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Sunday, November 9, 2014

Practical Advice: Unethical Games that Some Stamp Auctioneers Play

  In earlier "Practical Advice" articles, I offered some tips for those interested in consigning or bidding at stamp auctions. This article shall consider a few of the unethical practices employed by some auctioneers, and how to avoid being victimized.
   Whether one bids at or consigns to stamp auctions, it's important to realize that not all stamp auctioneers are completely honest or trustworthy, and that many fall somewhere between the extremes of saintliness and criminality. There do exist a few who cheat bidders and consignors, betray their trust, and hurt the hobby. Fortunately, completely unscrupulous auctioneers are rare.

   However, there are practices utilized by some auctioneers which are unfair to their customers. Bidders can often avoid "misunderstandings" resulting from such practices by carefully reading the fine print of an auctioneer's conditions of sale before bidding, and if necessary, requesting that his bids be accepted on condition of amending particular terms. A consignor should never fully trust an auctioneer until he's built a relationship with him, or has taken precautions to avoid being cheated. 

   Among the unethical practices to which I've been subject as a bidder (or of which I've been informed by others) are the following:

- Overgrading: many auctioneers and mail sale dealers are rather "liberal" when it comes to grading, ignoring minor defects which nevertheless have a major effect on market value. In addition, some of these individuals make a practice of delaying refunds on returned lots (sometimes for months), or refunding the cost of the lots minus shipping and handling. Grossly mis-describing lots is a disservice to bidders, and in my opinion, the best way to avoid  inconvenient and infuriating situations is by providing the auctioneer with references, and then bidding conditional on "inspection prior to payment - net in 10 days of receipt" terms on won lots. Grossly mis-described lots should be returned without payment for shipping, and should an auctioneer send some lots which are purchased by the bidder while others are grossly mis-described and returned, the "round-trip" costs for shipping these lots should be deducted from the payment for those kept.

- Excessive shipping and handling costs that are way over the cost of postage: this is usually trivial enough to be considered more of an insult rather than an injury, and is sometimes noted in the conditions of sale as a minimum shipping cost. However, sometimes the conditions of sale are rather vague about such costs and do not provide any guidance regarding amounts that will be charged, and auctioneers will attempt to use this vagueness as a license to bilk their customers. Once, an auctioneer tried to charge me $25.00 as the combined shipping, handling, and administrative cost on a $140.00 single stamp lot, which could have been sent to me via insured mail for about $5.00. Auctioneers sometimes justify such practices as means of charging successful bidders for the cost of producing the auction catalogs, which are often provided for free. This seems rather odd to me, since one would think that auctioneers would consider successful bidders among their best customers and would encourage them to bid in the future, rather than penalizing them for the costs of providing catalogs to those who did not bid, or who bid too little to win anything.  In any case,  shipping and handling costs should be clearly noted by the auctioneer, and factored into the bidding.

- Inadequate time allowed for an extension of the return privilege for purposes of obtaining expertization: despite the fact that expertization can sometimes take 6 months or more, there are some auctioneers who allow only 4-6 weeks. A possible reason for this term is that it allows the auctioneer to bilk bidders who neglect to read the conditions of sale by selling them fakes and forgeries as authentic stamps. If bidding in an auction with such terms, either request an amendment so as to allow for sufficient time for expertization, or else avoid bidding on lots which might require it.

- Disallowing returns on lots containing over a certain number of stamps: this is normal and acceptable when it comes to collections, but can prove problematic for sets of stamps. Should a bidder receive a set of stamps described as sound when one or more of the stamps is grossly defective, then he should be allowed to return the set. An auctioneer who uses such a condition to sell defective stamps as sound ones is basically attempting to implement an unconscionable contract.

- Purging bidders who return stamps from mailing lists: this strategy has been used by certain mail bid sales and auctions. Bidders who return mis-described stamps are sent  refunds, and then are purged from the mailing list, and receive no more catalogs. Ultimately, the auctioneer builds an extremely valuable mailing list of "suckers"- collectors who reliably overbid on overgraded, defective stamps, and never return them.

- "In-bidding", or secretly raising the second highest bid at auctions in which the winning bid is supposed to be one advance over the second highest bid. This is usually impossible to prove, and frequently an auctioneer who does this will attempt to lessen suspicion by not raising the second highest bid on every lot won by a bidder. There is really no means of preventing being cheated in this way; therefore one should never bid more than one is willing to pay for a lot.

- Allowing buyers to beat a winning auction bid for several days after the close of the auction: I've been informed that at least one mail bid auction engages in this practice. Obviously it would be unthinkable at a public stamp auction, and one wonders why anyone would want to bid at all  if  winning bids simply become increased reserves for buyers to beat after the auction is over.

Among those that I've experienced as a consignor (or of which I've been informed by others) are as follows:

- Collections or accumulations returned to the consignor after having had some of the most valuable stamps within them stolen: this is usually due to theft by prospective bidders inspecting the collections, although it is sometimes unclear whether the theft was committed by such individuals or by the auctioneer or one of his employees. Since stamps are small, it isn't very difficult for a thief inspecting a collection before an auction to drop a few into his case when the attendant isn't looking. When submitting collection lots, it's prudent to note the most expensive stamps within them in the description, and even to photocopy them and provide a copy to the auctioneer, so as to provide evidence justifying a reimbursement, should a theft occur.  Inadequate security can result in dishonest customers either blatantly stealing items from consignments, or employing other larcenous tactics, such as hiding valuable stamps within an accumulation among common ones, so that the accumulation may be won for a low bid.

- Inadequate insurance of consignments, coupled with a refusal by the auctioneer to take responsibility for resulting losses: this can be a very costly lesson. If an auctioneer is unaware of his private insurer's policies or has a claim denied through no fault of the consignor, then he is still obligated to take financial responsibility for the loss, rather than passing it on to the consignor. In order to avoid such situations from arising, it's best for consignors not to put too much faith in verbal agreements regarding insurance made with a stamp auctioneer, even if  he seems generally honest. Insist on having all such agreements in writing.

- Changes in management resulting in changes in business practices and relationships to customers;  it is always worth remembering that companies consist of human beings, and that trust should always be earned. A change in the management at a stamp auction firm can result in the quality of service improving, declining, or staying the same, if the new management faithfully carries on the traditions of the previous owners. At worst, it can result in a radical degradation of its business ethics and treatment of its customers. It's best not to assume that a firm will remain the same if its management changes. Ideally, there should be sufficient mutual trust between the customer and the auctioneer and a fundamental understanding that each will take responsibility for his mistakes (or, in the case of the auctioneer, those of his employees), and pay for them if costs are incurred.

   In the U.S., there has been a trend towards consolidation in the stamp auction business, resulting in a dramatic increase in the combined commissions (the seller's commission plus buyer's commission) that stamp auctioneers charge.  These have risen from about 20% a decade or two ago to the current outrageous levels of 25%-30%, with little or no real improvement in the quality of service. In fact, most auctioneers have significantly increased the required minimum lot values and minimum consignment values, thereby making their services less accessible to mid-level consignors. Some of them justify the increased commissions and increased lot and consignment minimums by arguing that their costs have increased, but I believe that the main reason is that the stamp auction business has become more of an oligopoly than it once was. There is a crying need for an auctioneer who offers reasonable commissions and better terms to for those with mid- and high level consignments, and should such an auction house be established, it would not only do very well, but might also result in others  lowering their commissions in order to compete.

   I have recently started a petition against excessive stamp auction commissions, which I encourage readers to copy and circulate. It gives the signer the option of indicating the maximum commission level that he or she will tolerate as a consignor, and includes an address to which to send completed petitions. When a sufficient number of people have signed the petition, copies will be sent to the American Philatelic Society and the American Stamp Dealer's Association.

   Until such needed reforms are implemented, there are other less expensive means of selling stamps. Ebay's stamp auctions have a far larger audience than that of any stamp auctioneer, and Ebay waives the insertion fees on the first 50 unsold lots per month. The total commissions on items sold amounts to less than 15%, even after combining the insertion fee, final value fee, and Paypal fee. Members of the American Philatelic Society's can use its online StampStore, by sending in stamps mounted on pages, with brief descriptions of the stamps, catalog values, etc.. The member sets the price, and if sold, the A.P.S. charges a 20% seller's commission. This is a recent innovation, similar to the organization's Mail Sale Circuit books, which have no online component and which provide a convenient means of selling  inexpensive stamps. With both Ebay and the A.P.S. StampStore, the seller sets the minimum bid or price, and in both cases, reserves can be lowered online, via re-listing lots on Ebay and by changing the price online with StampStore.

   I have no information on whether any of unethical practices described above are utilized by stamp auctioneers in other countries, so I encourage readers outside of the U.S. to express their views on this in the Comments section. Also, if any reader wishes to inform me of other tricks that some auctioneers play on their customers, I'll consider adding the description of it to this article.   

   Those interested in joining a community of Stamp Auction bidders and consignors may wish to join the Stamp Auction Bidders' and Consignors' Union (SABACU) group at Facebook. The organization provides a venue for discussion of stamp auctions, and endeavors to represent the interests of bidders and consignors.

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