As we continue to explore the Sherman Antitrust Act and how it relates to the auction industry, we take a look here at auctioneers posting commission rates on signs, flyers and on their websites … for public view.
Presumably, such a display of commission rates enables potential clients to see what that auctioneer charges, and make judgements about possibly consigning (or not consigning) to that auctioneer.
Yet, by publishing those rates in that fashion, other auctioneers can see those rates as well, and possibly then adjust their rates accordingly.
One of the most common violations of the Sherman Antitrust Act is price fixing. Price fixing is generally considered an agreement to inhibit price competition by raising, depressing, fixing, or stabilizing prices.
A quick search of the Internet produced 100’s (if not 1,000’s) of auctioneers websites with commission rate information. For example:
Our standard commission rates for a seller are:
10% for items selling for $10,000 or more
15% for items selling between $5,000 and $10,000
20% for items selling for less than $5,000 (minimum $50)
Other arrangements can be considered for large or particularily valuable consignments. Please contact us for further details.
Would such a posting on a website be a “per se” violation of the Sherman Antitrust Act? Probably not if we read the act precisely, which requires an “agreement” to charge the same, less, or more …
By an auctioneer posting his rates, he isn’t necessarily agreeing to charge the same as anyone else, but rather, merely publishing his own rates.
However, there might be an issue if the 14 other auctioneers in this same geographic market (such as all in New York,) or same product market (such as all who sell high-end jewelry) suddenly started to charge this same rates.
Such fixing of rates (price fixing) might be done, not by actual fixing or agreeing, but by constructive agreement which may show that “Effectively, the posting of those rates caused the other competitors to change their rates to those same rates, thus fixing prices.” especially if those price changes were increases, thus causing the public to pay more.
I think in such a case of 15 auctioneers in the same market charging the same commission rates, a violation still might be a difficult one to prove. Proving a violation would more likely require evidence of collusion and/or some intentional or express intent to price fix beyond merely posting rates for public view.
But, if 15 auctioneers are charging the exact same rates in the same market, one might conclude that the odds of that would indicate some sort of “agreement” or consensus is beyond likely — and almost a certainty.
No case of consequence where auctioneers were accused of price-fixing has ever been pursued outside of United States v. Sotheby’s Holdings, Inc. Criminal No.: 00 Cr. 1081, Filed: October 5, 2000, Violation: 15 U.S.C. § 1, where the United States held:
Beginning at least as early as April 1993 and continuing until at least December 1999, the exact dates being unknown to the United States, Sotheby’s and co-conspirators entered into and participated in a combination and conspiracy to suppress and eliminate competition by fixing auction commission rates charged to sellers (“sellers’ commissions”) in the United States and elsewhere. The combination and conspiracy engaged in by Sotheby’s and co-conspirators was in unreasonable restraint of interstate and foreign trade and commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1).
The charged combination and conspiracy consisted of a continuing agreement, understanding, and concert of action among Sotheby’s and co-conspirators, the substantial term of which was to fix sellers’ commissions in the United States and elsewhere.
For the purpose of forming and carrying out the charged combination and conspiracy, Sotheby’s and co-conspirators did those things that they combined and conspired to do, including, among other things
participating in meetings and conversations in the United States and elsewhere to discuss sellers’ commissions;
agreeing to raise pricing by fixing sellers’ commissions;
agreeing to publish non-negotiable sellers’ commission schedules;
agreeing to the order in which each co-conspirator would publish its non-negotiable sellers’ commission schedule;
issuing sellers’ commission schedules in accordance with the agreements reached;
exchanging customer information for the purpose of monitoring and enforcing adherence to the non-negotiable sellers’ commission schedules;
agreeing not to make interest-free loans on consignments from sellers; and
not making charitable contributions as part of the pricing to sellers.
In summary …
Does it appear to me that posting rates on websites, flyers and/or signs constitutes a violation of the Sherman Antitrust Act (or other such legislation?) No.
Does it appear to me that all auctioneers in a particular market charging the same rates constitutes a violation of the Sherman Antitrust Act (or other such legislation?) No.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Greater Columbus Auctions and Goodwill Columbus Car Auction and. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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