The Cousin in the Bidder List
An auctioneer runs an online auction for a consignor's 1969 Camaro. The platform shows bidder usernames and registration addresses. The consignor's cousin registers as 'FastLane88' using the consignor's home address and bids three times over two days, pushing the high bid from $21,000 to $27,500. The auctioneer notices the address match and that the bids came from the same IP address as the consignor's account, but does nothing because 'the market should decide.' The car sells to an out-of-state buyer for $27,500 plus a 10% buyer's premium. After the sale, the buyer learns that the underbidder was the consignor's cousin and demands a refund and cancellation. The consignor says the cousin was 'just helping the reserve get met.' The auctioneer has already invoiced the buyer and is about to pay the consignor. The buyer's deposit is in the auctioneer's trust account.
1. Is the cousin's bidding permissible? Explain shill bidding/by-bidding and the auctioneer's duty.
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The cousin's bids were shill bidding. A bid made by or for the seller to inflate the price is a misrepresentation to other bidders, even online. The auctioneer knew of the address and IP match and allowed the bids, so he became part of the deception. New Hampshire law and Board rules prohibit dishonest or fraudulent conduct and require the auctioneer to protect the integrity of the auction. If a reserve auction permits seller bids, that right must be clearly disclosed; here the cousin used a fake username and the consignor called it 'helping the reserve get met,' which is not disclosure. The auctioneer should have cancelled the suspect bids and investigated.
2. What should the auctioneer do about the sale, the buyer's deposit, and the consignor?
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The sale is voidable because the buyer was misled about the competitive bidding. The auctioneer should rescind, return the buyer's deposit from trust, and not pay the consignor. He should tell the consignor in writing that the cousin's bids are rejected and that the consignor may be liable for the misrepresentation. If the buyer still wants the car, the auctioneer should re-offer it with full disclosure or negotiate a price without the tainted bids. He must not keep the premium on a cancelled sale. Any commission claim should wait until the dispute is resolved.
3. What records and board disclosures are required?
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He should preserve the bid logs, IP records, registration data, messages with the consignor, and the auction terms. He should report the shill bidding to the Board and cooperate with any investigation. He should also review the platform's terms and add a rule prohibiting seller or agent bids. A written incident report and refund records are needed. Discipline may include fines, suspension, or revocation, and the buyer may have a consumer claim.