Legal Definitions - white bonnet

White Bonnet

In legal contexts, particularly within Scots law, a "white bonnet" refers to an individual who participates in an auction by placing bids without any genuine intention of purchasing the item. Their purpose is to artificially inflate the bidding price, create a false sense of demand, or encourage legitimate bidders to offer higher amounts. This practice is often considered deceptive and can be unlawful, as it undermines the fairness and transparency expected in an auction.

• Example 1: Art Gallery Sale

  Imagine an art gallery holding an auction for a valuable painting. The gallery owner, hoping to achieve a higher sale price, arranges for an employee to sit in the audience and place bids on the painting, even though the employee has no intention of buying it. These bids are designed to push the price higher, making genuine collectors believe there is more competition and encouraging them to increase their own offers.

  This employee acts as a "white bonnet" because they are bidding fictitiously to manipulate the auction's outcome rather than to acquire the artwork.

• Example 2: Real Estate Auction

  Consider a real estate developer auctioning off a luxury condominium. To ensure the property reaches a desired price point or to prevent it from selling too cheaply, the developer might instruct a trusted associate to bid on the condominium up to a certain undisclosed reserve. The associate's bids are not made with the intent to purchase the property for themselves but solely to drive up the price for other interested buyers.

  Here, the associate functions as a "white bonnet" by creating an illusion of higher demand and competitive bidding among genuine prospective homeowners.

• Example 3: Online Collectibles Auction

  An online seller is auctioning a rare vintage toy. To make the item appear more popular and increase its final sale value, the seller asks a friend to place several bids throughout the auction. The friend has no interest in owning the toy and will not complete the purchase if they end up being the highest bidder. Their bids are purely strategic to encourage other collectors to bid higher.

  The friend's actions exemplify a "white bonnet" because they are engaging in deceptive bidding to manipulate the auction price and entice legitimate buyers into paying more.