In my prior blog, I made a statement that auctions as now practiced “in my mind are illegal, manipulative, deceptive, and full of conflict of interest”. For me to break this down would take a text book full of examples, but I will try to analyze this statement in small packets in my blog format.
The most obvious problem is the conflict of interest. A buyer’s premium is now the preferred method of revenue income for any auctioneer; it is non-negotiable and the rate can be periodically raised with not so much as a whimper from buyer who pays it. It is a great business model. But that device is flawed when there is a seller who is paying a commission.
It’s funny how auctioneers have gotten to the point of justifying the buyer’s premium as a service to the buyer. But wait a minute, isn’t the auctioneer committed first to the seller; didn’t the auctioneer make a contract to represent the seller’s goods?
Auctioneers try to get around this by making the seller sign off on the auctioneer collecting a buyer’s premium. But whose premium is it anyway? By right it is the seller’s. But even if the buyer’s premium were to go to the auctioneer, why doesn’t the auctioneer show that premium on the seller’s receipt of sale. Maybe the combined commission and premium is embarrassingly high (20% seller commission + 20% buyer’s premium is a nice profit on no cost of inventory investment). It’s in the auctioneer’s best interest to keep the two fees separate and invisible to the seller.
Buyers get absolutely nothing for the premium, and sellers get mislead by the income they generate for the auctioneer. The auctioneer has successfully duped both by getting a fee from both parties of the transaction while ignoring the conflict of interest of services they tout to each side.
But wait, did I failed to mention another conflict of interest when the auctioneer has an ownership interest in what their selling. Another time.