The Consignor's Brother and the Reserve
Auctioneer Mia has a 1952 tractor consigned with a confidential reserve of $12,000. Consignor Dale tells Mia that his brother Evan will bid up to $15,000 to "keep the price where it belongs" and asks Mia not to disclose Evan's connection. Dale says, "Everybody does it; the reserve protects me anyway." Mia knows the auction is advertised in the local paper as an "absolute auction." She also knows Evan has bid at her sales before and is known to other bidders as a regular. Dale has not authorized any change to the advertising, and the consignment agreement is silent on seller bidding. Mia expects 80 bidders and has already spent $600 promoting the sale as absolute.
1. Analyze whether Mia may accept Evan's bids under these facts. Address both the advertised absolute sale and the confidential reserve.
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Mia should not accept the bids as proposed. The advertisement says "absolute," which tells the public there is no reserve and the property will sell to the highest bidder. An absolute sale cannot be converted into a reserve sale by a secret instruction, and the seller cannot use a bidder to prop up the price. Even if the sale were properly conducted with reserve, a seller or the seller's agent may bid only if the auction is clearly announced as one in which the seller reserves the right to bid. Dale's request is for an undisclosed shill bid: Evan would be bidding to protect Dale's price, not to buy for himself. The confidential reserve does not cure the deception because the public was told there is no reserve at all. The $600 promotion and the expected crowd do not change the disclosure obligation.
2. How should Mia respond to Dale, and what should she do about the advertising and the consignment?
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Mia should tell Dale plainly that she cannot accept undisclosed bids from his brother. She should explain that the sale is advertised as absolute and that she cannot conduct a reserve sale or accept seller-agent bids without a clear public announcement. If Dale wants a reserve, Mia must correct the advertising before the auction to state that the sale is with reserve and must disclose that the seller reserves the right to bid. Even then, Mia should not allow Evan to bid in a way designed to create a false appearance of competitive bidding. If Dale insists on the secret arrangement, Mia should withdraw the consignment or decline to conduct the sale, document the refusal, and return the tractor. She should also review her consignment agreement to add clear terms on reserve status and seller bidding.
3. What professional-discipline risk does Mia face if she follows Dale's instruction and the Board later learns of it?
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Mia faces discipline for unprofessional conduct, including misrepresentation and false or misleading advertising. The Board can find that she advertised an absolute auction while secretly maintaining a reserve and allowed a seller's agent to bid without disclosure. Those facts support a finding of deceptive practice and breach of the fiduciary duty owed to bidders and the seller. Mia's own knowledge matters: she knew the advertising said absolute, she knew Evan was Dale's brother, and she knew the reserve was confidential. That makes the conduct intentional rather than a clerical mistake. Discipline could include reprimand, suspension, civil penalty, or license revocation, depending on the harm and prior record. Mia's best defense is to refuse the arrangement and keep a written record of the refusal and any corrected advertising.