Shill-Bidding in Mastro Auction Scams
Sports have always been a crucial part of American culture. As a result, collecting memorabilia naturally became a hobby for sports fans throughout the nation. When the internet became available for commercial use, online auction houses helped open up a bigger market for collectors. During the 1990s and early 2000s, Mastro Auctions was one of sports memorabilia’s most well-known and trusted online auction houses. However, the company went out of business in 2009 as it was discovered that the auctions were rife with fraud. Not only did Mastro Auctions alter and lie about items, they also cheated by using a shill-bidders. Putting fake bids under his own auctions, Mastro was able to make collectors pay more by increasing the final prices of each item. New York attorney Jeffrey Lichtman compared this system to having “a 25% fraud tax built into the auction prices.” Although company records were destroyed, the auction house cheated sellers out of an estimated 1 million dollars.
As online auctions are mostly first bid auctions, buyers will typically bid up to their true value as to avoid a loss of money. However, when shill-bidding is involved, buyers may still “lose money” even if they win an auction with a bid lower than their true value. This is because buyers are unknowingly pushed by the seller through fake bids and end up paying a higher price than they needed to win the auction. Furthermore, as the value of sports memorabilia is largely determined by emotions, fake bids can lead buyers to think the item is worth more (increasing their true value) as they are tricked into believing there are others in the market evaluating the item at a very high price. The convenience of bidding online is great, but may be dangerous as shills are more difficult to spot online. As online auctions will continue to be rife with shill-bidding, the best way for bidders to protect themselves is to remember their true values and stick to it.