Dealer vs. Auctioneer

Last week we discussed quality control on Proxibid so that bidders have an even playing field with auctioneers. Posts generated lots of comments online. But calls and emails to Proxiblog were even greater, and a challenge arose because of it.

Several posts last week questioned the apparently unquestionable in the auctioneering world, from bid retractions to lot returns. Several coin dealers follow this blog, and more than a few decided to express their views privately to me. But one dealer went a step further, asking me how to open a Proxibid account so he could show auctioneers how it’s done.

I’ve given his name to the Proxibid sales team. After all, this is the best portal in the business and the more coin dealers doing business, the better the selection … and terms of service.

This is what the dealer wrote before I agreed to help him open an account:

    I spent some time on the Proxibid site this morning. Some of the terms of service are very clear in their statements that they guarantee nothing and all sales are final. That alone would cause me to only bid on certified coins. One of the auctioneers even said that if something is counterfeit and you buy it its your own stupid fault. At least that is my interpretation. I can see why you might butt heads with some of these guys as they are operating on a basis different than what you and I expect from a reputable coin dealer.

We get the point that most auctioneers are honest and ethical. But there are some professions (journalists, car dealers, tenured professors) where one or two bad apples spoil the lot, and the auctioneering profession is one of them. That is why so many auctioneers take pains to show how honest and fair they actually are, and we know that by personal experience and foster that on Proxiblog for the good of the industry.

But being honest also means knowing enough about numismatics to be doing business in coins. That’s where the money is these days, literally, because of the rollercoaster stock market. If you’re selling coins regularly on Proxibid, you also need to know coin dealer practices.

To become accustomed to them, read the code of ethics by the Professional Numismatics Guild.

The less auctioneers know about numismatics, the more they must provide sharp expandable pictures of obverse and reverse. They require high-quality consignments for return business with reasonable buyer’s and shipping fees. On top of that, they must acquire APN clearance and take returns on altered, doctored, mis-labeled and counterfeit coins.

And they should support Proxibid and pay fees because the portal is doing more than introducing more bidders to your sessions. It’s helping auctioneers make the transition to the new auctioneering world of Internet.

Proxiblog is an independent entity with no connection to the auction portal Proxibid. Our intent is to uphold basic numismatic standards as established by the American Numismatic Association and the National Auctioneer Association and to ensure a pleasurable bidding experience not only on Proxibid but also on similar portals such as iCollector and AuctionZip.

Counterfeits, Consignors and Contracts

Counterfeits, illegal copies and doctored coins are flooding the US coin market. Most come from China. Some estimates put the number of such coins at 10,000 per month. Proxibid works to resolve such issues when a buyer learns a purchased coin is a fake. But there are steps you can take to protect your business and retain your customers, including the creation of a consignor contract that specifies sellers are responsible for counterfeit coins.

We strongly recommend that all auctioneers create a consignment agreement that specifically states that sellers are responsible for all counterfeit coins returned for reimbursement.

Several auction houses already have such contracts. Here is such a clause from Leonard Auctions:

REPRESENTATION OF GENUINENESS. Consignor represents and warrants each item to be genuine. Consignor agrees that any item found to be non-genuine withint 30 days of the auction date, will be returned to the Consignor, and upon return, Consignor will pay Leonard Auction, Inc., the net proceeds of the returned item.

We applaud this, but also point out that sometimes it takes 2-3 months to prove that a coin is counterfeit. For instance, we just purchased one that was so skillfully done that we had to send it to NGC for authentication because we would not have been able to prove it was a contemporary copy of an 1869 coin. That cost us $70 in NGC fees, but it was worth the money.

In the past year we returned seven counterfeit coins to a half dozen auctioneers. All provided reimbursement even though we had agreed to the standard auctioneer contract:

All property is sold “AS IS,” and ALL SALES ARE FINAL. It is the Bidder’s responsibility to determine condition, age, genuineness, value or any other determinative factor. Any grades given are the consigners opinion and are not guaranteed. The Auctioneer will not be responsible for any errors or omissions in the description of the merchandise unless it is a material and intentional misrepresentation of the item itself. Bidders agree that they may not return any item they purchase.

That iron-clad contract may no longer hold ethically or legally in the wake of these chilling facts:

  1. China is exporting to America tens of thousands of counterfeit U.S. coins each month.
  2. Other counterfeit coins stored for decades in bank boxes are consigned regularly in estate auctions.
  3. Unscrupulous sellers consign altered or fake coins, targeting online auction companies with poor photography so as to hide defects.
  4. Unprincipled sellers put their inferior coins in holders with intentionally misleading labels, counting on auctioneers to quote retail prices as listed in numismatic books and guides.

Auctioneers who sell coins should read appropriate sections of title 18, chapter 25 of the federal code, “Counterfeiting and Forgery.”

Section 486 of that chapter states: “Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.”

Section 473 of that chapter states: “Whoever buys, sells, exchanges, transfers, receives, or delivers any false, forged, counterfeited, or altered obligation or other security of the United States, with the intent that the same be passed, published, or used as true and genuine, shall be fined under this title or imprisoned not more than 20 years, or both.”

There are other laws, too, such as the U.S. Hobby Act of the Federal Trade Commission, which reads, in part:

    Imitation numismatic item means an item which purports to be, but in fact is not, an original numismatic item or which is a reproduction, copy, or counterfeit of an original numismatic item. Such term includes an original numismatic item which has been altered or modified in such a manner that it could reasonably purport to be an original numismatic item other than the one which was altered or modified.

A doctored coin falls under this category. According to the Professional Numismatists Guild, doctoring is defined in part as “the action of a person or the enabling of another to alter a coin’s surface or appearance, usually to diminish or conceal defects, and thereby represent the condition or value of a coin as being superior to its actual condition or value.”

Those unfamiliar with coins will have a difficult time discerning doctored coins. If you’re selling coins, however, and know little about them, it is in your interest to hire a consultant who can look over a consignment.

A local coin shop owner or coin club member usually only charges about $100 to do the task.

Auctioneers who belong to the NAA also should remember the association’s code of ethics when dealing with doctored, deceptively labeled and counterfeit coins. According to the Preamble, members are required to go beyond laws and professional regulations, conducting business “in a manner that serves the public interest, protects the public trust and furthers the goals of their profession.”

One such vehicle to accomplish that is requiring consignors to sign a form that states they will reimburse the auctioneer when coins are returned with evidence of doctoring, deceptive labeling or counterfeiting. Contact your company’s attorney to ensure appropriate wording.

Proxiblog is an independent entity with no connection to the auction portal Proxibid. Our intent is to uphold basic numismatic standards as established by the American Numismatic Association and the National Auctioneer Association and to ensure a pleasurable bidding experience not only on Proxibid but also on similar portals such as iCollector and AuctionZip.