If you’ve never been to a live auction, then you may not have ever heard of the term “collusion.” Not all auctioneers mention it, so even if you have been to an auction or two, you may never have heard of the term.
Collusion can be defined as “The unlawful practice whereby two or more people agree not to bid against one another so as to deflate value or when the auctioneer accepts a fictitious bid on behalf of the seller so as to manipulate or inflate the price of the property.”
Despite the fact that it’s illegal, it’s still a pretty common event live auctions.
Here’s a typical scenario. You’re at an auction and let’s say you’re looking at a pallet of computers. You see a lot of items on there that you could use and say to yourself that you’ll be bidding on that. You notice there are some printers on the pallet that you don’t need, but will still bid on the pallet when the time comes. Now, while you’re looking at this pallet of computers, another bidder has noticed your interest and approaches you. He asks you if you’re interested in the computers or the printers. You tell him you’re only interested in the computers. He says he’s only interested in the printers and wants to make an agreement with you. He says he wants to bid on the pallet, but will not bid if you agree to sell him the printers for half the bid price. Now if you agree, that’s collusion.
It may sound tempting, but as enticing as it may be, don’t do it. It hurts the seller at the auction because now there’s less competition than there should be for the items and makes it likely that the item will sell for less than it would have.
Some auctioneers have even been known to plant people to try to get people to agree to collusion, and if you do…well, it’s not good.
Now let’s look at collusion from the other side where the seller uses it to his advantage. In this case, the seller would plant a person to bid on an auction in order to artificially run up the price on the auction. This person has no interest in buying the item. They just want to make you pay more than you would have had to.
Next time you’re at an auction, just keep in mind what collusion is and avoid it. Keep the game fair. An auction is already a place where you can get a great deal.