Vendor bidding, the game of auctioneers

Image: www.cesapurchasing.org

The Supreme Court of Appeal has dismissed arms manufacture, Ivor Ichikowitz’s appeal with cost, to have High Street Auction pay back 10% commission he paid and for the sale of the game reserve invalid. Ichikowitz bought Thaba Phuti, a lodge and game farm near Rustenburg, for R20 million in 2011.

Ichikowitz accused the auctioneer, Joff van Reenen of faking bids to inflate the price of the property because other bidders were non-existent, in a practice called “Vendor Bidding” or “Ghost Bidding”. 702 presenter, John Robbie spoke to Tirhani Mabunda, CEO of African Training Academy and School of Auctioneers about the legalities of vendor bidding. Mabunda confirmed that vendor bidding is legal as long as the bidder is notified beforehand according to section 45 of the Consumer Protection Act, Act 68 of 2008. Mabunda says vendor bidding is practised across the world.

Section 45 of the Act states that, unless notice is given that a sale by auction is subject to a right to bid by, or on behalf of, the owner or auctioneer: (a) the owner or auctioneer must not bid or employ any person to bid at the sale; (b) the auctioneer must not knowingly accept any bid from any such person, and; (c) the consumer may approach a court to declare the transaction fraudulent if this undertaking has been violated

What is 'Ghost' bidding or 'Shill' bidding?

Shill or ghost bidding is when sellers use memberships of people they know, or fake memberships they have created, to put false bids on auctions in an attempt to up the price of the property they are selling. A genuine auction requires the seller to set a reserve – the minimum price which the seller is willing to sell the property for.

John also spoke to auctioneer Joff van Reenen of High Street Auctions who said that proper procedure was followed during the auctioning of Thaba Phuti game lodge. According to van Reenen bidders need to know how to protect themselves against Ghost bidders, a process which is highly illegal.

There is a difference between vendor bidding, which is legal, and ghost bidding, which is absolutely illegal

How to protect against ghost bidding?

  • Know your rights as a buyer/bidder
  • Be attentive when rules are read prior the auction
  • Ask questions anytime (who is bidding, May I see the bidders record)
  • Everything should be transparent and the auctioneer should have all the documents.

To know more about the rules of auctioning click here

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