Absolute Auction Advertising, Buyer's Premium Switch, and Missing Records
Hal advertises a 'complete absolute estate auction, every item sells to the highest bidder, no reserves, no seller bids.' At the site, the seller tells Hal she will not sell a walnut secretary for less than $2,500. Hal announces before bidding that 'the family may protect a few pieces,' then withdraws the secretary at $1,900. He also advertises a 10% buyer's premium in a newspaper line, but at registration the sheet says 15%. Hal keeps registration cards and settlement sheets in his truck and says he cleans them out each month.
1. Evaluate the advertising and the reserve/withdrawal handling under Commission rules and auction law.
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The phrase 'absolute, no reserves' is a material representation. An absolute auction means the property is sold to the highest bidder regardless of price, without a reserve or seller bid. Hal cannot later impose a $2,500 floor or withdraw the secretary because the price is low. Announcing that 'the family may protect a few pieces' contradicts the advertising and may constitute misleading advertising and a failure to disclose reserve terms. The buyer's premium is also a material term: advertising 10% but charging 15% at registration is deceptive unless the 15% was clearly and conspicuously disclosed before bidding and the earlier ad was corrected. A fine-print line does not cure a headline claim. The Commission can treat this as false advertising and unfair dealing.
2. What records should Hal keep, and what are the risks of his record practice?
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Hal should retain bidder registration cards, bidder numbers, absentee and proxy bids, clerk sheets, auctioneer notes, settlement statements, buyer's premium calculations, advertising copies, and trust or escrow records for the period required by Commission rule. Cleaning them out monthly destroys the audit trail needed for buyer disputes, seller settlements, sales-tax review, and Commission inspection. If a buyer claims a 10% premium was promised, Hal's own ad supports the buyer. Inadequate records can also hide commingling or disbursement errors. He should use a numbered file per auction and a retention calendar.
3. Recommend a compliant script and process for the next auction.
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Before the next auction, Hal should choose reserve or absolute status in writing with the seller, advertise the exact status and any buyer's premium in plain language, announce material terms before bidding, and if a reserve exists, state that the auction is 'reserve' and that the seller may bid or withdraw only as disclosed. He should have the seller sign a written reserve and withdrawal authorization. He should script the opening announcement and keep a copy in the file. If terms change, he should announce the change clearly before accepting any bid and document who authorized it.