Legal Theory of Auction

Description

The widespread understanding of auction structure considers auction as consisting of three contracts: contract between the seller and the auctioneer, contract between the auctioneer and the buyer and the sale contract between the seller and the buyer. The book challenges this concept, arguing that the traditional tripartite concept of auction is too narrow and does not correspond to the actual structure of auction relations. Demonstrating that an auction structure consists of a plethora of legal relationships, including noncontractual relations, this book explores the legal concept of auction sale and the structure of accompanying relations. The book provides a historical overview of auctions and different auction models. Following a brief introduction to the economic theory, auction models are examined against the following legal criteria: price formation, publicity, parties’ autonomy, legal form and applied technology to find a legal concept and nature of auction. The book explores the legal position of key auction figures and auction objects to identify the categories of legal relations that appear at auction. It explores the legal nature of the main contract, as well as the relations between the consignor and the auctioneer, the auctioneer and the bidders, the bidders themselves, the consignor and the bidders. The book covers relations arising from droit de suite, financial and bidding agreements to provide a comprehensive overview of lesserknown legal relations that commonly arise in auction practice. Cover Half Title Title Copyright Dedication Contents Preface List of acronyms Table of cases Table of legislation Introduction Price-determination methods Brief note on the auction history The rationale for this book About the comparative legal method adopted in this book Lack of comparative researches Local character of auction sales Self-regulatory character of auction rules Fragmentary character of auction law The comparative method The objectives of the comparison Contents of this book and the problems covered Defining the legal concept of auction Defining the structure of auction relationships Defining the legal concept of internet auction Filling the gaps in the EU resale right regime Defining the legal nature of auction guarantees and the influence thereof on the position of the auctioneer Finding a demarcation line between licit and illicit price-influencing tactics at auction 1 Legal concept of auction Introduction Economic concept of auction Models One-sided and double-sided auctions Private value and common value auctions Open-bid auctions and sealed-bid auctions Revenue equivalence theorem The theorem The critics of the theorem Legal concept of auction Typical models Ascending (English) auction Features Public and private auctions Written and oral auctions Absentee bids Limited and unlimited absentee bids Descending (Dutch) auction Features Subcategories Is Dutch auction an auction at all? Auction and auction-like bidding mechanisms Games of chance and auctions ‘Controlled’ uncertainty No risk of losing the stake Purpose Competitive bidding Public procurement and auction Stock exchange and auction Auction and the public promise of a reward Interim conclusion 2 Auction relationships Introduction Auction participants Seller Auctioneer The notion Consigned and property auction Bidders Objects Legal relationships at English auction Consignment agreement Continental law Intermediation Representation Direct representation Indirect representation Auctioneer acting as sole contractor Ambiguities concerning representation Rights and duties of the auctioneer Fiduciary duties of the auctioneer Personal engagement in carrying out themandate Avoidance of conflict of interest Adherence to the consignor’s instructions Receipt of the price Rights Brokerage fee Damages Advances Anglo-American law Agency Rights and duties of the auctioneer The authority of the auctioneer Fiduciary duty Personal engagement of the auctioneer Receipt of the price Rights Brokerage fee Indemnities Relationship between the auctioneer and the bidders Continental law Anglo-American law The relationships between the bidders Contract of sale Continental law Theory of invitation The existence of an offer The effect of the last (in)valid bid for previous bids Higher bid Duration of a bid Notification of the knock-down Auction sale with a ‘retention of higher offer’ clause (in diem addictio) Legal implications of the auction sale Transfer of risks and conveyance of property The reserve price Anglo-American law Sale with reserve Conditional auction Sale without reserve (absolute auction sale) Sale without restrictions Transfer of risks and conveyance of property Legal relationships (Dutch auction) Interim conclusion 3 Internet auction Introduction The legal concept of internet auction Internet auction and other distance sales Auction models English (ascending) and Dutch (descending) auction Sealed-bid auctions Live auctions and combined internet auctions Business-to-consumer auction Consumer-to-consumer auction Business-to-business auction Business-to-administration (business-to-government) auction Government-to-consumer auction Proprietary and intermediary auctions User-to-customer and auctioneer-to-customer auctions ‘Pay-to-sell’ and ‘pay-to-buy’ auctions Differences between internet and physical auction Auction platform as a neutral intermediary Auction platform as an auctioneer The agency character of an auction platform Virtual knock-down: functional equivalent to thetraditional fall of the hammer Closing remarks Disadvantages of internet auctioneering Anonymity Risks of mistakes Security risks Delocalisation of auction sale and the problem of applicable law The Rome I Regulation The general regime for (internet) auction sales Special regime for consumer (internet) auctions The jurisdiction: principle of forum loci acti Platform’s immunity from liability Legal relationships User framework agreements Individual user agreements Seller-auctioneer relationship Bidder-auctioneer relationship Contract for sale Interim conclusion 4 Auction and the EU artist’s resale right Introduction Origins of the resale right Civil-law and common-law views on the resale right Civil law Moral grounds for the introduction of the resale right Need to fight social inequalities Common law Utilitarian theory of copyright Free alienation of personal property EU Resale Right Directive The legislative history Scope of application of the EU resale right Notion and legal nature of the resale right Transactions subject to resale right Professional art sales Is an internet auctioneer an ‘art marketprofessional’? Sales exempted from the resale right Persons liable for payment Seller’s liability – the principal model Alternative liability regimes The auctioneer’s liability for payment of royalty Circumvention of strictness of liability rules via indirect representation The ‘passing-on’ of the royalty Works covered by the resale right Claim for payment of royalty The establishment of the royalty claim Basis for calculation Deduction of auctioneer’s fees from the calculation basis? Calculation, collection and management of the royalty Persons entitled to royalty Disclosure requirements Interim conclusion 5 Auction guarantees Introduction Auction guarantees Types of auction guarantees In-house guarantees Third-party guarantees Irrevocable bid (stand-by guarantee) Legal nature of auction guarantees Auction guarantee and unilateral promise to buy Auction guarantee and ‘restitute or buy’ contract Conditional private-treaty sale Auction guarantees at continental auction sales Impact of the auction guarantees on the art market Auction guarantees meet critics Economic advantages of auction guarantees Reforming the auction guarantees Collective funding campaigns: alternative to auction guarantees? Interim conclusion 6 Price-influencing tactics Introduction Sham bidding Civil-law aspects Continental law Knock-down to the best bidder Annulment Convalidation Knock-down to the seller or puffer Anglo-American law Knock-down to the best bidder Annulment Convalidation Punitive damages Knock-down to the seller or puffer Competition-law aspects Continental law Person entitled to seek damages Person liable for damages Scope of damages Anglo-American law Proving causation and measure of damage in antitrust cases Abstention agreements (‘bid-rigging’) Abstention from bidding for the benefit of a single bidder (pactum de non licitando) Civil-law aspects Continental law Annulment of the sale Convalidation Anglo-American law Annulment of the sale Convalidation Competition-law aspects Continental law Anglo-American law Bid-rigging for the joint account of several bidders (‘auction rings’) Damages under civil law Damages under competition law Bona fide partnership for the joint account of bidders (buyers’ consortium, Bietergemeinschaft, Einkaufsgemeinschaft, convention d’association) Interim conclusion Conclusion Bibliography Index