Ghost bidders are not wanted

“The SAIA constitution and code of conduct explicitly prohibits ghost bidding and regards it as an illegal practice in the industry,” says Nico Maree, Executive Director of SAIA.

Maree cautions that in the past there has been confusion between vendor bidding and ghost bidding and advises the public not to jump to conclusions.

“There is a clear distinction between vendor bidding, which is legal, and ghost bidding, which is not.

Vendor bidding as stipulated in section 45 (4) of the Consumer Protection Act (CPA) is allowed, subject to a proper mandate supplied by the seller and proper advertising, which must be done by the auctioneer before the auction.

“It is necessary to protect the interests of seller, particularly the reserve values of their assets submitted for auction. However, practicing vendor bidding secretively is an illegal act,” Maree says.

Auctioneers have to publicly advertise vendor bidding before the auction and stipulate the following upfront: “The seller reserves his rights in terms of Section 45(4) of the CPA.” If the auctioneer did not advertise the sellers rights according to the mandate it becomes ghost bidding.

Vendor bidding must be made clear in the conditions of sale and the rules of auction. As soon as the reserve price was reached the auction theoretically becomes absolute, unless there is a subject to confirmation period incorporated.

Vendor bidding is permitted at an auction – and the seller himself, the auctioneer, or a vendor bidder representing the seller or the auctioneer, may bid during the auction up to, and not exceeding, the reserve price.

“The wording ‘may bid’ is used deliberately, as provision for vendor bidding and the actual presence of a vendor bidder does not necessarily entail that vendor bidding will be practiced,” Maree says.

“The need to invoke vendor bidding is unnecessary at many auctions where competitive bidding amongst genuine buyers exists and their contest equals or exceeds the reserved or upset price.”

Maree says the public should also take note of the role of proxy bidding during auctions and not confuse it with ghost bidding.

“Circumstances often prevent buyers from attending auctions personally. In such instances, it is the responsibility of buyers to mandate proxies to represent them at auctions in accordance with regulations 21 (2) (g), 26 (3) and 26 (4) of the CPA. Apart from administration and registration, which is invariably performed by clerks, the process of mandating proxies has nothing to do with the auctioneer.”

It is also important to differentiate between an absolute auction and a reserve auction. Vendor bidding is only allowed at a reserve auction.

An absolute auction is where no reserve price has been placed on the lot and any bid is accepted. A reserved auction is where a reserve price is placed on the lot and if the reserve price does not meet the seller’s price, he may decide not to sell. If an auction was not advertised as a reserve auction, it is automatically an absolute auction and no vendor bidding is allowed.

The SAIA industry code or the Consumer Protection Act (CPA) makes provision that an auctioneer must record the proceedings, but it does not stipulate how it should be recorded. The recording can be in writing, voice recorded or on video.

“According to the CPA the auctioneer is only obliged to make a copy of the vendu roll, as it serves as a record of the auction,” Maree says. The vendu roll is a complete record of all the auctions’ assets on auction; list of all the items sold or not, and the sales prices achieved.

Though auctioneers are not required to film or voice record an auction, I recommend that auctioneers should consider these methods of recording, should there be any form of dispute,” Maree says.

Presenting this “evidence” will show a willingness to co-operate and emphasise that auctioneers have nothing to hide.