“Dummy” Bidders at Auctions

Dear Kim:

I recently attended a fundraising luncheon ($150/plate) at which a single item was auctioned at the end to benefit an organization other than the organization hosting the luncheon. The item (an experience) was hotly bid on by three people and finally went for $1,100. I learned later that one of the bidders was a “plant” who was authorized to bid up to $1,000. Had that been the final bid, the plant’s firm (related to the organization putting on the luncheon) would have paid it. This didn’t sit quite right with me.  I realize the winning bidder could have dropped out at any point, but it seems not only manipulative but somehow unfair or unethical to drive up the price in this way, even for a “good cause” (which it was). What are your thoughts?
~Means and Ends

Dear Ends:
Actually, the custom of putting a “plant” in an auction is not unusual and is not considered unethical.  Much of the success of an auction is the excitement of the bidding, but sometimes you have an audience of people reluctant to be the first to raise their hand, or an auctioneer (particularly if it is a volunteer) who is not that good at getting people to bid.  Having a couple of people whose job it is to be the first bid, or to “bid up” an item so that it will be sold for a price closer to its value is helpful to the spirit and tone of the auction. Most of the time the “plant” doesn’t actually buy the item even if they are the highest bidder—the item is simply taken off the auction block and either used at a future auction or sold separately.    You might find that manipulative, and I wouldn’t disagree with you, although since fundraising is all about creating excitement and getting people to feel generous, I don’t find it unethical.

But there are more reasons why a “plant” is often used.  As you know, the items in an auction are donated, and so any money made off of them goes to the profit of the event.  However, when an item sells well below its value, the donor of the item can be very upset.  This happens a lot with art auctions, where a piece of art sells for far less than it is worth and the artist is hurt and offended.  Bed and Breakfast stays, where the owner is giving up a weekend of profit for much less than he or she would have earned is a similar example.  I have had donors of auction items say afterwards, “I would have given them the money if I had known how little they would get for this.”  Organizations wind up in the worst of all possible worlds with a disappointed (and even resentful) donor and not that much money.  Further, when something with an established market value can be sold in other venues than at the auction (such as on e-Bay or Craigslist) it seems counterproductive to let someone have it at a bargain rate.

So let’s apply these reasons to your situation.  You don’t say what the experience was valued at, so we can’t apply that rationale.  However, it appears to me that the firm that the “plant” works for had authorized her or him to bid $1000 and was, in fact, prepared to pay that.  The winning bid was higher, so the firm did not have to pay.  This is not actually a true “plant”—this is just someone making sure that an item went for what it was worth and being willing to pay for that to happen, as well as creating some excitement along the way. And, even though the firm was related to the organization sponsoring the luncheon, it doesn’t sound like they were related to the organization that benefitted from the profits from this item.   So, in my mind, there is no dilemma here at all.

~Kim Klein