Three Conflicts on One Saturday: Self-Dealing, Phone Bids, and Family
You are the contract auctioneer for a weekly consignment sale. Three things converge on the same Saturday. Your brother-in-law consigns a tractor with a $14,000 reserve. A regular dealer who buys 30% of your lots asks you to bid by phone on a pallet of tools up to $3,200. And you personally want a machinist's toolbox in Lot 44. Your spouse is clerking, your ringman is licensed, and 60 bidders are in the room. The dealer's phone bid would arrive while you are chanting, and the toolbox sits two lots after the tractor.
1. You want the machinist's toolbox. May you bid on it at your own auction, and if so, how exactly?
Read the worked answer
Yes - but not invisibly, and not while you are the one calling the bid.
- An auctioneer may buy at his own auction only with clear disclosure and without using the chant, the ring, or information asymmetry to his advantage.
- The clean method for Lot 44: before the lot opens, announce, 'I am a bidder on Lot 44.' Hand the gavel to the licensed ringman, step into the crowd with a bidder number, and let the ringman take your bid like anyone else's. Record yourself as the buyer on the clerk's sheet at hammer plus premium.
- What you may not do: bid on a lot whose reserve you know while implying to the room there is one; stop the chant to take your own bid late; open at a price you invented; or buy in the lot after seeing the absentee sheet.
- If your spouse is clerking, have a different clerk enter Lot 44 so the record is not written by an interested party. An undisclosed purchase is the fastest way to lose a license and to make every other sale you conduct that day vulnerable to challenge.
2. The dealer wants you to execute a $3,200 phone bid while you are chanting. How should that be handled?
Read the worked answer
Not by you, and not on your ear while you call the bid.
- An absentee or phone bid must be executed by someone who is not conducting the sale and who has no interest in the outcome - the clerk or the ringman - on a documented absentee sheet showing the maximum authorized and the time received.
- You cannot hold a phone, call bids, and exercise discretion over a bidder's ceiling at the same time. Worse, you would see the dealer's $3,200 limit and be able to use it to run other bidders toward it; that is precisely the information asymmetry the disclosure rules exist to prevent.
- Disclose the arrangement. Announce that absentee bids are being executed, and record the dealer's identity on the sheet. Because this dealer buys 30% of your lots, disclosure matters more, not less: a bidder who learns the auctioneer was taking live instructions from the largest buyer in the room will question every price in the sale.
- If the pallet is a lot you personally want or consigned, escalate the conflict - have the ringman execute the bid and have an independent clerk open and close the lot.
3. The brother-in-law's tractor reaches $13,400 and stalls. He signals from the side that he will drop the reserve. What are your obligations?
Read the worked answer
The relationship does not disqualify the consignment, but it changes what you owe the room - and the drop-the-reserve rule does not bend for family.
- Treat the signal as a reserve waiver, nothing more. Announce it: 'The reserve on this tractor is waived; selling to the highest bidder.' Then reopen from the last bona fide bid of $13,400 and let everyone compete. No private nod to a preferred bidder, no quiet sale to a friend of the consignor.
- Do not bid on the tractor yourself, and do not let a proxy bid for you. If you want it after it passes, that is a direct purchase from a related party - document an independent valuation, because both the Board and a disappointed consignor will ask what it was worth on the day.
- Do not waive or discount the commission for a relative unless the same terms are available to every consignor; preferential treatment of a related consignor is a breach owed to your other consignors.
- Disclose the relationship if asked, note it in the consignment file, and remit the net proceeds on the same schedule as everyone else on a separate ledger line. Keep the ringman in the chant so no bidder can say the auctioneer was selling his family's property to himself.