Sometimes an auction can be the best way to sell things, especially if you have something that is in strong demand. But with any auction, there's also the risk of losing a lot of money.
Some customers of a Poplar Bluff, Mo., firm say that Midwest Auction Service promised them high prices on their goods, which included motorcycles, snowmobiles, travel trailers and the like. But the auction results were far less than what customers had expected.
In some ways, this is a story of customers listening to the sales pitch but not reading their contracts carefully. The auction house says it made no guarantees.
But some customers say they were led to believe that there was an "invoice protection plan" that was supposed to keep them from losing money.
The Better Business Bureau urges anyone who consigns goods to be sold at auction to read the consignment contract carefully. At many auctions, goods are sold to the highest bidder, even if the bid price is lower than the consigner expected. Check the company's BBB Business Review to see whether the auction company has been satisfying its customers.
If the consigner wants to be protected, look for a "reserve price" clause in the consignment contract. Such a clause may allow the consigner to remove the item from the auction if it doesn't sell for at least the reserve price.
Here is today's BBB release, with tips at the end:
St. Louis, Mo., Sept. 5, 2012 – The Better Business Bureau (BBB) is urging
businesses to be cautious when consigning items to Midwest Public Auction, an auction house in Poplar Bluff, in Southeast Missouri.
Several customers told the BBB that Midwest Auction representatives used misleading sales tactics to obtain business. In some cases, the customers say, they lost tens of thousands of dollars when their consigned items sold for prices that were much lower than promised.
“It darn near ran me out of business, and they didn’t care,” said a businessman from Webster City, Iowa, who said he lost more than $12,000 in a Midwest Auction deal that went sour.
The company appears to have ties to Leon McGregor, a Tennessee man under indictment in Georgia on theft and racketeering charges in connection with other auction businesses. Midwest Auction’s original website, www.midwestpublicauction.com, lists McGregor as the site’s registrant and as its administrative contact. The firm’s current site is www.invoiceprotectionplan.com.
When Midwest Auction registered with the Missouri secretary of state in February
2011, its sole owner was listed as Donnie M. Smotherman of Goodlettsville, Tenn., but its address was 1550 Cravens Road in Poplar Bluff.
Complaints against the auction house have come from nine states. All allege that the company reneged on oral guarantees to obtain prices at or near retail prices for sellers’ motorcycles, travel trailers, snowmobiles or other items. Several customers said Midwest Auction used high-pressure sales tactics to get them to consign items.
Michelle Corey, BBB president and CEO, said the allegations indicate a troubling pattern of behavior. “What Midwest Public Auction is promising in its pitches, and what it’s actually delivering, may be two very different things,” she said.
Smotherman told the BBB that the complainants represent a small percentage of the company’s customers. Most customers are satisfied with Midwest Auction’s work, he said.
Smotherman said all the consumers who have complained have agreed to so-called “absolute” auctions, where the items are sold to the highest bidders, regardless of the price. Smotherman said that is clearly stated in the contract.
“Nowhere do we guarantee you a certain amount,” he said. “These guys are upset; they are bitter. They say we are promising them the moon, when the contract they sign says different.” He said it makes no sense for a seller to sign a contract “that is totally different from what he is being told. We go by the letter of the law on our contracts, every one of them.”
Smotherman said he is unsure why McGregor shows up on the former website domain registration for his company. “I didn’t know it was registered to him, unless he had the domain name and I used it.“He has no connection with the company at all,” Smotherman said. “But what if he did? I don’t see where the BBB would even care about that.”
McGregor was among four people indicted by a Glynn County, Ga., grand jury in September 2011 for two counts of theft and three counts of violating the state’s RICO (Racketeer Influenced and Corrupt Organizations) Act. The charges are related to auction sales of boats, boat motors, recreational vehicles and other motor vehicles. McGregor has pleaded not guilty.
The BBB in Murfreesboro, Tenn., shows McGregor as the former general manager of the now-defunct Elite Auction Sales Inc., of Murfreesboro. That firm, which was adjudged bankrupt in October 2009, had an “F” grade with the BBB, the lowest grade possible.
A businessman from Elizabethtown, Ky., said that he consigned 28 motorcycles to Midwest Auction last summer. A representative with the auction house assured him that he would get at or near the retail price for the cycles, he said. But they ultimately sold for significantly less than retail prices. He said he lost more than $100,000 in the auction and nearly lost his business.
The businessman said that shortly
before consigning the cycles, he told the company’s salesman: “If this goes
south, I’ll lose my house, my business, everything I have.” He said the
salesman told him: “Don’t worry. You’ll laugh all the way to the bank.”
A businessman from Knoxville, Tenn., said a man from Midwest Auction who initially said he represented a bank contacted him last year about selling several
motorcycles. The businessman said the man told him that he had ready buyers for the cycles. “You can get your asking price or more,” he said the man told him.
The sale generated $7,900, more than $12,000 less than what had been promised. “It was a heck of a hit,” the businessman said. “It was bad. My wife wouldn’t talk to me for a couple of weeks.”
A businessman from Arthur, Ill., who consigned five lawnmowers to the company, said auction representatives pressured him for business for more than a year. He said he was convinced, in part, by a so-called inventory protection plan that he believed would guarantee him a price close to his asking price. “They said I couldn’t lose,” he said. He said he was told repeatedly that the company receives retail prices for its items. “We don’t sell to dealers,” he said he was told. He said he ultimately received about $7,000 for items he bought for $11,200.
Other complainants include a man from Milo, Maine, who said auction company workers told him that his six snowmobiles should bring $49,000 or more at auction (he ultimately got $25,000 for them). A customer from Elkins, W.V., said the company “touted an invoice protection plan that would guarantee we could not lose money.” That customer said the actual sales total was $25,000 less than he had agreed.
The company’s website says, “dealers and wholesalers don’t come to us to buy
products because we get top dollar amount for your products.”
In all cases, Midwest Auction said the customers received no written guarantees of minimum bids. The company said customers signed contracts agreeing to accept the highest bids.
The BBB offers the following advice to persons considering consigning items to auction companies:
- Get a written contract, and read and understand all contract terms before
signing. Do not rely on promises or guarantees that are not in writing.
- If you are uncomfortable about accepting the lowest bid for your items, make sure a reserve price (the lowest price you are willing to accept) is written into the contract.
- Check out a company’s BBB Business Review by going to www.bbb.org or by calling 314-645-3300.
Follow the BBB on Facebook or on Twitter @stlouisbbbeditor.