The by-bidder is an example of a bidding strategy that is considered to be unethical by many people, and is actually illegal in a number of locations around the world. Essentially, a by-bidder is an agent who chooses to bid in an auction with the express purpose of raising the price of the bids placed on a particular item. The activity results in motivating legitimate bidders to place higher bids that will surpass the offers submitted at part of the by-bidder approach in order to have a chance at winning the auction.
The owner of the item that is to be auctioned generally engages by-bidders for the purpose of obtaining a price for the article that is more higher than what would have been obtained otherwise. The process that a by-bidder utilizes is very simple process to accomplish this. By placing bids at strategic points in the bidding process, it is possible for the by-bidder to create an illusion of more interest in the item than really exists. This perceived interest might cause other bidders to desire the item more than they would under different circumstances, resulting in an ever-increasing auction price.
A by-bidder will often go to great extremes to make sure no one connected with the auction is aware that he or she is representing a seller for the purpose of driving up the price. This is because most auctions and auction houses consider this process to be inappropriate. Generally, auctioneers prefer to deal with people who either have a personal interest in acquiring the item, or who represent someone who wishes to acquire the item. When an auction house determines that an individual is functioning as a by-bidder, it is not uncommon for bidding privileges to be revoked. In some cases, heavy fines are imposed and there is also the possibility of further legal action.
A by-bidder may receive compensation for services rendered in two forms. The owner of the item may pay a flat rate to the by-bidder in exchange for entering a specified number of bids at certain prices. As an alternative form of payment, the by-bidder may receive a percentage of the winning bid amount. Generally, a by-bidder will request at least a portion of the compensation in advance, with the remaining portion due upon the successful completion of the auction or auctions involved.
