The essence of an auction is that two or more people compete on equal terms against one another to acquire goods for which the sale price is not set or pre-determined.

This is fairly straightforward stuff. An item is offered for sale. You bid turn and turn about with others and the guy with the greatest desire or the deepest pockets is the winner.

The process may be complicated by absentee bidding, telephone bidding, agency bidding, vendor reserves and goodness knows what else but at the end of the day

[this expression has recently been voted the phrase that most gets up people’s noses!] it’s simply about people vying with each other for the right to pay the market price on a particular day.

As I have noted before, the way to improve results at auction is to increase competition. The more effective the auction firm is at drawing bidders to the sale, and the more skilful the auctioneer is at extracting the maximum bids from each of them, the better the process functions and the better the results for the vendors. (It’s also an interesting fact that buyers gain more confidence bidding against others than buying for the minimum acceptable bid!)

Rigging the Process

It is an unfortunate fact of life that some people will always try to subvert the way things are supposed to happen. In the auction environment this can occur in a number of ways.

The most common and potentially the most dangerous is where two or more people get together and agree not to bid against each other. If they are the only interested parties the effect is to depress prices, costing both the auction house and its vendors money.

One commonly hears stories of people conspiring – and that’s what it is, an illegal conspiracy – to help one another out. “I will leave Lot 24 alone, if you let me buy Lot 36” is a common theme in conversation before an auction.

There are many variations: “I only want the first part of Lot 112: let me buy it and I’ll sell you the rest cheap.” Or, “Let’s buy that big block in partnership and split it.”

Sometimes it happens on a nod and a wink. For “political” reasons, many dealers deftly withdraw from bidding against their own clients.

I would like to believe that such practices are not widespread. However, I would also like to believe in peace in the Middle East!

A number of incidents over the years have impressed upon me how rife such arrangements are. On several occasions, my father and I have both wanted to acquire the same item. Inevitably others at the sale will comment incredulously about us bidding against one another. Each of us would prefer the other wasn’t bidding but why should it make a difference that your competitor is a family member?

Last year I attended a Millennium sale in Sydney where I sat beside Richard Juzwin and Simon Dunkerley. At one point all three of us bid for the same lot. Again, there was an air of disbelief that we hadn’t “tossed for it” before the sale.

This attitude of widespread and benign indifference towards, even encouragement of, an obviously illegal and unethical practice probably stems from the attitude that “it’s only a hobby”. How sad.

One of the unfortunate side issues is the way in which collectors in particular become compromised. “I did the right thing by you last time so you stay out of it today.” Certain individuals have a reputation for such predatory activities. It’s no surprise that those who would seek to make these pacts are also known to have reneged on their word, sometimes using agents to obscure their interest.

Hopefully over time, as the market becomes more professional, such practices will be shunned.

Individual collectors can assist the process by refusing to be bullied into such arrangements. This requires a certain degree of courage but, as Amelia Earhart said “Courage is the price that life exacts for granting peace”.

But, human self-interest being what it is, the best defence against these unscrupulous tactics is for auction firms to continually strengthen their mailing lists and create ever more competition.

The more people there are interested in a particular lot, the less the result can be rigged. I look forward to the day when the market is so vibrant that attempts to control prices will be abandoned as an utter waste of time and effort.

From the perspective of a vendor, this is a vital consideration. In assessing who should sell your collection, it is important to know who has a track record of high prices for similar material. This will usually be the firm that has the greatest depth of clients, and thus the environment for greatest competition.

One way to weigh this up is to evaluate who is doing the most or the best advertising? A firm that doesn’t advertise is probably not growing its client base and is therefore more exposed to the operation of illegal “rings”.

Questionable Practices

It’s not just bidders who unfairly compromise the auction process. Sometimes it is the action of a vendor or the auction house itself that is questionable.

One of my pet peeves is the vendor who places reserves on his material just before auction day. This is an allowable practice but sometimes stretches the bounds of fairness. To declare a reserve price at the outset is one thing; to ambush bidders is quite another.

There are a number of “justifications” for placing reserves on your lots. You may be protecting yourself against a loss. A similar item may have sold for a huge price in London recently. You may want to “protect the market”. (How noble!)

Whatever the excuse, the effect is to reduce competition. The higher the reserve, the fewer people will be prepared to bid.

I had a situation recently where a vendor reserved one of his items at the estimate. As it happened, I held a bid at that figure. I announced the reserve to the room, no bids were forthcoming, so I duly sold the lot to my postal bidder, noting on his invoice that the reserve had been imposed. He, quite justifiably, felt hard done by and wanted to return the item. Technically he didn’t have a leg to stand on. However, I sympathised with his position and allowed him to rescind the contract. Yes, my primary responsibility is to my vendors but my buyers should also be shielded from vendors who don’t play fair.

An associated problem area is vendors insisting on very high estimates for their material. Again this has the effect of restricting competition. However, in this case all the vendor wants is a bid at 70% or 75% of estimate to achieve the price he really wants.

A few months back yours truly was suckered by a vendor who insisted his overseas material was worth far more than I was comfortable with. He persisted, I succumbed, and the material was listed at his prices. Surprise, surprise. Very few items sold and the vendor subsequently agreed to me reducing the estimates by 50%! Hopefully at that level we will have an auction.

That vendor gets my “Who’s Kidding Whom?” Award for 2003.

Big Boys Do It Too

Even leading auction firms have been caught out playing this game.

A few years ago the sale was held in Melbourne of an important Australian Colonies collection. The estimates were surprisingly high and it was widely rumoured that the firm had bought the collection and was, in fact, the vendor.

As I have said before, there is nothing wrong with that unless the firm treats its own material differently from that of other vendors. In this case, a very high proportion of lots that sold went out at prices very close to the estimates, while lots with no book bids opened to the room at 85-90% of estimate, an unusually high starting point.

There was very little room bidding and it was palpably obvious to all in attendance that those who had placed bona fide absentee bids were being skinned.

Out to Tender

This was the most blatant example I have witnessed of covertly converting an auction into a sale by tender.

The difference between the two is profound. For an auction to achieve top prices, there must be competition between two or more buyers. For a tender to be successful, only one offer is required. At auction if you bid $1000 on a lot estimated at $100 you might end up paying $200 or $400 but you will pay $1000 only if another bidder forces you up to that level. But if you participate in a sale by tender and offer ten times estimate you will pay the full amount even if there is no other bidding.

I would also say that sale by tender is the refuge of those who lack faith in The Auction Game or who are lacking in other areas. The dumbest offering in Australian philatelic history was Australia Post’s archival sale in 1987. What was an eagerly awaited public auction was converted into an inherently unfair tender process, costing AP tens of thousands of dollars in unrealised value. Then they did it again the next year! My dictionary defines “stupidity” as doing the same thing again and expecting a different result.

There is nothing illegal about the tender process but it has no place in the auction environment.

Unfortunately, many auctions blur the distinction between the two. If you are a strong bidder and consistently pay close to or at your full bids, there is a strong likelihood that your offers are being treated as tenders. Put another way, you are being “run”. If you suspect this is happening, attend in person or use an agent for future sales.

While there are many excellent and reputable postal auction firms, I think it is fair to say that the danger of this happening is greater in a mail bids sale than in a public auction. This is because all the bids are on the book and the process is less transparent than a room auction.

In March I placed bids with a major American postal auction firm. I have no reason to believe that anything untoward happened and I was pleased with my purchases. However, I was astonished when advised that they don’t publish a Prices Realised List for their postal sales. These days most firms can produce a PRL at the touch of a button so I wouldn’t accept that they can’t do it. By not issuing a PRL this firm is doing itself a huge disservice by sowing seeds of doubt. What do they have to hide?

A variation on the sale by tender theme is openly operated by some firms. Read their fine print and you will discover that bids at or below estimate are taken at their full value, with only higher bids being subject to normal auction conditions.

Other Shenanigans

Some collector organisations have seriously blotted their copybooks when they have ventured into the commercial environment. It’s bad enough that they don’t create sufficient competition to obtain good prices for their vendors but when they actively suppress competition people are entitled to be highly offended.

A prominent interstate body some years ago ran a public auction featuring a major postal history collection. Intent on divvying the material up among their stalwarts they went to some trouble to prevent the catalogue infiltrating other parts of the country. Their shabby little scheme went awry when an out-of-towner just happened to attend the sale and bought all the choice lots!

On another occasion an interstate Study Group offered a selection of terrific items from a deceased member’s collection. It is normal practice for such sales to be open only to members of the club, which in itself seriously limits competition. But this one went beyond the pale, with bidding being restricted to members resident in that State only! So the locals scratched each other’s backs, and the poor old widow got well and truly shafted.

I know it’s becoming a prevailing thread in my articles but I am opposed to amateur groups running auctions, especially if they include estate material. To maximise the return to the often needy beneficiaries it is important to have the sale conducted by a trade professional. And those best suited to undertake the task are the public auction houses.

Over the past quarter-century I have assembled quite a dossier on questionable, unethical and illegal practices that impact upon The Auction Game. Despite this I remain an enthusiastic proponent of public auctions as the best environment in which to buy, and the best in which to sell.

If you have been the victim of any such circumstances, don’t leave the game. Just change your “club”. Distance yourself from people who seek to involve others in their tawdry schemes. Support only those firms that you believe are acting responsibly and ethically.

Finally, make sure specific instructions for the disposal of your own collection are included in your will. You can’t know when your time is up, so you should act as if it will be tomorrow. Procrastination on this issue can leave your family exposed to ambulance-chasers, or to executors who may know nothing about stamps. And don’t make the mistake of expecting that your wife, who you’ve caused to believe that your stamps have little value, won’t burn them or give them away!

The essence of an auction is that two or more people compete on equal terms against one another to acquire goods for which the sale price is not set or pre-determined.

This is fairly straightforward stuff. An item is offered for sale. You bid turn and turn about with others and the guy with the greatest desire or the deepest pockets is the winner.

The process may be complicated by absentee bidding, telephone bidding, agency bidding, vendor reserves and goodness knows what else but at the end of the day [this expression has recently been voted the phrase that most gets up people’s noses!] it’s simply about people vying with each other for the right to pay the market price on a particular day.

As I have noted before, the way to improve results at auction is to increase competition. The more effective the auction firm is at drawing bidders to the sale, and the more skilful the auctioneer is at extracting the maximum bids from each of them, the better the process functions and the better the results for the vendors. (It’s also an interesting fact that buyers gain more confidence bidding against others than buying for the minimum acceptable bid!)

Rigging the Process

It is an unfortunate fact of life that some people will always try to subvert the way things are supposed to happen. In the auction environment this can occur in a number of ways.

The most common and potentially the most dangerous is where two or more people get together and agree not to bid against each other. If they are the only interested parties the effect is to depress prices, costing both the auction house and its vendors money.

One commonly hears stories of people conspiring – and that’s what it is, an illegal conspiracy – to help one another out. “I will leave Lot 24 alone, if you let me buy Lot 36” is a common theme in conversation before an auction.

There are many variations: “I only want the first part of Lot 112: let me buy it and I’ll sell you the rest cheap.” Or, “Let’s buy that big block in partnership and split it.”

Sometimes it happens on a nod and a wink. For “political” reasons, many dealers deftly withdraw from bidding against their own clients.

I would like to believe that such practices are not widespread. However, I would also like to believe in peace in the Middle East!

A number of incidents over the years have impressed upon me how rife such arrangements are. On several occasions, my father and I have both wanted to acquire the same item. Inevitably others at the sale will comment incredulously about us bidding against one another. Each of us would prefer the other wasn’t bidding but why should it make a difference that your competitor is a family member?

Last year I attended a Millennium sale in Sydney where I sat beside Richard Juzwin and Simon Dunkerley. At one point all three of us bid for the same lot. Again, there was an air of disbelief that we hadn’t “tossed for it” before the sale.

This attitude of widespread and benign indifference towards, even encouragement of, an obviously illegal and unethical practice probably stems from the attitude that “it’s only a hobby”. How sad.

One of the unfortunate side issues is the way in which collectors in particular become compromised. “I did the right thing by you last time so you stay out of it today.” Certain individuals have a reputation for such predatory activities. It’s no surprise that those who would seek to make these pacts are also known to have reneged on their word, sometimes using agents to obscure their interest.

Hopefully over time, as the market becomes more professional, such practices will be shunned.

Individual collectors can assist the process by refusing to be bullied into such arrangements. This requires a certain degree of courage but, as Amelia Earhart said “Courage is the price that life exacts for granting peace”.

But, human self-interest being what it is, the best defence against these unscrupulous tactics is for auction firms to continually strengthen their mailing lists and create ever more competition.

The more people there are interested in a particular lot, the less the result can be rigged. I look forward to the day when the market is so vibrant that attempts to control prices will be abandoned as an utter waste of time and effort.

From the perspective of a vendor, this is a vital consideration. In assessing who should sell your collection, it is important to know who has a track record of high prices for similar material. This will usually be the firm that has the greatest depth of clients, and thus the environment for greatest competition.

One way to weigh this up is to evaluate who is doing the most or the best advertising? A firm that doesn’t advertise is probably not growing its client base and is therefore more exposed to the operation of illegal “rings”.

Questionable Practices

It’s not just bidders who unfairly compromise the auction process. Sometimes it is the action of a vendor or the auction house itself that is questionable.

One of my pet peeves is the vendor who places reserves on his material just before auction day. This is an allowable practice but sometimes stretches the bounds of fairness. To declare a reserve price at the outset is one thing; to ambush bidders is quite another.

There are a number of “justifications” for placing reserves on your lots. You may be protecting yourself against a loss. A similar item may have sold for a huge price in London recently. You may want to “protect the market”. (How noble!)

Whatever the excuse, the effect is to reduce competition. The higher the reserve, the fewer people will be prepared to bid.

I had a situation recently where a vendor reserved one of his items at the estimate. As it happened, I held a bid at that figure. I announced the reserve to the room, no bids were forthcoming, so I duly sold the lot to my postal bidder, noting on his invoice that the reserve had been imposed. He, quite justifiably, felt hard done by and wanted to return the item. Technically he didn’t have a leg to stand on. However, I sympathised with his position and allowed him to rescind the contract. Yes, my primary responsibility is to my vendors but my buyers should also be shielded from vendors who don’t play fair.

An associated problem area is vendors insisting on very high estimates for their material. Again this has the effect of restricting competition. However, in this case all the vendor wants is a bid at 70% or 75% of estimate to achieve the price he really wants.

A few months back yours truly was suckered by a vendor who insisted his overseas material was worth far more than I was comfortable with. He persisted, I succumbed, and the material was listed at his prices. Surprise, surprise. Very few items sold and the vendor subsequently agreed to me reducing the estimates by 50%! Hopefully at that level we will have an auction.

That vendor gets my “Who’s Kidding Whom?” Award for 2003.

Big Boys Do It Too

Even leading auction firms have been caught out playing this game.

A few years ago the sale was held in Melbourne of an important Australian Colonies collection. The estimates were surprisingly high and it was widely rumoured that the firm had bought the collection and was, in fact, the vendor.

As I have said before, there is nothing wrong with that unless the firm treats its own material differently from that of other vendors. In this case, a very high proportion of lots that sold went out at prices very close to the estimates, while lots with no book bids opened to the room at 85-90% of estimate, an unusually high starting point.

There was very little room bidding and it was palpably obvious to all in attendance that those who had placed bona fide absentee bids were being skinned.

Out to Tender

This was the most blatant example I have witnessed of covertly converting an auction into a sale by tender.

The difference between the two is profound. For an auction to achieve top prices, there must be competition between two or more buyers. For a tender to be successful, only one offer is required. At auction if you bid $1000 on a lot estimated at $100 you might end up paying $200 or $400 but you will pay $1000 only if another bidder forces you up to that level. But if you participate in a sale by tender and offer ten times estimate you will pay the full amount even if there is no other bidding.

I would also say that sale by tender is the refuge of those who lack faith in The Auction Game or who are lacking in other areas. The dumbest offering in Australian philatelic history was Australia Post’s archival sale in 1987. What was an eagerly awaited public auction was converted into an inherently unfair tender process, costing AP tens of thousands of dollars in unrealised value. Then they did it again the next year! My dictionary defines “stupidity” as doing the same thing again and expecting a different result.

There is nothing illegal about the tender process but it has no place in the auction environment.

Unfortunately, many auctions blur the distinction between the two. If you are a strong bidder and consistently pay close to or at your full bids, there is a strong likelihood that your offers are being treated as tenders. Put another way, you are being “run”. If you suspect this is happening, attend in person or use an agent for future sales.

While there are many excellent and reputable postal auction firms, I think it is fair to say that the danger of this happening is greater in a mail bids sale than in a public auction. This is because all the bids are on the book and the process is less transparent than a room auction.

In March I placed bids with a major American postal auction firm. I have no reason to believe that anything untoward happened and I was pleased with my purchases. However, I was astonished when advised that they don’t publish a Prices Realised List for their postal sales. These days most firms can produce a PRL at the touch of a button so I wouldn’t accept that they can’t do it. By not issuing a PRL this firm is doing itself a huge disservice by sowing seeds of doubt. What do they have to hide?

A variation on the sale by tender theme is openly operated by some firms. Read their fine print and you will discover that bids at or below estimate are taken at their full value, with only higher bids being subject to normal auction conditions.

Other Shenanigans

Some collector organisations have seriously blotted their copybooks when they have ventured into the commercial environment. It’s bad enough that they don’t create sufficient competition to obtain good prices for their vendors but when they actively suppress competition people are entitled to be highly offended.

A prominent interstate body some years ago ran a public auction featuring a major postal history collection. Intent on divvying the material up among their stalwarts they went to some trouble to prevent the catalogue infiltrating other parts of the country. Their shabby little scheme went awry when an out-of-towner just happened to attend the sale and bought all the choice lots!

On another occasion an interstate Study Group offered a selection of terrific items from a deceased member’s collection. It is normal practice for such sales to be open only to members of the club, which in itself seriously limits competition. But this one went beyond the pale, with bidding being restricted to members resident in that State only! So the locals scratched each other’s backs, and the poor old widow got well and truly shafted.

I know it’s becoming a prevailing thread in my articles but I am opposed to amateur groups running auctions, especially if they include estate material. To maximise the return to the often needy beneficiaries it is important to have the sale conducted by a trade professional. And those best suited to undertake the task are the public auction houses.

Over the past quarter-century I have assembled quite a dossier on questionable, unethical and illegal practices that impact upon The Auction Game. Despite this I remain an enthusiastic proponent of public auctions as the best environment in which to buy, and the best in which to sell.

If you have been the victim of any such circumstances, don’t leave the game. Just change your “club”. Distance yourself from people who seek to involve others in their tawdry schemes. Support only those firms that you believe are acting responsibly and ethically.

Finally, make sure specific instructions for the disposal of your own collection are included in your will. You can’t know when your time is up, so you should act as if it will be tomorrow. Procrastination on this issue can leave your family exposed to ambulance-chasers, or to executors who may know nothing about stamps. And don’t make the mistake of expecting that your wife, who you’ve caused to believe that your stamps have little value, won’t burn them or give them away!

[Gary Watson is the Director of Prestige Philately, Australia’s only world-class stamp auction firm. A one-time lawyer, he has also published “Stampwealth: New Directions in Philately”. Readers can request a free copy by phoning (03) 9754 7666]