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When does going partners on/splitting an auction coin become collusion?

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Dealer A and dealer B both like the same high value coin coming up for auction. So, rather than bidding against each other, they decide to go partners on it.

 

Is that collusion and why or why not?

 

What if the same two dealers decide to go partners on multiple lots in the same auction? For purposes of collusion, does it matter if one of the dealers is putting up the capital? If one of them has a retail collector base and the other doesn't, etc.? In other words, what factors help determine whether such agreements would or would not constitute collusion?

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Dealer A and dealer B both like the same high value coin coming up for auction. So, rather than bidding against each other, they decide to go partners on it.

 

Is that collusion and why or why not?

 

What if the same two dealers decide to go partners on multiple lots in the same auction? For purposes of collusion, does it matter if one of the dealers is putting up the capital? If one of them has a retail collector base and the other doesn't, etc.? In other words, what factors help determine whether such agreements would or would not constitute collusion?

 

 

A low level of collusion.

 

What if dealer A says to dealer B, I won't bid on coins 1, 3, 5 if you don't bid on coins 2, 4, 6?

 

Or what if dealer A gives $500 to dealer B not to bid on a particular lot?

 

Or what if dealer A knows dealer B is going to bid on dealer A's consignment and dealer A has a shill dealer bidding on the floor to make dealer B bid more?

 

:shrug:

 

If two parties make an agreement/partnership to bid so that they can get the auction lot for less or push the bidding to make an invested coin go for more, then that is collusion.

 

 

TRUTH

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Provided the auction has a reasonable number of attendees, this act does not limit open competition, and therefore is not collusion.

 

+1

 

Also agree.

 

It is a partnership and not collusion.

 

It does not prevent anyone else from competing, although it may drive up the price by combining investors capital, but it is still not illegal.

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Or what if dealer A knows dealer B is going to bid on dealer A's consignment and dealer A has a shill dealer bidding on the floor to make dealer B bid more?

 

THIS IS COLLUSION and I KNOW that it does happen in the coin market, too!!

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Can auction houses can bid on coins on their own account I ask factiously. MJ

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From investopedia.com

 

"A non-competitive agreement between rivals that attempts to disrupt the market's equilibrium. By collaborating with each other, rival firms look to alter the price of a good to their advantage. The parties may collectively choose to restrict the supply of a good, and/or agree to increase its price in order to maximize profits. Groups may also collude by sharing private information, allowing them to benefit from insider knowledge.

 

Investopedia explains 'Collusion'

 

Collusion involves people cooperating or working together when they should be competing. In the stock market, collusion can take many forms. Traders participating in accommodation trading, where goods are exchanged for non-competitive prices, are involved in collusion.

Colluding traders might share private information regarding upcoming takeovers, allowing them to benefit from insider trading. Price rigging also involves the collusion of sellers, who inflate the price of an asset to realize higher profits."

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So, rather than bidding against each other, they decide to go partners on it.

 

What if a major collection of very specialized coins comes on the market at auction. Only 5 dealers would have an interest in them and are marketmakers in this field. All of them come together and agree on amounts to be paid, which lots to be split and what coins to be sold. They make a 5 party partnership. Otherwise, they would compete against each other.

 

 

???

 

 

TRUTH

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If terms are agreed upon I see no problem. However I dont see how this would work if only one side is providing the funds.

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If terms are agreed upon I see no problem. However I dont see how this would work if only one side is providing the funds.

 

He likely means that one party will pay in full for 'appearances'. Then they will split the difference privately.

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Have they filed documents for their partnership or formed a LLC? and what are their plans for any purchased partnership items?

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Have they filed documents for their partnership or formed a LLC? and what are their plans for any purchased partnership items?

 

Exactly. A partnership is one that is done as an ongoing business endeavor. The word "partnership" can be loosely applied to anything. But in this case, partnership = conspirators.

 

 

TRUTH

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If terms are agreed upon I see no problem. However I dont see how this would work if only one side is providing the funds.

 

He likely means that one party will pay in full for 'appearances'. Then they will split the difference privately.

 

Correct. You can have an image of competition, but you never know what goes on behind the scenes.

 

I have had several auction lots in many well know auctions. In one case, I had some coins in a sale. I sat down at the sale to see what would be the outcome on the floor. Two dealers sat in front of me and actually negotiated several coins which would be bought, not bid on, and split between them. One bid on some of my consignments. The other backed off. I learned very early on what goes on.

 

 

 

 

TRUTH

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As you describe it, Mark, I would think it's okay, particularly if neither dealer would buy the lot on his own. There are a lot of gray areas with auctions, however, both on the buyer and seller side and we all have to go into auctions knowing there are risks (see: potted plant).

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Here's a better example of collusion, in my humble opinion. An auction house makes a deal with cohort "bidders" to drive up the apparent market value of certain coins under the auspices of "open competition". The purpose would be to establish an inflated base price for future sales.

 

In other words, the auction house places shill bidders to target a pair of 1913-O dollars in PF-66 CAM by bidding an outrageous amount. It just so happens that the same auction house secretly purchased a small hoard of 1903-O dollars and wants to encourage future profits by establishing record prices today.

 

To me, that would be collusion. Does it happen? ;)

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The scenario presented by Mark is an example of collusion.

 

Possibly the best-known example of bidder collusion is the 1959 Pennypacker Auction Center sale of the large cents of Leonard Holland. It was not well publicized, and only a small number of dealers and advanced collectors knew about it and showed up. Notables attending the sale included Louis Helfenstein, Dorothy Paschal, Gene Reale, Harvey Stack, and Walter Breen. They formed a consortium to buy the coins (several of the attendees channeled their bids through the same agent), which they obtained for very low prices. After the sale, the coins were again auctioned within the group in a hotel room. Sometimes the differences were dramatic, with coins subsequently bringing double or triple the original hammer prices.

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I think collusion can only be applied when there's a clear effort to deceive. In an auction setting bidders often attempt to make minimal gestures so other bidders don't even know whom they're bidding against. As long as no unfair advantage is gained it seems alright to me.

 

 

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I think collusion can only be applied when there's a clear effort to deceive. In an auction setting bidders often attempt to make minimal gestures so other bidders don't even know whom they're bidding against. As long as no unfair advantage is gained it seems alright to me.

 

 

I don't think that "deceive" plays any part in it. For example, If bidders flagrantly and openly collude, they aren't trying to deceive anyone, but they are still guilty of collusion. On the other hand, bidders can make gestures in order to try to remain anonymous in their bidding, but that has nothing to do with collusion.

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I don't know the actual laws but they are probably different from state to state.

 

If the dealers plan it out where they both bid but never against each other on the same lot, I would call that collusion.

 

If one dealer stays out of the auction and never bids on anything, I don't see it as collusion.

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This can be a problem especially in the coin market which is VERY thin to begin with....

 

I would imagine though that a "partnership" must be an ongoing concern not something made up over night. One thing I don't know is how this all relates to breaking the law. I don't know the laws on any of this nor how it might be defined.

 

jom

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Dealer A and dealer B both like the same high value coin coming up for auction. So, rather than bidding against each other, they decide to go partners on it.

 

Is that collusion and why or why not?

 

What if the same two dealers decide to go partners on multiple lots in the same auction? For purposes of collusion, does it matter if one of the dealers is putting up the capital? If one of them has a retail collector base and the other doesn't, etc.? In other words, what factors help determine whether such agreements would or would not constitute collusion?

 

This not so hypothetical hypothetical is interesting, and 2 parts, no less.

 

Part 1- The Partnership:

 

First, to set the stage correctly, the auction has not yet taken place "....coming up for auction.....".

 

Their Partnership, when agreed to, is no less valid for being an oral agreement instead of a written agreement. This can also sometimes be defined as being married (or not).

 

However, in keeping within the Feld Rule of Hypothetical Responses, it was not stated if it is or is not a written or oral partnership.

 

Moral arguments may abound, but( blah, blah) moral arguments are not collusion.

 

Perception of wrong doing may abound, as may its evil twin-gossip-, but perception and gossip is not collusion.

 

The hypothetical does not state whether or not the 'partnership" was made public and/or announced in any manner to any participant. But, (blah,blah) not doing so is not collusion.

 

The hypothetical does not state that one or the other Dealer is representing the Seller/Auctioneer/Owner of the coin, and/or whether or not either of the Dealers had anything to do with establishing the price of the coin on behalf of the Seller/Auctioneer/Owner. If they did so, in any form, silent or otherwise, the legality of collusion is born.

 

It is not stated in the hypothetical that price offerings at the upcoming auction would be used to limit competition from others, or used to set artificially low prices, due to the perceived influence by other bidders of the 2 Dealers and what they would or would not offer as a price point that MAY be the equal of price fixing. But (blah,blah), MAY is not collusion.

 

So far, what has been presented is a legitimate relationship. It is their (the 2 Dealers) problem if it causes them harm thru loss of customers who don't like it, or the disgruntlement of other Dealers because they were not offered the chance.

 

Part 2- The Quantity/Cashflow/Customer Base Partnership:

 

The only things that change from Part1 is quantity of purchase and amount of capital and customer base. This also is known as business.

 

Respectfully(and, in general, a useless commentary),

 

John Curlis

 

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From investopedia.com

 

"A non-competitive agreement between rivals that attempts to disrupt the market's equilibrium. By collaborating with each other, rival firms look to alter the price of a good to their advantage. The parties may collectively choose to restrict the supply of a good, and/or agree to increase its price in order to maximize profits. Groups may also collude by sharing private information, allowing them to benefit from insider knowledge.

 

Investopedia explains 'Collusion'

 

Collusion involves people cooperating or working together when they should be competing. In the stock market, collusion can take many forms. Traders participating in accommodation trading, where goods are exchanged for non-competitive prices, are involved in collusion.

Colluding traders might share private information regarding upcoming takeovers, allowing them to benefit from insider trading. Price rigging also involves the collusion of sellers, who inflate the price of an asset to realize higher profits."

 

Thus, the not so hypothetical hypothetical as described by Mr. Feld is not collusion.

 

Respectfully, of course

John Curlis

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From investopedia.com

 

"A non-competitive agreement between rivals that attempts to disrupt the market's equilibrium. By collaborating with each other, rival firms look to alter the price of a good to their advantage. The parties may collectively choose to restrict the supply of a good, and/or agree to increase its price in order to maximize profits. Groups may also collude by sharing private information, allowing them to benefit from insider knowledge.

 

Investopedia explains 'Collusion'

 

Collusion involves people cooperating or working together when they should be competing. In the stock market, collusion can take many forms. Traders participating in accommodation trading, where goods are exchanged for non-competitive prices, are involved in collusion.

Colluding traders might share private information regarding upcoming takeovers, allowing them to benefit from insider trading. Price rigging also involves the collusion of sellers, who inflate the price of an asset to realize higher profits."

 

Thus, the not so hypothetical hypothetical as described by Mr. Feld is not collusion.

 

Respectfully, of course

John Curlis

 

John, what if the two dealers in question would otherwise be bidding against each other? And they feel that if they go partners, they can acquire the coin for less than if they competed against each other? And do better, financially, by splitting the coin?

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Thank You, Mr. Feld.

 

In Part1 and Part 2 above, the hypothetical, by its very nature, declares the purpose of the partnership-a legitimate business pursuit, in which both HOPE to gain something, and FEEL they can gain something.

 

They are not CERTAIN, because there will be other COMPETITION, that could upset their Hope and Feel.

 

It was stated in the hypothetical they were individually considering pursuit of the coin, prior to the agreement. This mutual interest led to the partnership.

 

Forgive me, but Hope and Feel are not crimes yet nor, for that matter, is Hope and Change.

 

Now, in Part 3, the original hypothetical is seemingly expanded, and presented to the reader, by deft use of suggestive wording, as an alternative scenario, that begs a different conclusion or a change in logic.

 

Alas,the attempt to alter this Hope, Feel and Change Part 3 scenario also fails, in that nothing changes.

 

Respectfully, always, (and certainly with understanding of the lack of importance of my opinion)

 

John Curlis

 

 

 

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John, what if the two dealers in question would otherwise be bidding against each other? And they feel that if they go partners, they can acquire the coin for less than if they competed against each other? And do better, financially, by splitting the coin?

For me, this would not constitute collusion, but it does not compromise the open market. Now, if the auction had been limited for some reason to an artificially small market, then some collusion could take place.

 

It is the auction house's responsibility to ensure that the competition is fair and open. If the auction house foolishly (or intentionally with nefarious purpose) limits competition, then collusion could be taking place.

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John, what if the two dealers in question would otherwise be bidding against each other? And they feel that if they go partners, they can acquire the coin for less than if they competed against each other? And do better, financially, by splitting the coin?

For me, this would not constitute collusion, but it does not compromise the open market. Now, if the auction had been limited for some reason to an artificially small market, then some collusion could take place.

 

It is the auction house's responsibility to ensure that the competition is fair and open. If the auction house foolishly (or intentionally with nefarious purpose) limits competition, then collusion could be taking place.

 

James, what if 5 dealers decide to go partners (rather than bidding against each other) for coins of mutual interest in an auction? At what point would you consider it a situation where the "open market" has been "compromised" and/or that the "competition" has been "limited"? And please don't throw in talk about the auction house limiting competition - that is not (or wasn't) the subject at hand. ;)

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The Hypothetical can be changed at any time by the hypothetical Author; this is also a Feld Hypothetical Rule.

 

However, there must be reasonable parameters, that allow reasonable responses.

 

Are there 20 or 500 or 800 or 1,000 other bidders in the auction? Have 5 or 10 or 20 Collectors formed a similar partnership fo the same purpose and the same auction?

 

Are there 10 or 20 or 2,000 coins being offered?

 

It is not being proffered by the hypothetical Autor that this gathering of individuals for the purpose of mutual business benefit constitute a conspiracy to limit competition.

 

There are, today, medical Provider Super Groups that form a partnership/consortium/co./etc. for mutual benefit. It is a Partnership without walls, (although there is also a business Model that is based on a Partnership with walls) using certain business model tools, such as sharing central EHR/Billing Services, and all Partners come together to negotiate their fee for service reimbursement with insurance companies. These Partners operate across State lines, and in a surprisingly significant number of States. This is a general outline, and simplification of the Partnership.

 

Does this Partnership compromise Healthcare, or improve it? Does it limit competition? Is it a conspiracy?

 

What if 5 well funded Collectors come together for the express purpose of targeting a certain Auction that is offering coins that each Partner is individually interested in? Is this open competition? Is this unacceptable? Is it a conspiracy?

 

Respectfully, and Interested,

John Curlis

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James, what if 5 dealers decide to go partners (rather than bidding against each other) for coins of mutual interest in an auction? At what point would you consider it a situation where the "open market" has been "compromised" and/or that the "competition" has been "limited"? And please don't throw in talk about the auction house limiting competition - that is not (or wasn't) the subject at hand. ;)

The 5 dealers would simply be forming a de-facto "corporation", or a single interested party. They would simply be bidding against all the other competition as a sole entity. So here as well, no collusion would be implied for me. Again, this all assumes that whatever cooperation is involved does NOT limit other participation. In other words, if the 5 dealers got together, and blocked all other competitors from even entering the auction setting, that would be collusion - i.e. limiting participation of the open market.

 

But they are just pooling resources in order to bid as a single interested party, so there is no collusion.

 

I'll express your scenario in a different but analogous way. I put up $1000, as do four other dealers, and we use our pooled funds of $5000 to bid on certain coins, planning to divide up profits equally. This accomplishes the same thing as your scenario, but should never be perceived as collusion.

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Wouldn't this type of collusion in a large scale manipulate prices to the dealers benefit? Like a whole room of dealers working together......they could buy real low

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