Why is shill bidding so bad?

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Posted By: Cy 

I would like to pose a question to the board. Many times I have seen posts that blast people for possible shill bidding. Why is shill bidding so bad? I mean all that is happening is that one guy is bidding up the price of an auction so that his friend can win a larger financial gain. What could be so wrong with a friend helping out another friend?

It happenes in other areas of auctions, doesn't it? How many times have we heard people ask their friends not to bid on an auction because the person really wants the lot and doesn't want to pay a premium price for it. And no one even blinks. It happens on this message board a fair number of times. I imagine it is happening right now with Lipset's and Sloate's auctions nearing their close. Isn't this the same thing? Isn't one person altering an auction and helping out a buddy financially, even though the friend may want to bid on the lot himself? Do you think Lew Lipset or Barry Sloate are thrilled to read that people are trying to minimize the price of one or many of their auctions through collusion?

So let me pose the question again. If it is perfectly OK to tell a friend NOT to bid on an auction so that one can buy an auction lot at a substantially cheaper price, why is it so bad to ask a friend to bid up his auction so he can make a little more money on his sale.

To me it's the same thing. Someone is asking another to alter the auction for financial gain.

Sincerely,

Cy

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Posted By: RBCraik

Ask Adam. Ask Bob. Because it is illegal. Prima facia. To ask such a question, even rhetorically, at a minimum demonstrates a disconnect regarding the auction process. At worst case, an ethics problem.

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Posted By: runscott

Bob - I agree completely with you, very well said. You are right in that for anyone on this board to ask the question "will you collude with me" is definitely on par with shill bidding. I completely concur with you and Cy.

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Posted By: Jeff S

I agree that collusion to keep bidding down is unacceptable. However, it is worth noting that much of the bidding discussion on this board actually creates bidders -- that is, if I want 33% of a lot, and I solicit partners who want another 33%, and so on, then people who otherwise may not bid on a lot become part of the action, thus possibly driving the bidding up further. Even if some of the people who are partnering to win the bid might bid on their own, the amount the group bids is probably greater than the amount an individual would, because the group is specifically interested in more individual cards in the lot.

Also, from a practical perspective, I would almost rather people talked about my auctions and made comments that reeked of collusion, because it gives me free publicity, and usually the people whose friends tell them not to bid wouldn't bid anyway. I have no idea whether others feel the same way.

Again, I don't support or encourage explicit bidding collusion, and as far as I know, have never engaged in it...just throwing a couple of ideas out there.

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Posted By: Kenny Cole

I am astounded that this question was asked I presume that it was only to elicit a response. Shill bidding has nothing to do, and does not relate, to buddies deciding that they will not bid against each other with respect to a given card or lot.

The problem with shill bidding is that it is dishonest from the get go. When a shill bid is lodged, the presumption is that the bid is real. However, it is not. That is, by definition, FRAUD. It is an intentional attempt to deceive other potential buyers about the value of the card and elevate its value. If friends decide not to bid on a card because another friend wants it, there is nothing legally wrong with that, although the seller might not be happy. That is far different from having a seller seek to inflate the value of a card by having a proxy try to bid the card up.

I hope that your question is for purposes of information only. There is no comparison. If you don't see the difference between deciding not to bid in order to consciously let a friend get a card he/she wants, and having a buddy who has no intention of buying a card bid it up so that you can make more money than you would have otherwise, you really need to re-think your moral values.

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Posted By: runscott

Cy's post made perfect sense and I can't see how you could construe it to indicate that he has questionable moral values.

To spell this out for board members with extreme tunnel vision: Cy is pointing out that shill bidding is BAD, and that collusion is similar, and therefore is ALSO BAD. If you read anything else into this, then you totally missed the point.

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Posted By: Adam J. Baxter

Just as everyone who responded to this post has stated in one way or another, the genesis of shill bidding is FRAUD. Misrepresentation in business is fraud at worst and ethically bad business at best. Even if there were no consequences for shill bidding, whether legal or otherwise, the fact of the matter is, engaging in the practice of shill bidding is a gross violation of eBay policy. When one becomes an eBay member we all agree to the terms of usage and within those terms is to honor the rules of the website and illegal or not, shill bidding is against eBay's rules. It's that simple.

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Posted By: Adam J. Baxter

There is no such thing as a stupid question (at least that's what I've been told until I asked one!) I agree with Scott that inquiring about shill bidding or fakes or whatever, doesn't necessarily constitute guilt or bad intentions. It's unpleasent questions about subjects like shill bidding that actually help educate new collectors against the scum that swim in the depths of eBay.

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Posted By: Kenny Cole

You know me better than that. I am not shooting at Cy's moral values, per se. As I said, I think (hope) that he was simply trying to raise the question in an intellectual sort of manner. I absolutely disagree with you, however, when you try to equate bidder "collusion" with fraud. They aren't nearly the same. You know that. One is illegal, one isn't. Sellers might not like it that friends choose not to bid on an item because another friend wants it, but that's life. Can you honestly tell me that you've never done that? I very seriously doubt it.

Surely you aren't arguing that the two are the same. The entire thesis of the question was whether allowing a buddy to get a card (i.e., not bidding it up) was as bad as shilling it up. My answer is absolutely not. Is your answer different?

In my view, you cannot equate shill bidding, which is intended to deceive, with agreeing not to go after a card which you and several other people want. If you disagree, that's fine. However, I'm not quite sure what your rationale would be for that assertion. Please explain it to me so that I can understand.

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Posted By: runscott

none of which you know to be true. Because of that, and the fact that I've already stated concisely my opinon, I'm not going to respond other than to say that I do know Cy personally and I spoke to him after he posted.

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Posted By: runscott

If someone who plans to bid but can't afford the entire lot, contacts others in like situation, that type of collusion would help the seller. I personally nabbed a card that way and would have no qualms about doing it again.

But the type of collusion where several people who all planned to bid, get together and agree to have one person bid for all, then split up the winnings, is not good for the consignor, who in many cases might be a buddy of yours, or the auction house. And I do think that it is similar, if not just as bad, as shill bidding. As far as the "but one is legal, the other isn't" argument, that doesn't change the ethical nature of either.

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Posted By: Rob M (ramram)

We have a legal issue and a moral issue. I believe Cy is talking about the moral issue.

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Posted By: Kenny Cole

Scott,

I am making no assumptions about you. You are not even pertinent. Sorry if that hurts your feelings. You were never even in the picture, except insofar as you wanted to inject your opinion into stuff. I asked you to set forth the basis for your opinion, and you now seem to be running.

You chewed my ass because you disagreed with what I said. Fair enough. But that means I get to do the same thing when I think you are wrong. Be a man. Quit fading. Step up to the plate and answer my questions. Then we can really go at it.

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Posted By: marty

"Ask Adam. Ask Bob. Because it is illegal. Prima facia. To ask such a question, even rhetorically, at a minimum demonstrates a disconnect regarding the auction process. At worst case, an ethics problem."

Making an agreement not to bid openly for an item is ALSO illeagal. This is a form of bid rigging.

"Bid rigging also takes many forms, but bid-rigging conspiracies usually fall into one or more of the following categories:

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."

This is taken directly from
LINK

Bid Suppression is just as illegal as shilling.

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Posted By: Kenny Cole

Marty,

You are misinformed. Bidder "collusion" may be against ebay rules, but it flat is not illegal. Ebay is powerful, but it isn't powerful to the point where it can make violations of its rules a criminal offense. Simple as that. When you find a case where someone is charged with the crime of bidder collusion on ebay, please let me know. I'm not going to be holding my breath.

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Posted By: botn

As a fairly aggressive buyer of caramel cards on ebay as well as most other auctions I have been contacted by collectors to back off of certain lots. Out of respect for them, I have done so knowing that this same thing is probably happening to me when I list stuff on ebay.

I think that it is clear that shill bidding is fraud and there are many known auction houses that have found themselves in serious legal trouble for participating in these deceptive practices. Deciding to not bid on a lot, as a gesture to a friend, is also a form of price fixing, however it is not illegal, despite it being unethical from the seller's point of view.

I do not condone, endorse or employ shill bidding in my ebay listings. But as a buyer I do not really care if a seller does it. It is always great to pay less for an item than you had budgeted for but I know what I am willing to pay for items that I bid on.

Greg

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Posted By: kevin M

Actually, Collusion between two parties not to bid is illegal in many states (at least it is in New Hampshire), as well as many European Countries. I have been to more than a few auction houses were it is posted on the wall.

But, Lets stay away from what is illegal and legal and stick with ethics. Just because something is illegal, does not always mean that it is wrong. I am sure that everybody here has driven over the speed limit, but didn't let the ethics of thier actions keep them awake at night.

In terms of ethics, shill bidding and collusion are both equally as bad, actually collusion may be worse as I will explain below.

I think that auction houses often feel the need to shill, because they know that people are out there colluding.

People often shill just to hit a reserve price, but colluding between parties not to bid is only done to keep the price down. In the first scenerio, nobody is getting screwed because you were not going to win the item in the first place, however in the 2nd scenerio, both the auction house and consignor are getting screwed.

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Posted By: kenny cole

Cite me the statute. Then, show me how many times people have been charged with failing to bid on something because they bailed in favor of a friend. Then, give me a conviction rate. I bet it's zero. It ain't there, and it ain't being charged.

Generally speaking , you don't win convictions accusing people of not doing things that they're not required to do. I would try that case any day. I bet the ADA stuck with that case wouldn't.

Oh, by the way, I guess I must be a criminal. There have been several instances where I was interested in a card, but decided not to bid because I thought that a friend of mine wanted it more. Mea culpa. Me bad. I confess. Send me to the joint for baseball card non-biding. I am clearly guilty.

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Posted By: marty

Kenny, here is a case

This is taken directly from the article.

"Maynard also entered a guilty plea to lying to a federal grand jury last December about the case. He faces a maximum of three years in prison and a $350,000 fine, but prosecutors say Maynard will get less since he entered a guilty plea and has agreed to work with federal authorities."

This is not about baseball cards, but it is about bid collusion.

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Posted By: runscott

Are you sleeping with Ryan?

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Posted By: runscott

just because you are so proud of yourself.

<<You know me better than that.>> I don't know you at all, but I do know Cy.

<<I am not shooting at Cy's moral values, per se.>> Go back and re-read your post - you did actually shoot at his morals...per se

<<As I said, I think (hope) that he was simply trying to raise the question in an intellectual sort of manner.>> Good job - you got one right. The problem is that it was so difficult for you to figure that out.

<<I absolutely disagree with you, however, when you try to equate bidder "collusion" with fraud. They aren't nearly the same. You know that.>> 'similar' Kenny, 'similar'. What do I know? How do YOU, the omnipotent Kenny know what anyone else knows?

<<One is illegal, one isn't.>> So what? Cy's question is about ethics, not legality. Please, when someone talks to you, listen before responding, even if it's a virtual conversation.

<<Sellers might not like it that friends choose not to bid on an item because another friend wants it, but that's life. Can you honestly tell me that you've never done that? I very seriously doubt it.>> Gee, Kenny - this sounds like another assumption that the omnipotent Kenny Cole is making about someone else. You seem to be assuming that just because you have character flaws that everyone else has the same ones. Life doesn't work that way, Kenny.

<<Surely you aren't arguing that the two are the same.>> I used the word 'similar' Kenny - get out your dictionary. A cheap paperback will do the trick.

<<The entire thesis of the question was whether allowing a buddy to get a card (i.e., not bidding it up) was as bad as shilling it up. My answer is absolutely not. Is your answer different?>> No, Kenny, that wasn't the thesis of the question. There are many types of collusion - all have been discussed in this thread. Again, the word 'similar'.

<<In my view, you cannot equate shill bidding, which is intended to deceive, with agreeing not to go after a card which you and several other people want. If you disagree, that's fine. However, I'm not quite sure what your rationale would be for that assertion. Please explain it to me so that I can understand.>> No amount of explanation of anything would help YOU understand. You have your own opinion and everyone else is both wrong, and unworthy of having their own. You have made this clear to everyone who has responded to any of your posts. Do you need anything else from me, Kenny? If not, I'll go back to responding to other board members who give a flip about the opinions of others.

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Posted By: leon aka peace maker

Well....I was going to stay out of this one cause ya'll are having such fun but figured what the heck. Several things I thought about in reading this thread.

1. The question and topic are great. I agree if an issue is never brought up and can't be discussed.

2. I did not think Cy was saying anything more than "let's open this up for conversation". Great topic.

3. Whomever said something about "it's against ebay rules"....well, I am not a big ebay proponent but still like the venue....quite honestly I think their responses, accountability, and service SUCK bad. SO in that respect saying it is against ebay rules is moot ( to me anyway).

4. My personal view of the subject is that both collusion and shilling are sort of similar but not really.....yes, that is what I meant to say. They are both a form of price fixing yet shilling is majorly frowned upon ( and I agree ) yet collusion is only frowned upon when it is brought into the open? Sort of "don't ask and I won't tell" situation......so in my thinking both collusion and shilling do the same thing.....fix prices....

regards all

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Posted By: Kenny Cole

Conspiring to eliminate competitive bidding, which is statutorily required on any public works project where a contract is going to be let, is the same thing as opting not to bid on an ebay item so that a friend can get it at a lower price. OK. Got it.

If that is true, I guess I should just go ahead and get fitted for my orange jumpsuit. Bummer. I hate orange. Reminds me of longhorns and aggies.

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Posted By: leon

On purpose I did not get into the legality of the issue. Of course I talk to friends about not bidding, or "going in with", or "going to a certain level"....it's just a fact of life in our hobby. AS I enjoy some pastimes that are illegal but are not morally bad ( IMO ) I don't usually get into legality issues, too much....whomever said the fact about speeding is correct, relative to what we are talking about ....it is legally wrong but maybe not morally....and this point could be argued ad nauseum too......I honestly don't think there is a right or wrong answer to this topic...it is up to each individual how they want to act.....I will publically say that I think shilling is wrong and I won't do that...although, again, there is a fine line here somewhere.....just not sure where

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Posted By: Kenny Cole

Scott,

I don't need to sleep with Ryan. We both have wives. That sort of thing would be more your bailiwick. I will say, however, that my wife has bigger balls than you do. Of course, so do my fish.

Its kind of funny. You profess to be Mr. First Amendment when it suits your purpose. However, that proclamation is only good when you are trying to gore someone else's ox. You don't like it at all when it gets directed back at you. Why does the word "hypocrite" come to mind?

By the way, you never answered my question about whether you'd ever bailed on an eBay auction in favor of a friend. Since I'm omnipotent, I'm going say, hmmmmmm . . . yes. But, since I'm omnipotent, I'm sure that you only did it once, that you learned your lesson, and that you won't ever repeat the mistake. After all, opting not to bid on a card in favor of a friend would make you a collusive fraud, especially if you did it more than once. We can't have that. It might cause you to fall off your pedestal and sprain your tongue.

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Posted By: Kenny Cole

Leon,

I agree with you. Right or wrong is viewpoint dependent. I personally think there is a huge difference between: 1) shilling a card up; and 2) deciding not to bid on a card so that a friend who wants it can hopefully get it a little cheaper. But that's just me.

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Posted By: Jay Miller

Just to give a little different perspective, I once had a conversation with Lew Lipset about people asking others not to bid on items. His view was that if no compensation is offered for the "favor" then there is not a problem (although the auction house may not be happy about it). If compensation is offered then it is illegal.

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Posted By: runscott

and I have no doubt at all that your wife has larger balls than me.

End of conversation. End of opening this thread.

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Posted By: warshawlaw

Legal: The California Civil Code makes shill bidding illegal.

Moral: Shill bidding is wrong because it involves collusion between seller and shiller to take advantage of a legitimate buyer by telling the buyer that the market price on a card is a certain price when it is not.

I have no problem with people partnering up on auction lots. If they are not going to bid otherwise, so much the better for the auctioneer and the seller. We share investments in all other kinds of stuff (land, cars, etc.) so why not in cards?

I do not agree that colluding not to bid on an item is the moral equivalent of shill bidding to run up the price. A shill bid is an act that has an absolute effect on the auction; the price goes up, no matter what else transpires. It is also an active effort on the part of the auctioneer to fish for the maximum bid of the high bidder and force him to pay that maximum. Refraining from bidding is an omission that does not force anyone to pay more for an item. If an item is way below market and two guys agree that one will not bid on it against the other, the likelihood is that a third party will come in and scoop up the bargain item anyhow, screwing the colluders. If no one else comes along and bids, the item has probably reached a market level or had problems that led others away from it. Remember also that the auctioneer has plenary control over the auction. If he wants a certain return on the auction, he can either set the minimum at that level or set a reserve that must be met by the bidders. Most people I've talked with think that if the auctioneer is dumb enough to set the minimum at a fraction of value with no reserve, he gets what he deserves if the item sells for less than hoped. Finally, a shill bid inflates the reported result of the auction, even if the shiller takes the lot and no money ever changes hands. This in turn skews market perceptions of the auction's results when the auctioneer reports them to the hobby press and also frequently winds up in publicity and advertising that induces consignors to send their items to the auctioneers who appear to have been so successful in the past. Shill bidding is just way more pernicious and destructive than collusive non-bidding.

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Posted By: botn

Most of you are responding to this topic from the point of view of the buyer. Put yourself in a retailer's shoes. Once fair competition for an item is eliminated or reduced, the retailer suffers by not realizing the full "value" of the item.

If a retailer finds out that buyer "collusion" exists on a continual basis in his auctions, you may find that retailer impose reserves, higher opening bids or abandoning the auction format in favor of a direct sales.

Greg

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Posted By: jay berhens

Nice in theory, but not realistic. As was pointed out, even if 2 or more people get together and agree not to bid on something so that someone else can win the itme, this does not mean that another bargin hunter will not swoop in and try to steal the item for themselves. For bidders to have any real impact on an auction, all interested parties have to be involved in the bidding, or nonbidding as it were.It's only takes 2 bidders to run up the price.

Shilling takes only one person in collusion with the seller to help drive and control the sale price. The seller doesn't need the help of every bidder to pull of his scam.

Jay

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Posted By: Jeff S

Greg:

That is certainly true: if auctioneers felt that they were getting less money for their items than they otherwise would, they would shift to other methods. (Case in point: I'm much more likely to use methods other than eBay to move a card than I was a year ago, for a variety of reasons not relevant here.)

But if anything, your point indicates that bidder collusion is not a significant problem.

Lipset, Sloate, Mastro, etc., are all very smart guys (or so it seems to me, who has never met any of them). People with their kind of industry connections would, I think, take advantage of whatever selling method they could that nets them the largest profit, and that certainly doesn't have to be a catalog auction format.

But they don't.

Obviously, all of these auctioneers are well aware of bidder collusion in its many forms, and realize that regardless of whatever warnings they place in their auction rules, this practice will go on largely unchecked.

Yet despite this "problem," these auctioneers persist in doing catalog auctions that have minimum bids that are way, way below "retail", usually (I imagine) well below their investment.

In other words, they believe bidder collusion, if it occurs, isn't a big enough problem to merit a change of format.

And judging from auction results for as long as I've been following them (a few years, anyway), it isn't a big enough problem to keep them from getting fair (often much more than that) prices for their items.

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Posted By: Kevin M

It is very naive to think that just because an auction item has a low minimum bid, that there is not a higher reserve.

Don't kid yourself, Shill bidding by auction houses in some form is a very common practice in all fields of collectibles. Usually, it is simply allowing the owner of the item to bid on it until it meets the reserve. If they win it back, they pay a small commission or none at all.

The reason these people do auctions is because it is easier to get consignments for auction, than outright sale. Most of the time people don't know the true value of their item and are more willing to auction the piece, especially if they are protected by the auction house.

How many people on this board are willing to put an item in Mastro, Lipset, etc at 1/10 of its retail value, unless they are being protected somehow? If auction houses didn't allow any type of shilling, they would find themselves out of business very quickly.

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Posted By: Brian C Daniels

your wallet was bigger than mine! But as Douglas McArthur saud;

" I shall return" I'll sell you the Meyers for $250 ??? ; )

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Posted By: Julie

so some guy could get a card cheap(without asking his permissioin, I should say), but you guys were all so concerned about me being a racist (for some peculiar reason) that nobody mentioned it!