There is the Advertising Standards Authority’s 2014 ruling on guide prices and there is recent fair trading legislation, but isn’t it simply time for fair play?
A good few years ago, an auctioneer put up a board in a town near me stating a “guide price” of “£250,000 to £350,000”. The locals believe (still) that the site is contaminated. There is no indication that the auctioneer ever sold the site and, although the board fell down some time ago, it is still lying inside the fence with the rather elastic price range looking faded but still visible.
To answer Barbra Streisand’s questions from The Way We Were, it really can be that it was so simple when that auctioneer erected its board, and that time has rewritten every line. Indeed, things look pretty complicated now. In 2014 an auctioneer was rapped by the ASA for quoting a misleading guide price. The ASA ruled that auctioneers should make it clear what a guide price is, how it differed from the seller’s reserve price, and how it was subject to change. Auctioneers should, the ASA said, explain that a guide price indicated that the “minimum acceptable sale price” (or, in plain English, the reserve) fell within 10% of that price. A guide range should indicate the range within which the reserve fell.
A few points on the ASA’s adjudication. First, guide prices and ranges change. They are subject to the seller’s changing feelings about the proposed deal and the auctioneer’s advice. But an auctioneer must convey three things: the fact that guide prices and ranges fluctuate; a source from which the latest and (critically) definitive information about guides can be obtained; and the difference between a guide price and a reserve.
Second, if I saw that a guide price had moved from “£750,000 to £800,000” to “£750,000-plus”, I would consider that the reserve had gone down. Only when I had pored over the ASA adjudication could I see that the auctioneer may actually be effecting a 10% increase of the reserve price.
Third, the ASA adjudication concluded one saga for one auctioneer and one complainant. It is not a complete code.
Here is a short guide for auctioneers on how they can not only stay on the right side of the law but also build a reputation for fair dealing with interested parties.
The Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) and the Business Protection from Misleading Marketing Regulations 2008 (the BPRs) do more than replace the old Property Misdescriptions Act 1991. They are wide-ranging rules that form a new code for all businesses. They lay down a fairness-based approach to the relationship between auctioneers and bidders and interested parties.
Auctioneers should note the specific provisions of the ASA decision – but, critically, live their professional lives by the CPRs and BPRs. These regulations expressly ban bait advertising. And my – admittedly wonky – maths leads me to the conclusion that having a reserve up to 10% over the guide price may well get an auctioneer dragged into court on a bait advertising charge under the CPRs or BPRs, with only the ASA’s decision between that auctioneer and a criminal conviction.
Since their publication in 2002, the Common Auction Conditions have supplied auctioneers with a key tool for fair dealing. The Auction Conduct Conditions section deals in a straightforward and upfront way with guide prices and their interaction with reserve prices. And the days of auctioneers putting guide prices and ranges on their boards are going fast. Today, many auctioneers can state authoritatively that their websites contain the latest and definitive guide prices and ranges. Technology also allows them to give automated personal briefings of movements of guide prices to those who have viewed online particulars.
As to reserves, auctioneers should use their famed interpersonal skills to ensure that their seller clients clarify their true “bottom line” and to explain to those clients why and exactly how the guide price or range should reflect that.
Might auctioneers go further and take an unequivocal step towards 360-degree fairness by disclosing their reserves? Perhaps they fear that disclosed reserves will form price barriers in bidders’ minds? They may well come to think that such an open approach will bring in even more bidders.
Nicholas Redman is senior professional support lawyer at DLA Piper
