Editor's Note: Patrick Ryan is an investor in cllct.
The hottest topic in the hobby this month has been the debate over shill bidding after high-profile collector Patrick Ryan confirmed he had bid on his own item in a Fanatics Collect auction.
“I mistakenly bid on my own item, which is actually very different than shill bidding,” said Ryan, a well-known sports card and memorabilia collector based in Houston.
The debate intensified following Ryan’s appearance on a podcast with Dr. James Beckett, published Nov. 3. Beckett is the creator of the hobby’s Beckett price guides, which later spawned Beckett Media and Beckett Grading Services.
The podcast largely covered the nuances of shill bidding, which requires intent from the bidder to be considered a crime, as well as other controversial auction mechanisms, including hidden reserve prices.
There are complex topics with detailed nuances, so cllct is here to provide an overview of key questions and the answers.
What happened?
Ryan posted an Instagram story in which he was talking about his own card, an autographed 1986 Fleer Michael Jordan sticker, in a Fanatics Collect auction.
Some followers noticed the word “Outbid” was across the item, meaning Ryan himself had bid on a card he owned.
What was Ryan’s response?
Ryan initially said he did not bid on the item to boost up its value.
"I am sorry for bidding carelessly in many auctions," Ryan said in an Instagram story Monday. "As a collector, one should be very deliberate in their approach to buying. It's wrong to not be more careful."
Why was he allowed to bid on his own item?
At most auction houses, consigners are not allowed to bid on their items. However, Ryan was able to bid on his card in this auction because he consigned it to Acquir, which then brought it to Fanatics Collect.
So, Fanatics Collect didn’t technically know the card was Ryan’s.
What happened when this came to light?
Ryan again said he did not bid on the item to boost its value, but he also said once he realized it was his card, he should have contacted both Acquir and Fanatics Collect.
Fanatics Collect responded by pulling the item from the auction.
Ryan told cllct Tuesday his account has been restricted from bidding at Fanatics Collect, but he is unsure how long that will last.
“Fanatics Collect does not comment on individual cases," the company told cllct. "Trust and integrity are at the core of our platform, and we take appropriate steps to uphold such principles."
A spokesperson for Acquir told cllct the company won't comment on individual cases, but did say, "We don’t condone bidding on your own items, under any circumstances."
What is shilling?
Shilling is bidding on your own item, as either the consigner or the auctioneer, to boost the price of the item at auction. It also is shilling to bid up the price of another seller's item to increase its value and then not follow through on the sale.
Is it legal?
The Federal Trade Commission defines shill bidding as illegal "when fraudulent sellers or their partners, known as 'shills,' bid on sellers’ items to drive up the price."
The intent is the key, and that adds to the complexity of the question.
In some states, auctioneers are allowed to bid on items they auction, at least until it hits the consigner’s reserve price. Depending on what state it is in, the reserve price doesn’t have to be disclosed.
What are the policies of various auction houses?
eBay prohibits shill bidding, which it defines as when "someone bids on an item to artificially increase its price, desirability or search standing." That includes friends and employees of the seller.
However, eBay items are often consigned, meaning the auction site doesn’t know the actual seller. eBay — or any auction house for that matter — also doesn’t know which bidders might be connected to the buyer.
So, it can be difficult to determine who wants to buy an item legitimately and who might be just pumping up the price.
'Trust is the foundation of a healthy marketplace, and eBay and its companies have zero tolerance for shill bidding," eBay told cllct. "When we detect this activity we take decisive action, including removing listings and suspending accounts when necessary."
What are the rules at other prominent auction houses?
At Heritage Auctions, consigners can’t bid on Internet auctions, as they are locked. But they can bid in live auctions. Terms and conditions say that if consigners win the lot, they obviously must pay. Heritage also allows employees to consign lots, and Heritage itself can bid on lots with no restrictions.
SCP Auctions president David Kohler said his auction house does not allow consigners to bid on their own items and forbids any scheme in which consigners use others to boost the prices on their items.
Terms and conditions at RR Auction dictate consigners cannot bid on their own lots, and those who consign are automatically blocked from bidding. It’s very difficult for auction houses to identify a friend of a consigner, but RR has a rule for prohibiting “agreements between bidders and consigners.” If that rule is determined to be violated, RR might saddle the consigner with the buyer’s premium and a loss of the seller’s commission. Rules allow RR to bid up to one increment below the reserve.
Iconic Auctions can bid on lots up to its consigner’s reserve, but has the most aggressive terms and conditions when it comes to consigners and their acquaintances bidding.
“Bid manipulation of any kind is expressly forbidden. A seller is prohibited from placing bids or arranging to have bids placed on behalf of seller, seller's agent or assigns. No shill bidding is allowed," Iconic's rules state. "Buyers are prohibited from communicating with each other with the purpose of manipulating the final purchase price of an item. Please note that it is a violation of law to make bids in a false name or with an invalid payment method, even if our software initially accepts such a bid. Be aware that even if you do not give us your real name, your web browser transmits a unique Internet address to us, which can be used by law enforcement officials to identify you. Do not test our auctions with false bids. This puts you at substantial personal legal risk. Fraudulent bidders will be prosecuted to the fullest extent of the law. Currently, both the FBI and the U.S. Secret Service are responsible for investigating all Internet fraud cases.”
We could not find the terms and conditions on Goldin Auctions' website, but as an eBay company, the rules likely revert to the parent company's terms.
Is having a friend bid on something common?
Yes. Although considered unethical, it definitely happens frequently in the business. This often happens because auction houses discourage reserves or have reserves below the price that someone is willing to sell it for.
Is price protection a form of shilling?
Again, the definition of shilling is a fluid one. Cards are often price protected — that is inflated to hit a market number — and often those who bid hope they don’t wind up with the card.
Instead, their goal is to keep the item at a price that holds the market (usually because they hold some of those cards). That practice can certainly be defined as shilling.
Often, when an item is shilled as a form of price protection by someone who doesn’t intend to buy it, that person wins, then doesn’t pay for the item, and the auction house never says the item didn't actually sell, which serves to protect the price.
Auctions that finish but aren’t paid for will still appear as completed when searching through eBay’s listings. Terapeak, eBay’s official research tool, filters out those listings and only shows completed auctions with successful purchases.
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Darren Rovell is the founder of cllct and one of the country's leading reporters on the collectibles market. He previously worked for ESPN, CNBC and The Action Network.