REAL Buyers. REAL Sellers. REAL Auctions.
...not everything in Las Vegas is a gamble. There is at least one sure thing, we’re promised; the ability to buy and sell cars in a fair and equal environment... The roll of the dice. The turn of a card. The red or black and numbered wedge where the marble falls. The row of images you see when the slot machine cylinders stop turning.
By Larry Edsall
After each, the reward can, indeed, be substantial. But seeking that reward involves a risk, sometimes a very significant risk. That’s why they call it gambling—“to play a game for money or property,” says Merriam-Webster, “to bet on an uncertain outcome.”
But not everything in Las Vegas is a gamble. There is at least one sure thing, we’re promised; the ability to buy and sell cars in a fair and equal environment.
“As a leader in the collector car auction industry, we decided it was time to bring our company’s commitment to fair and ethical auction practices to the next level,” said Craig Jackson, chairman of the company co-founded nearly four decades ago by his father.
“Particularly during these challenging economic times, there needs to be transparency in our industry, and we are leading that charge,” he added.
“What Barrett-Jackson is assuring its customers on both sides of the transaction—buyers as well as sellers—is that the company runs a clean ship,” said Steve Davis, president of Barrett-Jackson. “If you’re selling, it’s going to be a fair transaction and if you’re buying, you’re not bidding against a shill. Valid sellers are selling, valid bidders are bidding, and the price that results is fair based on the auction.”
Jackson and Davis contend such an approach in an arena where business practices often come into question is an important part of the Barrett-Jackson corporate heritage as well as its promise of “total auction transparency,” one of the core auction standards adhered to by the company. Jackson and Davis refer to the “standard features” that are provided to every customer who participates in the Barrett-Jackson auction experience:
- Experienced and passionate management team
- Total auction transparency
- Highest standard of business ethics
- Real buyers
- Real sellers
- Level playing field
- Vehicles offered reflecting diverse market
- Live SPEED television coverage
Or, as Jackson puts it in summary: “An auction is supposed to be an auction. It’s not supposed to be a fixed-price sale.”
That statement underscores Barrett-Jackson’s decision several years ago to step away from the norm and become a “no-reserve” collector car auction.
At most such events—and at many auctions of any sort of collectibles—owners putting their vehicles up for sale are allowed to set a “reserve” price, a minimum figure at which they’ll actually sell the item. However, this reserve is not revealed to the bidders, who may competitively, even enthusiastically bid a vehicle to, say, $50,000 or $150,000 or even $500,000 or more, only to learn that the reserve has not been met and a transaction will not be consummated on the auction block.
Needless to say, the excitement of the bidding that seems to electrify the arena’s air supply quickly evaporates, disappearing into deep disappointment. It’s as if you pulled the handle, the cylinders spun, and there are all the indications that you won—but instead of clinking coins there’s only music and lights, no payoff.
Jackson and Davis also are concerned about other practices they see at auctions, from cars being pre-sold (with bidding at the auction being, well, scripted) to auction houses or their executives secretly owning some of the cars going across the block, to false bids from telephones with no one at the other end of the line, or to selling vehicles known to have a shady title or ownership history.
“There are a lot of crazy things going on out there, and we want to protect our customers,” added Jackson. He went on to tell the story of someone who wanted to sell a car with Barrett-Jackson that was purchased at another auction, except the car’s title wasn’t signed off properly and didn’t stand up to Barrett-Jackson’s scrutiny. The car’s owner later returned, and with a signed and notarized title in hand, even though the car’s previous owner was dead and therefore could not have penned the fresh signature on the car’s title. Again, Barrett-Jackson rejected the car. This title was no longer transferrable in the way it was presented, and could have resulted in a long, drawn out headache for the future owner who had no idea when he purchased the vehicle.
This kind of scrutiny can be frustrating to some, who have learned that some other auction companies are willing to take a shortcut. Barrett-Jackson believes the extra legwork is worth the effort. “In the long run, we know our customers will respect us more for running a clean auction,” said Jackson.
Jackson and Davis admit that there can be controversial issues at no-reserve auctions, especially if vehicle owners or their agents are allowed to bid on their own vehicles—in effect buying back a vehicle when the real bidding hasn’t reached a figure they think the car is worth.
Jackson and Davis say they recognize there is some confusion about the difference between the rules at reserve and no-reserve auctions, and they know this confusion sometimes spills over to their own events. The laws that govern sales at auction set very specific guidelines, though, and all auction companies are required to abide by them. The National Auctioneers Association (NAA) tries to break down the different terms in a way that can be easily understood.
For example, the NAA defines “auction with reserve” as follows: “An auction in which the seller or his agent reserves the right to accept or decline any and all bids. A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time.” In a sale with a reserve, the auctioneer may advance the bid on the owner’s behalf up to the reserve price.
On the other hand, an “auction without reserve” is defined as: “An auction where the property is sold to the highest qualified bidder with no limiting conditions or amount. The seller may not bid personally or through an agent.” In a no-reserve auction, the auctioneer may not knowingly accept a bid from an owner or an owner’s agent, and all bids placed are real bids from real, interested buyers.
Barrett-Jackson not only bans unauthorized practices (such as owners bidding on their own cars) in its consignment agreement with sellers, but uses casino-style, state-of-the-art technology to catch those who refuse to abide by the laws.
“We have systems in place,” says Jackson, explaining that real-time television monitors show auction personnel images of a vehicle’s owner, the active bidders and their auction buying and selling histories.
“If we find the owner or a known agent of the owner bidding, we stop the auction and go back to the last real bidder,” Jackson says.
Another problem in the collector car industry of late has been tardy payments. People bidding at Barrett-Jackson must furnish bank-backed proof of their ability to pay before play, and Jackson said emphasizes that “we call and verify” each of those bank letters of guaranty.
At the same time, he said, funds from auction transactions do not go into the Barrett-Jackson operating account but “into a separate account that pays the consignors.”
Davis said Barrett-Jackson is trying to lead the collector car auction industry in transparency and notes that such transparency is one of the factors (live television coverage is another) that make Barrett-Jackson auctions attractive both to those selling vehicles and to those buying, even those new to the collector car auction experience.
“Last year [at Barrett-Jackson’s inaugural Las Vegas auction], fifty percent of bidders were new, and they accounted for seventy percent of the purchases,” Davis said, “and the consignors know they’re getting a pool of qualified bidders who are coming to have a good time and to buy cars.”
Barrett-Jackson recently engaged “Big 4” global professional services and auditing firm, Deloitte & Touche LLP, to conduct an independent examination of Barrett-Jackson’s management’s assertions relating to its auction practices for the company’s 2008-2009 auction season. The examination included testing key management assertions and criteria impacting the conduct of each Barrett-Jackson auction, including: the consignment process; bidder qualification and registration procedures; documentation of and adherence to the contracted terms of sale; conformity to the commission structure and commissions charged; proper calculation and timely payment of seller proceeds; and general adherence to documented auction practices.
“In an era of economic uncertainty, when many giants of the U.S. financial markets have literally been brought to their knees by practices that lacked transparency and accountability, the American public has grown tired of one scandal after another,” said Jackson. “Consumers are weary of doing business with companies that say one thing but practice another. Now, more than ever, the time has come for the leaders in the collector car hobby to stand up and be accountable to one another and—most importantly—to the automotive enthusiasts who support the auction business.”
“Trading that takes place in a fair and equitable marketplace, specializing in products that just happen to look good in the garage? Now that’s the America I remember,” added Davis.
