Let’s face it, when you are an auctioneer, most people don’t really know the costs of doing business. Most believe that it should be taken out of the auctioneers commission. That would be great if the auctioneers commission would keep them operating. Let’s take a look into charges that come with an auction.
Auctioneering is a profession, not a hobby. So don’t think you will get a free auctioneer if you agree with the price points or not. That is like asking an employee to come in and work 80 hours a day on a hot grill cooking burgers at the local fast food joint and then not paying them. It will not happen.
I was paging through documents sent to me by someone who wanted my opinion on a particular situation. The auction company was promoting that they operate with the highest of ethics, but were not a member of an association or licensed in the states that they say they support. So before we get into it – understand, there are auctioneers that aren’t, and it is important where to go to question if they are licensed or not.
Most Auctioneers and Auction Companies do not post their rates, charges and costs for an auction. Naturally a publication of such rates would enable clients to see what the Auctioneer and/or Auction Company charges and make judgments about if they wish to consign or not. If Auctioneers and Auction Companies did publish their fees and rates, other Auctioneers and Auction Companies would adjust their rates accordingly.
That is a great idea, however, with the change in the laws, that would be considered price fixing and would violate federal law. We know that certain transparency when it comes to the topic is needed, but there is nothing that an auctioneer will do that will have them post their commission rates online.
The most common violation of the Sherman Antitrust Act is price fixing. What is Price Fixing? Price fixing is ordinarily considered an agreement to inhibit price competition by raising, depressing, fixing, or stabilizing prices.
If you searched the internet you would find hundreds if not thousands of Auctioneers and Auction Companies who have listed their commission rate and expense information.
Flat rate – Many Auctioneers and Auction Companies charge a commission that is a flat rate. 50% on all items plus labor, marketing, etc.
Sliding Scale – Some Auctioneers And Auction Companies charge a commission that adjusts based upon the price of items. As the price goes up their commission goes down.
So is it a violation of the Sherman Antitrust Act if an Auctioneer or Auction Company to post or publish their rates?
The answer is no. A careful reading of the Sherman Antitrust Act will make it clear that there must be an “agreement” to charge the more, less or the same as other Auctioneers or Auction Companies. The purpose of this part of the Sherman Antitrust Act is to protect sellers and buyers from price fixing which interferes with the free open and fair market forces to naturally meet where natural and uninhibited bidding among buys takes place.
- 10% for items selling for $10,000 or more
- 15% for items selling between $5,000 and $10,000
- 20% for items selling for less than $5,000 (minimum $50)
- Plus labor, marketing, etc.
An Auctioneer or Auction Company by posting their rates, hasn’t necessarily agreeing to charge the same as anyone else. Rather, they have simply just published what they charge for their services.
The only instance of where this would be a violation of the Sherman Antitrust Act would be where a group of Auctioneers or Auction Companies in the same geographic area would agree to charge the same rates in an attempt at price fixing by an agreement with other Auctioneers and Auction Companies. Proving a violation would more likely require evidence of collusion and/or some intentional or express intent to price fix beyond merely posting rates for public view.
There was one case where the accusation of price-fixing was made against Sotherby’s that was filed in October 2000 for violating the Sherman Antitrust Act – 15 U.S.C. § 1. The United States argued that in April 1993 thru December 1999 Sotherby’s and conspirators entered into and participated in a combination and conspiracy to suppress and eliminate competition by fixing auction commission rates charged to sellers (“sellers’ commissions”) in the United States and elsewhere. In criminal case Criminal No.: 00 Cr. 1081 the government stated that the combination and conspiracy engaged in by Sotheby’s and co-conspirators was in unreasonable restraint of interstate and foreign trade and commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). The United States charged the combination and conspiracy consisted of a continuing agreement, understanding, and concert of action among Sotheby?s and co-conspirators, the substantial term of which was to fix sellers’ commissions in the U.S. and abroad.
For the purpose of forming and carrying out the charged combination and conspiracy, Sotheby’s and co-conspirators did those things that they combined and conspired to do, including, among other things participating in meetings and conversations in the United States and elsewhere to discuss sellers’ commissions; agreeing to raise pricing by fixing sellers’ commissions; agreeing to publish non-negotiable sellers’ commission schedules; agreeing to the order in which each co-conspirator would publish its non-negotiable sellers’ commission schedule; issuing sellers’ commission schedules in accordance with the agreements reached; exchanging customer information for the purpose of monitoring and enforcing adherence to the non-negotiable sellers’ commission schedules; agreeing not to make interest-free loans on consignments from sellers; and not making charitable contributions as part of the pricing to sellers.
However, you as an individual, company, trustee, executor or executrix facing the decision of the best way of selling real estate or personal property should put your focus on finding the best quality Auctioneer and/or Auction Company that will provide you the very best results.