Is collusion a common practice in numismatic auctions?

[BillJones]

Below is the original quote (and situation) which I believe clearly constituted collusion. Apparently Mr. Snow made $2000 for not bidding, his "good friend" saved "about $5000" and the consignor thereby received several thousand dollars less for his coins than he otherwise would have. How is that not collusion?

 

I could see a problem if Snow had bought off a group of bidders to keep them from bidding against him or his client in the auction. There is clearly a problem in that case.

 

BUT It seems that Snow and his client are the only two people would be bidding on the lots at this level. AND Snow stated that if he won the lots he would have sold them to the SAME CLIENT. Under those circumstances it seems that Mr. Snow was acting in his client's interests and saving his client against essentially bidding against himself. If it's a matter of Snow buying for the client or the client buying the coins for himself, I can't see an ethical problem here.

 

I don't think that Mr. Snow has an obligation to act as a shill against his customer.

[MikeInFL]

...There's a big difference between teaming and colluding, IMO...They bid as a "team" with a single bid. Everything is transparent and above-board, and many times a formal agreement is made between the companies teaming....Mike

I appreciate the good input.

 

I just don't see how the 5% commission for bidding turned this teaming arrangement into collusion. Our small company of about 12 employees has played the prime contractor role before, having subcontracted the Lockheed Martin behemoth. We have also been subcontracted under them. In these arrangements it was only the funding vehicle in place and other mere conveniences that made the "teaming" arrangement necessary in the first place. The prime contractor in both cases made a commission for doing very little.

 

In both arrangements, either the prime or sub could have done the entire job by themselves. They could have competed against each other. If the truth were known, typically the government preferred the arrangement in spreading work around, or taking advantage of the aforementioned "conveniences."

They are vastly different situations because in your example each company is providing a part of the solution, if only reselling. AR/payment is perfectly acceptable as the only component for the general contracting company to provide -- they are adding value (and assuming risk). Whereas in Rick's examples, he is not providing anything (other than not bidding), is adding no value whasoever (other than to artificially keep the price down), and assumes no risk. Remeber he's not bidding on anyone's behalf. He is taking money for not bidding in once case, and not bidding without remuneration in another.

 

In the business world I live in, what Rick did is collusion, and a textbook example of it. Frankly, I am rather surprised that you don't agree, but I can appreciate your position and respect your right to hold it.

 

 

[Anyway, as was said earlier, collusion would have occurred if there were only two bidders and one refrained with the full intention of ripping off the auction and splitting the profits with his partner. Since the two had no control over the other bidders, nor attempted to sway or suppress other bidders' bids, I see nothing improper here.

I've never seen a definition of collusion requiring "only two bidders and one refrained with the full intention of ripping off the auction and splitting the profits with his partner" -- not in contracts, not in laws/ordinances at local, state, and not in federal statues. Read the paragraph I posted earlier very carefully, and look at other examples available online and you will find similar language -- which is far less stringent than the example you use above.

 

That said, it was Rick's obvious intention when he said WTTE of "I made $2k and the customer saved $5k" -- he fully intended to artifically lower the realized price, and in this example take his piece of the action -- and in so doing artifically lowered the hammer price which would have been higher if he had not make the (in my opinion) collusive agreement. In my eyes, the argument that there were other bidders holds little weight (although it may dilute the effect, it is the intent that matters), and it holds even less weight in his second example where he took money for not bidding and a clear lowering of overall bid was the (admitted) result.

 

So in summary, Rick seemed to be providing no value, other than the collusive value of his agreement to not bid or be paid not to bid. In the latter example, he fully intended to artifically lower bids, and in so doing, and in my opinon, colluded to do so.

 

I am not a lawyer and I can't speak with any authority for the legaility of said issues, but ethically it smells bad to me, and simply putting yourself in the consignor or auction house's shoes makes it pretty obvious (to me).

 

Also, please don't get the wrong idea. I am not accusing, condemning or judging Rick, but I am questioning the set of ethics he is applying to this situation and drawing parallels to the "world" I live in on a day to day basis outside of the coin game.

 

All of the above is respectfully submitted as my opinion only, and I fully recognize the opinion and ethics of others may vary...Mike

[MikeInFL]

Also, and this bears repeating, I think that the ethical question is quite different between the two examples Rick describes. While I think they are both examples of collusion, the second example, where money changed hands and there was a resulting decrease in hammer price, is far more egregious than the first, where no money changed hands...Mike

[jackson64]

Mike, I think your original suspicion and MarkFelds comments were accurate..the second scenario is collusion ....if it were two baseball owners who were both interested in signing a star player and they made an agreement beforehand to not drive the price up...and in exchange they worked out a cash deal to compensate the other person...they'd be in big trouble to say the least...

 

whether it is a player who is hurt by the collusion of owners or a consignor of a coin losing money by the collusion of dealers...it is still unethical business.......

[Tradedollarnut]

Below is the original quote (and situation) which I believe clearly constituted collusion. Apparently Mr. Snow made $2000 for not bidding, his "good friend" saved "about $5000" and the consignor thereby received several thousand dollars less for his coins than he otherwise would have. How is that not collusion?

 

I could see a problem if Snow had bought off a group of bidders to keep them from bidding against him or his client in the auction. There is clearly a problem in that case.

 

BUT It seems that Snow and his client are the only two people would be bidding on the lots at this level. AND Snow stated that if he won the lots he would have sold them to the SAME CLIENT. Under those circumstances it seems that Mr. Snow was acting in his client's interests and saving his client against essentially bidding against himself. If it's a matter of Snow buying for the client or the client buying the coins for himself, I can't see an ethical problem here.

 

I don't think that Mr. Snow has an obligation to act as a shill against his customer.

 

Not gonna read the whole thread, but if what Bill says above is accurate then I'm gonna have to agree with his conclusion.

[MarkFeld]

Below is the original quote (and situation) which I believe clearly constituted collusion. Apparently Mr. Snow made $2000 for not bidding, his "good friend" saved "about $5000" and the consignor thereby received several thousand dollars less for his coins than he otherwise would have. How is that not collusion?

 

I could see a problem if Snow had bought off a group of bidders to keep them from bidding against him or his client in the auction. There is clearly a problem in that case.

 

BUT It seems that Snow and his client are the only two people would be bidding on the lots at this level. AND Snow stated that if he won the lots he would have sold them to the SAME CLIENT. Under those circumstances it seems that Mr. Snow was acting in his client's interests and saving his client against essentially bidding against himself. If it's a matter of Snow buying for the client or the client buying the coins for himself, I can't see an ethical problem here.

 

I don't think that Mr. Snow has an obligation to act as a shill against his customer.

 

Not gonna read the whole thread, but if what Bill says above is accurate then I'm gonna have to agree with his conclusion.

The problem is that the scenario that Bill opined on doesn't necessarily seem to be the one that was actually presented in the second example that Mr. Snow mentioned, namely:

However, also at the FUN show, I was going to bid on a number of coins and another good friend had intentions on the same coins. I offered to bid for him for 5% rather than compete against him. (Hey - I'm there to feed my family! I can't lay down on all the coins I targeted.) I made $2K for 15 minutes work (yeah, work - raising my hand) and he saved himself about $5K.

[MikeInFL]

Below is the original quote (and situation) which I believe clearly constituted collusion. Apparently Mr. Snow made $2000 for not bidding, his "good friend" saved "about $5000" and the consignor thereby received several thousand dollars less for his coins than he otherwise would have. How is that not collusion?

 

I could see a problem if Snow had bought off a group of bidders to keep them from bidding against him or his client in the auction. There is clearly a problem in that case.

 

BUT It seems that Snow and his client are the only two people would be bidding on the lots at this level. AND Snow stated that if he won the lots he would have sold them to the SAME CLIENT. Under those circumstances it seems that Mr. Snow was acting in his client's interests and saving his client against essentially bidding against himself. If it's a matter of Snow buying for the client or the client buying the coins for himself, I can't see an ethical problem here.

 

I don't think that Mr. Snow has an obligation to act as a shill against his customer.

 

Not gonna read the whole thread, but if what Bill says above is accurate then I'm gonna have to agree with his conclusion.

 

When you get a chance, please do, TDN. I would appreciate your perspective...Mike

[MikeInFL]

Mike, I think your original suspicion and MarkFelds comments were accurate..the second scenario is collusion ....if it were two baseball owners who were both interested in signing a star player and they made an agreement beforehand to not drive the price up...and in exchange they worked out a cash deal to compensate the other person...they'd be in big trouble to say the least...

 

whether it is a player who is hurt by the collusion of owners or a consignor of a coin losing money by the collusion of dealers...it is still unethical business.......

 

Bingo. Translate this situation into any number of other markets and it is clear that this type of behavior is unacceptable.

 

One might say that numismatics is a free market and truly free markets have abuses. In other markets there are laws and regulations on such behavior. Numismatics is not the same.

 

However, as a few folks around here are quick to point out -- and I am coming to realize is very true -- all is fair in the coin game. Deceive, misrepresent, collude, conspire, price fix, market maniuplation; take your choice.

 

At the risk of sounding uber-ethical, it is a sad comment on numismatics that integrity and ethical behavior is in short supply. I love coins, but often feel like I have to wade among snakes to enjoy them. That is sad...Mike

[Tradedollarnut]

Mike: As a businessman, I try to accept that life is full of shades of grey and not worry how much white or black is in them. Business is a series of compromises and we all make them.

 

Too many actions are technically collusion or technically this or technically that. Was Pittman ethical when he played statue of liberty and stared down his opponents on the bid floor in an attempt to intimidate them out of the bidding? As a consignor, how would you feel? Yet it's the thing of legend....

 

I do think it would be unethical to go to someone and coerce a fee out of them by stating "I'm going to bid against you if you don't pay me". No shades of grey in that one. But if in the midst of a conversation with a longstanding client you state "I'm on that coin but I guess if you hire me to represent you, you can get me off of it".... the difference being the intent beforehand to actually pursue the coin and the prior relationship between the parties. Like he says - he's got to make a living.

 

I guess I look at it as something akin to attorney client privilege. The prior relationship between the parties exempts them somewhat.

[MikeInFL]

Thanks TDN. I think that your criticism (presuming it was aimed at me ) is fair, and am guilty as charged -- I do tend to see things as black and white, perhaps even to a fault...admittedly.

 

I see your point about the first example, where a pre-existing relationship was in place between bidder/client and dealer. And I see how the prior relationship could effect things. The fact that there are lots of bidders on most auctions these days further dillutes the true effect that such an agreement could make, and this should be taken into account.

 

However, and as you seemingly admit, the second example is another one entirely, and the one that seems to present the most ethical challenge. I can't justify it in any way -- but that's just me, and Rick's mileage clearly varies.

 

Anyway, thanks for your response. I appreciate it...Mike

 

p.s. I'm not sure how I feel about Pittman. Let me think about it.

[Tradedollarnut]

Look at it this way:

 

Would it technically be any different at all if he had told the client "I'm on that coin because I know I can make money on it, but I'll give you first shot as a flip when I win it"?

 

Same exact result if you think about it.

 

In my mind, the business relationship between dealer and client allow them to formulate strategies to acquire the coins exempt from collusion accusations. They are not supposed to be competitors.

[MikeInFL]

TDN,

 

I see your point, and it is a good one...

 

The first example is a clearly different animal. While I'm not sure I would handle the situation that way, but I can see, understand and relate to the position and behavior.

 

However, it is really the second example that is problematic to my way of thinking, and your explanation doesn't apply there (at least to me)...Mike

[Tradedollarnut]

and your explanation doesn't apply there

 

That would depend on whether the 'good friend' is a client or not.