ask what I want and if you don't want to meet my price, too bad. I do not see the harm in a book bid for a unique or very rare item, although it would move things along much better if there was simply a reserve as starting bid. That way if no one's interested it just moves on. Which points out one thing that favors book bidding: it flushes out potential buyers at levels that a seller might accept if approached after the auction, buyers that a straight reserve might not find. I know I've set minimums on items on ebay and been approached when an item did not sell with a request to sell it at a reduced price. Sometimes, I will take the deal. I am sure that if someone bids 90% of the reserve on an item, a good thinking auctioneer would try to bring the seller and bidder together to make a private deal and may well close a deal that leaves everyone better off. <br /><br />I ask this seriously, not sarcastically: Are there people who have the $$ to bid on the types of items we are discussing who are actually driven to bid more if they think they are in a competition? Has anyone here ever thought "Hey, there's another bidder, I guess I'll just bid beyond my limits on this lot because there's someone else bidding?" And if so, has that been for a replaceable item (like a postwar rookie card) or has it been for a unique item or one that rarely surfaces hence isn't readily valued?<br /><br />

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Posted By: <b>Scott</b><p>I ask this seriously, not sarcastically: Are there people who have the $$ to bid on the types of items we are discussing who are actually driven to bid more if they think they are in a competition? <br />--------------------------------<br /><br />I think that the fewer the number of potential buyers there are...the higher the potential for that to happen. Its called bragging rights <img src="/images/happy.gif" height=14 width=14><br /><br />If you owned the hypothetical t206 Jackson that was mentioned earlier in this thread....wouldn't you love to know that Steve Jobs and Bill Gates are both closet Jackson collectors and will be bidding for the card...and don't you think each might be willing to spend perhaps another million just to "stick" it to their rival.<br /><br />

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Posted By: <b>Dave G</b><p>.....that no one has suggested contacting their senator or whoever in NY State and get them to inquire as to the actual rules for auctions in NY and if this "book bid" is legal, and then advocated that they try and change it and make the auction a real auction. Unfortunately Sotherbys, Christies etc will bring big lobbying bucks to bear and ensure that it would be voted down. We are talking millions of dollars here as well as publicity - the high end collectibles market is about bragging rights, not real rarity, and I'm sure that nothing will be done about the problem, as these auction houses are BIG BUSINESS for the Big Apple - just like Detroit will never really increase the fuel efficiency of their cars as they say there is no profit in selling small fuel efficient cars - despite what the Japanese accomplish.