Live auction bid calling has gone on for thousands of years. The Internet and associated online auction (digital) bids have only been placed more recently. Yet, when the subject of increments comes up, some auctioneers confuse the suggestion with a mandate.
Bid calling live or online is made up of offers from bidders, and acceptance by the auctioneer and/or online platform. As such, if the bid is $5,000 the auctioneer or platform could suggest $5,100 as the next bid, but could a bidder offer less?
In the live environment, it happens. In the online world, it may go unnoticed, as the platform might make no provision for any bids less than $5,100. What matters here is what promises the auctioneer has made to the seller and to the bidders.
In a “without reserve” auction, the auctioneer promises the seller and the bidders to “sell to the highest bidder.” In a “with reserve” auction, the auctioneer promises to maybe sell to the high bidder, or not. These two types of auctions are materially different in this regard.
As such, in a “without reserve” auction, if a bid of more than $5,000 and less than $5,100 was refused, the auctioneer would be breaching that promise. There is substantial case law that suggests if certain increments are required, that suggests a “with reserve” auction.
Could any increment increase be refused in a without reserve (absolute) auction? The prior case Pitchfork Ranch Co. v. Bar Tl, 615 P.2d 541 (Wyo. 1980) involved the auctioneer refusing a 0.625% increase over the prior bid and ending up in court. A 0.625% increase on $1,000 — for example — is $6.25.
The better strategy would be to sell “with reserve” so that the increments could be unquestionably set, rather than promising to sell to the highest bidder (and/or regardless of price) and have this unnecessary risk: https://mikebrandlyauctioneer.wordpress.com/2022/09/26/absolute-auctions-and-de-minimus/.
In summary, in a without reserve auction, it’s not about “fair and reasonable” but rather, if the increase exceeds a de minimis non curat lex (negligible) amount. This may yet be another reason your online auction needs to be “with reserve” so you can reserve to decline any bids you or the platform don’t consider “fair and reasonable.”
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at Mike Brandly, Auctioneer, Brandly Real Estate & Auction, and formerly at Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auction Association’s Designation Academy and Western College of Auctioneering. He has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.
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