I just had a letter to the editor of The Maine Antiques Digest published in the July 2008 issue. I took exception to the position of the author of a monthly column on Auction Law as it related to bid rigging. It’s a topic I hope to discuss in future blogs.
Letter to the Editor:
In your monthly feature on Auction Law and Ethics, Steve Proffitt discussed the legal processes of the Sherman Antitrust Act to protect consigners from bid rigging. As he clearly states “bid rigging, price fixing, and market allocation have each been determined to be per se violations of the Act”. His perspective and focus is on the methods of colluding buyers to prevent fair competition to realize a true market price.
I would like to make the argument that there is another side of the auction process that needs to be equally addressed, and that is how auctioneers and specifically the Sotheby’s/Christie’s duopoly have succeeded in manipulating the Act. Mr. Proffitt’s perspective does not take into account how 1) the secret reserve is clearly a rigging of the bidding process, 2) the non-negotiable (and ever rising) buyer’s premium is price fixing, and 3) that Sotheby’s and Christie’s market allocation is so dominant that there is negligible competition to their chosen fields from other auctioneers.
The ring format that Mr. Proffitt alludes to in the auction buying process has been replace by joint ventures, as the cost of capital and risk by any one dealer can be best overcome by a shared agreement. Also, competition is far more open with the internet and the media, and not confined to the back of the auction room for a post sale “knock-out”.
It’s time to examine how the Sherman Act can use the hammer of enforcement by truly breaking the back of bid rigging. If the motivation of bid rigging is selfishness and greed “in the hope of extreme gains for themselves”, the actions and methods of this duopoly cry out for a government assessment of their manner of operating and their damages to fair trade.