The Jewish Ethicist: Shill Game
Can I use fake bids to raise prices in an auction?
Q. Can I have a friend submit bids in an on-line auction? After all, the actual buyer doesn't have to outbid him if it's not worth the higher price.
A. The tactic you describe is called a "shill bid," because the accomplice
is known as a "shill," meaning a collaborator in a confidence game. This
appellation should give us a clue to the ethical stature of this tactic.
An auction involves an agreement between the seller and the buyers. The
agreement is that the seller agrees to sell the object to whoever wins the
auction. The bidders agree to take part in the auction under these
conditions. People take part in auctions because they want a shot at a
bargain. If they want to give the seller a chance to size them up they will
negotiate; at least that way the chance to "size up" the other side is mutual.
This is not merely an implicit agreement. All of the major auction sites,
strictly forbidden. Since sellers agree to abide by these terms, if they
break them it is considered fraud. In Jewish law, this would be considered
geneivat da'at, meaning deceit. According to the information I have been
able to obtain, this practice is also illegal in most jurisdictions.
An almost identical situation is mentioned in the Jerusalem Talmud, which
discusses an employer who tricks workers into working for a low wage by
telling them that this is what other workers are getting. 1 The
conclusion is that the deception is unethical and the workers are entitled
to feel resentment towards the employer. The commentators extend this to
the parallel situation where the workers trick the employer into paying a
high wage by convincing him that this is the going rate. 2 This is an
almost exact parallel to the "shill-bid" situation, since the shill's bid
is likewise an outright lie which comes to bid up the price by convincing
the true bidder that someone else is willing to pay a high price.
In fact, the shill-bid situation is more severe. In the case discussed in
the Talmud, even though the deception is decried, the workers have a
partial justification: they can claim that even though the employer was
tricked into agreeing to the high amount, if he had refused to pay this
amount they would have refused to work 3 But this is not applicable to
an auction, where the seller agrees in advance to sell the item to the
highest legitimate bidder.
Shill bidding is forbidden because it's a lie, because it's against the
auction by-rules, and in many places because it's criminal fraud. A seller
who has inadvertently engaged in this practice should come clean and ask
the buyer to pay only the highest bona-fide bid not the amount that was
elicited by the shill bid.
SOURCES: (1) Yerushalmi Bava Metzia 6:1. (2) Beit Yosef Choshen Mishpat
332. (3) See Shach Choshen Mishpat 332:16.
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