The New Sotheby’s Bidding Scam-Irrevocable Bids
December 24th, 2008 by admin
Here is the latest attempt by Sotheby’s to confound and confuse bidders, the irrevocable bid. If you are unfamiliar with it then read their rules on their key to symbols in their catalogue:
http://www.sothebys.com/app/live/share/ShareSymbols.jsp?event_id=28772
Lots with this symbol ” ” indicate that a party has provided Sotheby’s with an irrevocable bid on the lot that will be executed during the sale at a value that ensures the lot will sell. The irrevocable bidder, who may bid in excess of the irrevocable bid, will be compensated based on the final hammer price in the event he or she is not the successful bidder. If the irrevocable bidder is the successful bidder, they will be required to pay the full Buyer’s Premium and will not be otherwise compensated. If the irrevocable bid is not secured until after the printing of the auction catalogue, a pre-lot announcement will be made indicating that there is an irrevocable bid on the lot. (Effective for sales commencing October 20, 2008)
If you understand how it works you will recognize that Sotheby’s still operates with an emphasis on deception, fraud, and self interest to take advantage of both buyer and seller. This newest form of manipulation, like the secret reserve with the seller, requires deception on Sotheby’s part with a willing buyer. After all, bidders like me don’t normally have the advantage of insider information to secure a bid before we see a catalogue, never mind not knowing that your irrevocable bid somehow is above the reserve. My, did a little bird whisper in the ear of the irrevocable bidder what that reserve was? Was that bird Sotheby’s?
The ultimate carrot that Sotheby’s employs in this sham method is compensating the unsuccessful irrevocable bidder. This whole process is like the dealer “ring” in reverse, where a “ring” member buys the item and gets compensated by an amount over the final price as hammered out in the “ring”. I believe the government came down quite hard on dealers for acting in this manner as a form of auction price manipulation. Where does Sotheby’s get off with such blatant kickbacks in the bidding process?
Finally, as an affront to the irrevocable bidder, they start the bidding below what amounts to their guaranteed offer. Bidders are being abused with sham biding not only by the reserve, but cajoled to bid over that price point, to a second undisclosed price point. Can you imagine a real property public auction operating this way? A disclosed offer above the seller’s minimum acceptable price is where the bidding should start.
As the close of 2008 can’t come soon enough, the antiques industry, as well as most forms of commerce, has been dealing with financial and economic challenges that were never quite expected to play out as rapidly as we are now seeing. In an age when we now aspire to see transparency and honesty in business transactions, Sotheby’s has dared to take it up a notch, in the wrong direction. Will this be a new precedent in the auction format, like the buyer’s premium, secret reserve, and other conflicts of interest?
Jack Trumpy wrote on 01/7/09 at 10:13 am :
I’m an antiques dealer in NYC and have been since 1985. Having been hit hard by the drop in sales this fall, I wasn’t doing any buying at the “duopoly” as you aptly describe them, so it comes as a surprise to hear of this latest ploy to fix prices.
Theoretically, Sotheby’s could offer this opportunity to a few insiders who would then lowball every lot with an irrevocable bid, just above the reserve. If the insider wins the lot, great! If he loses it to another bidder, equally great! And how is it fair to the consignor who now has to “cut-in” another individual if the piece sells above the irrevocable bid?
The term for this is really “insider trading”, since it gives certain individuals information that is not made public, giving them an unfair advantage. It should be prosecuted as such as soon as possible.
admin wrote on 01/7/09 at 8:10 pm :
Jack,
Thank you very much for your comments. If all dealers and the general public understood this issue like you, there would be some sort of call for enforcement or prosecution. Also there is not a single government agency (NYC Consumer Affairs or Federal Fair Trade Commission comes to mind) who is willing to at least publicly question and confront Sotheby’s with this practice.
Leonce Antiques wrote on 01/9/09 at 1:47 am :
Thanks for posting this article. Very useful information for anyone looking to consign with Southebys. Its hard to believe there is still no agency in charge of regulating the auction industry.
curtis dowling wrote on 06/17/09 at 2:39 pm :
Great reading this, and I am going to challenge this ASAP. would any of you drop me a line if you are willing to help me?
admin wrote on 06/17/09 at 7:37 pm :
Thank you for your comment. The irrevocable bid issue is something that most people aren’t aware of and don’t quite know how to attack it.
I believe it requires a concerted effort by dealer organizations (which are pretty useless) or government interdiction as a regulatory entity to expose this method’s unfair and discriminatory operation.
Ricki Lanciotti wrote on 09/6/10 at 7:52 am :
I thoroughly likedreading your article! I am bookmarking it and subscribing to your feed.