We have discussed extensively that there are only two types of auctions under the laws in the United States.
There are not three, four nor five types. Additionally there are no legal “hybrids” of the two types.
In other words, an auction is either, “with reserve” or it is not. Said another way, an auction is, “without reserve” or it is not.
See here our writing on the two types of auctions: http://mikebrandlyauctioneer.wordpress.com/2009/11/15/different-types-of-auctions/
We have titled our story here, “What is an “unreserved” auction?” suggesting that other words are sometimes used when advertising an auction’s type. For instance:
“Our auction today is an unreserved auction.”
“Today’s auction is a no-reserve auction.”
“Plan to attend our reserve-less auction.”
“Next week we have an outstanding reserve-lacking auction.”
“Please check our website full of reserve-absent auctions.”
“Tomorrow’s auction is one having no reserves.”
What type of auctions are these? What type of auction is a “reserve-lacking” auction? What type of auction is a “no-reserve” auction?
We ask this almost in jest. As is law in the United States, all auctions (inclusive of court-ordered, voluntary, forced, sales by owner, etc.) are one of two types: “with reserve” or, “without reserve.”
Let’s explore one specific example: If an auctioneer advertised an auction as a, “unreserved” auction, would it be considered a, “with reserve” or a, “without reserve” auction? Furthermore, why would an auctioneer advertise an auction with such wording?
There is little question that buyers are attracted to, “without reserve” auctions to a much greater extent than, “with reserve” auctions. The, “prospect of a deal” present in a, “without reserve” auction draws attention more than virtually any other aspect of an auction; auctions lacking the, “prospect of a deal” draw smaller crowds, less bidding, and lower prices.
We wrote about, “without reserve” or, “absolute auctions” in 2009: http://mikebrandlyauctioneer.wordpress.com/2009/11/14/absolute-auctions/
It would appear that some auctioneers want to advertise their auction as a, “without reserve” auction in hopes of maximizing the crowd, but want to conduct that same auction, “with reserve” to retain rights of seller bidding and seller withdrawal.
Doing so is illegal in the United States.
However, it goes on. And apparently the thinking is if the auctioneer uses some other words which clearly suggest the auction is, “without reserve” but not use the actual words, “without reserve” then the auction can be, “with reserve” with the benefits of the public thinking it is, “without reserve.”
For instance, “Our auction today is an unreserved auction,” means what? Does the auctioneer using this term, “unreserved” want the public to think the auction is, “without reserve” when in fact it is, “with reserve?”
To illustrate the magnitude of this kind of misrepresentation, let’s say …
Bob and his wife Marilyn see a car auction advertised as “unreserved” taking place in California later in the month. Bob sees that there is a 1965 Chevrolet Impala 4-Door Hardtop listed in the auction catalog — just like one he had as a teenager. Bob and Marilyn live in Vermont.
Bob has always wanted another 1965 Impala. Yet, his efforts thus far to find one at auction have been unsuccessful, as either the bidding has gone too high, or the seller rejected his high bid.
Bob is particularly sensitive to auctions where the seller can decline the high bid or the seller can bid against him to ensure a certain price. Thus, Bob has read-up on the UCC 2-328 and knows that if an auction is advertised as, “without reserve” then the seller cannot bid, nor can the seller decline the high bid.
Bob calls the auction company in California and speaks to Dale Thomas, the auction’s owner. Bob tells Dale of his longstanding hope to find a 1965 Impala and wants to be assured that at this auction, the seller cannot bid, nor can the seller decline the high bid.“Bob, I have good news. This is a “unreserved” auction, so I think you’ve found what you’re looking for. There are numerous hotels and easy airport access near the auction site. In fact, find me when you get here, as I have a steak dinner coupon for you and your wife at Dino’s Steakhouse. And, boy that Lot #112, that ’65 Chevrolet Impala, is a really good looking car.”
Bob tells Marilyn that they are going to California in two weeks. Marilyn asks if he can just bid online and save all that travel? Bob replies, “Babe, they do have online bidding, but I need to see this car for myself — look under it, smell it, sit in it.”
Bob & Marilyn schedule vacation from their jobs, make their airline and hotel reservations, and otherwise ready themselves for their trip to California. Bob is so excited he can hardly sleep at night. Marilyn has told some of her friends that Bob might have finally, “found his baby.”
Upon arriving in California, Bob & Marilyn take a cab to the auction site. Not more than 10 minutes after they enter, Bob sees “his” 1965 Impala. “It’s wonderful, isn’t it Marilyn?” says Bob. After about 30 minutes looking over the car, they head to their nearby hotel.
The next morning marks the auction’s opening. Lot #112 will be coming up sometime around 11:00 a.m. Bob registers for the auction, and he and Marilyn grab seats just to the left of the podium, about 20 rows back.
Lot #112 finally rolls to center stage. Bob readies his bid card as the announcer tells the audience about “his” 1965 Impala. Finally, the auctioneer proclaims, “The bidding is on!” and asks for an opening bid of $35,000.
A ringman to the far right yells, “You’ve got $10, you’ve got $10!” and the auctioneer asks for $11,000. The bidding continues between this ringman’s bidder and another bidder in the back of the room as the price reached $17,000. Bob then raised his card, and a ringman close to him yelled, “I’ve got $18!”
Bob and the other bidder from the far right continue to bid … $19,000, $20,000, $21,000, $22,000 … all the way to $26,000. Bob has the bid at $26,000 and the auctioneer says, “Are we done? I’m at $26,000 on the left … anyone else at $27,000?”
Just then, a bid of $28,000 comes from the phone bidder area — just to the right of the auctioneer. The ringman turns to Bob and asks him for $29,000. Bob bids $29,000 and the phone bidder bids $30,000. This bidding continues until the phone bidder bids $37,000. Bob so wants this car, but he can’t pay $38,000 for it — he’s out of money.
“Sold for $37,000 on the phone,” announces the auctioneer. Bob and Marilyn look at each other, and Marilyn says, “Bob, you’ll find another one; at least this auction was aboveboard, and the car sold to someone.”
Three weeks later, Bob receives a catalog from this same automobile auction company. As he browses through the catalog, he sees lot #61 and can’t believe his eyes — it’s that same 1965 Impala. “Marilyn, come look at this … see this lot #61 … this is that car, the car we tried to buy. It’s coming to auction again it looks like!”
Dale picks up the phone and calls the auction. Dale Thomas happens to answer. Bob inquires about that 1965 Impala.“Yes, Bob, good to hear from you” says Dale. “And, yes, that’s that same car. The seller bought it back at the last auction, but the good news for you is that he’s lowered the reserve. This could be a real opportunity for you! And wasn’t that the best ribeye steak you have ever had?”
Bob is nearly speechless. “Dale, the seller bid on this car last time? It had a reserve? You said this was a ‘unreserved’ auction. I’m confused, and I’m not happy.”
This is the ruse:
The auctioneer attracted Bob by suggesting to him the seller couldn’t bid, nor could the seller withdraw the car once he bid. Bob attended the auction thinking if he was the highest [legitimate] bidder, he would own a 1965 Chevrolet Impala. Yet, the auctioneer allowed the seller to bid and therefore withdraw the car from the auction.The auctioneer purposely didn’t say this was a, “without reserve” auction, and rather chose the term, “unreserved” auction so that he wouldn’t be held to the UCC 2-328 definitions. Bidders would think it was a, “without reserve” auction, but it would actually be, “with reserve.”
Misrepresentation means presenting information in such a way that does not accord with the truth, or purposefully twisting or emphasizing of certain statements so as to produce an inaccurate and/or misleading impression, or a deliberate intention to deceive, either for profit or advantage.
There’s not a court in the United States that wouldn’t deem this behavior as misrepresentation.
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 Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He is adjunct faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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