Legal Definitions - chilling a sale

Chilling a sale refers to an unlawful practice where individuals or groups conspire or collude to suppress competition at an auction or sale. The primary goal of this action is to discourage other potential buyers from bidding, thereby enabling the colluding parties to acquire the item or property at a significantly reduced price. This behavior undermines the fairness and integrity of the competitive bidding process, preventing the seller from receiving a true market value for their goods.

• Example 1: Real Estate Foreclosure Auction

  At a public auction for a foreclosed home, three real estate investors, who are known to each other, agree beforehand that only one of them will place a bid. They also subtly spread rumors among other potential bidders that the property has severe, undisclosed structural issues, even though a recent inspection report shows it to be in good condition. As a result, many interested parties decide not to bid, and the designated investor acquires the home for a price well below its market value.

  This illustrates "chilling a sale" because the investors combined their efforts and used misleading information to discourage other buyers from participating competitively. Their aim was to secure the property at a lower price than it would have fetched in a truly open and fair bidding environment.

• Example 2: Government Surplus Vehicle Auction

  A local municipality holds an auction to sell off old fleet vehicles. Before the bidding begins, a few mechanics from different repair shops, who have an informal agreement, walk around the vehicles. They loudly point out exaggerated or fabricated mechanical flaws to anyone showing interest, implying the vehicles are not worth much. When the bidding starts, only these mechanics place minimal bids among themselves, resulting in the vehicles being sold for significantly less than their actual value.

  This scenario demonstrates "chilling a sale" as the mechanics combined their efforts to discourage other potential buyers by spreading misleading information about the vehicles' condition. This tactic aimed to reduce the number of competitive bids, allowing them to purchase the vehicles at a lower collective price.

• Example 3: Rare Collectibles Auction

  During a specialized auction for rare vintage comic books, a small group of prominent collectors, who frequently attend these events, make it clear through their demeanor and whispered comments to new attendees that certain high-value lots are "theirs" and that new bidders should not interfere. They might also make a show of inspecting items and declaring them "overpriced" or "damaged" within earshot of others, even if untrue, to deter competition.

  Here, the collectors are effectively conspiring through implied threats and false statements to discourage other potential buyers from bidding on the items they desire. Their goal is to reduce competition and secure the comic books at a lower price, which is the essence of chilling a sale.