DEFINITION of 'Chandelier Bid'

A bid that is announced by an auctioneer during an auction that has not been signaled by a participant, but has rather been fabricated by the auctioneer on behalf of a consignor, in order to create the appearance of greater demand for the item at auction.

BREAKING DOWN 'Chandelier Bid'

Chandelier bids are so named because the auctioneer announcing the bids may point to the ceiling or other areas of the room rather than at actual bidders. This gives the illusion that bids are being made.

Chandelier bids are not illegal, but can be frowned upon by bidders who don’t like the idea of competing against imaginary competitors. They are most likely to be used when the seller has placed a reserve price on the item, with the auctioneer having leeway at increasing the “bid” until the reserve price is reached. Chandelier bidding goes by many other names, including:

  • Rafter bidding
  • Consecutive bidding
  • Vendor bidding
  • Consignor bidding
  • Buy-in bidding
  • Off-the-wall bidding
  • Phantom bidding

Regardless of the term used, the goal is always to create a sense of urgency and elevate the mood in the room, in order to instigate a bidding frenzy. Chandelier bidding is also used to rescue low-energy auctions, where lackluster participants consecutively pass on lots for sale, because the appearance of too many passed lots tends to have a domino effect that leads to further passed lots.

Although chandelier bidding is legal, provided that any such bids stop short of the reserve price of the lot in question, and provided that auction houses who engage in this practice disclose this likelihood in their auction catalogues, former New York Democrat assemblyman Richard Brodsky dedicated nearly two decades of his political life attempting to legislatively ban the practice. However after the ninth iteration bill finally passed through the Assembly in 2007, it was subsequently killed in the Senate. Brodsky continued unsuccessfully to ban the practice, until his legislative tenure ended in 2010. New York Republican State Senator John Flanagan likewise attempted to pass a companion bill in 2007, explaining: “Consumers can get hurt when everything isn’t out in the open, when they’re competing against imaginary bidders at an auction.”

Not surprisingly, both Brodsky and Flanagan faced staunch opposition from auction houses and also met resistance from many republican legislators. Consequently neither of their sponsored bills became law.

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