Auction Law & Ethics
You’re about to bid for a lot you want at an auction. The auctioneer introduces the piece and commences the chant for the offering:
“I’m bid five hundred…now a quarter…I’m bid five hundred here, now a quarter, five ana quarter, five ana quarter…now a half…five ana half, five ana half, 75, 75, now 600 dollar. I’m bid 600, now six ana quarter, six ana quarter, now a half, six ana half, will ya’ give six ana half…now a half…75 where…75, 75, now 700 dollar. I’m bid 700, now a quarter…seven ana quarter, seven ana quarter…willy bid a quarter…quarter…quarter…anywhere? Sold for 600 dollars!”
Did you see what happened? The auctioneer just knocked that lot down to you for $600 and not the $700 you had bid. He made a $100 mistake in your favor. Now what are you going to do?
The answer to the question doesn’t require lengthy research in law books, court opinions, statutory codes, or any other authorities. The answer will come to you quickly. This is because the issue is rooted in ethics—not someone’s written rulebook of what you should and should not do in this situation but, rather, in your own ethical beliefs.
I’ve been thinking for several months about doing a series on ethics—what it is, why it’s important, why it’s important for auctioneers, and how it applies to situations commonly found in auctions. This is the opening installment in which we will seek to establish a foundational understanding of the topic. We will do that by answering a question: What is ethics?
Ethics is like looks (i.e., physical appearance). Everybody has some, but that doesn’t mean they’ve got the best looks or ethics. Society contains a wide spectrum of ethics (looks, too), and what some people have is not good. Personal ethics can range from angelic to demonic (which is actually a lack of ethics), and this is why we see some people do terrible things. Ethics defines the quality of the persons that we are.
The word “ethics” comes from the Greek “ethos,” which means character, custom, disposition, and habit. Ethics involves what is good and bad, moral and immoral, just and unjust. As we have modern codes of ethics associated with various professions, occupations, associations, and the like, examples of written ethical codes can be found far back in history. Perhaps the best known in our culture comes from the book of Exodus in the Bible’s Old Testament where it is recounted how God gave Moses the Ten Commandments. Another Biblical example is found in the New Testament’s book of Matthew, which includes this lesson taught by Jesus in the Sermon on the Mount—“So in everything, do to others what you would have them do to you ….” Of course, this is what we commonly refer to as the “Golden Rule.”
The general take on ethics often misses the mark. Too often, we view ethics as being situational. It is not so limited. The topic is much broader and is focused on individuals.
We also tend to think of ethics as being a written collection of requirements that guide and constrict conduct in certain areas. While this is true for certain topics related to accountants, attorneys, auctioneers, and innumerable other professions, businesses, and groups, it is also true that each of the persons involved in these activities possesses internal beliefs on values that are unique to them and a major component in defining who they are. These values represent ethics.
Go back to the beginning of this column and the auction example. There is no rulebook to be consulted for how a buyer should respond to the situation where an auctioneer makes a mistake that would benefit the buyer, while costing the auctioneer. The buyer’s response must come from the internal values we call ethics and, since these values vary greatly among people, different buyers would respond differently to this situation. A buyer with strong values would correct the auctioneer’s error. One on the opposite end of the spectrum would quietly benefit from the error and never pass a breath that might reveal it.
It is also important to recognize that ethics is not limited to business or any other particular area. Instead, ethics is involved in every aspect of our lives and applies to all of our relationships and dealings with others. When a cashier mistakenly hands you $5 too much in change, how you respond is tied to your ethics. When a waiter forgets to charge you for the dessert you ordered, your ethical beliefs (or absence thereof) will lead you to speak up or remain silent about the oversight. When a friend wants to gossip about another friend, your ethics determines whether you will or won’t. Ethics is a broad umbrella. As Henry Paulson (past secretary of the treasury) once opined: “In just about every area of society, there’s nothing more important than ethics.” Consider the teachings of three of history’s greats.
Our contemporary view of ethics traces back to ancient Greece and the philosopher Socrates. During the fifth century B.C., Socrates framed the subject of ethics by posing the defining question like this: “What ought one to do?”
Socrates was not asking what should be done in a given situation or on a particular matter. He was asking in a much broader context: What kind of person do I want to be? What kind of life do I want to live? Socrates viewed unselfishness and a concern for others and society to be important personal objectives, and he emphasized that these values help build character and integrity, which are the centerpiece of ethics.
During the subsequent century, Aristotle furthered the teachings of Socrates with the additional thought that a person’s good character could be cultivated through self-discipline but also corrupted through excessive overindulgence. Aristotle also believed that people should avoid extremes and practice moderation in all matters. He further warned that weakness of will can lead to a failure of character when temptation overcomes clear thinking and restraint.
The lessons of Socrates and Aristotle became so enduring and far-reaching that I well remember my great Aunt Nan regularly preaching them. She would do this when the several branches of our family gathered at her home in the country for a get-together and we children would give her the opportunity. She might never have heard of Socrates and Aristotle, but she was a dedicated believer in their teachings and applied them throughout her life with great success. Aunt Nan lived independently and alone for all of her 100 years and possessed a sterling character.
So what is character? General Omar Bradley, who commanded 43 divisions with 1.3 million soldiers in World War II, was the last five-star general and the first chairman of the Joint Chiefs of Staff. He was also a statesman who emphasized ethics throughout his life. General Bradley described character thus: “Dependability, integrity, the characteristic of never knowingly doing anything wrong, that you would never cheat anyone, that you would give everybody a fair deal. Character is a sort of an all-inclusive thing. If a man has character, everyone has confidence in him.”
An individual’s ethical beliefs are built with the bricks philosophers call “virtues.” These are the norms from which we pick and choose to build our ethics and distinguish between acceptable and unacceptable, good and bad, and moral and immoral behavior. Significant virtues include traits such as benevolence, courage, discipline, empathy, fairness, fidelity, generosity, honesty, respect for others, and responsibility. When a person repeatedly practices a virtue, it eventually becomes part of the person’s character.
There is more to character development than the adoption of different virtues, however. Character formation is also strongly influenced by certain external factors. These include family, community, conscience, customs, education, life experiences, the media, peers, role models, and religion.
Ethics plays a larger role in our lives than does the law. This is because ethics is much broader in both scope and application than is the law. Consider two points.
First, what might be legal might not be ethical. An example would be for a person to stand by passively and knowingly watch a blind person walk past and enter an intersection in front of oncoming traffic. The failure to warn or stop the sightless person would break no law, but it would surely violate important ethical precepts such as benevolence, empathy, respect for others, and responsibility. U.S. Supreme Court Justice Potter Stewart once wrote: “Ethics is knowing the difference between what you have a right to do, and what is right to do.”
Second, what might be illegal might still be ethical. Here’s an example. Suppose all of the pharmacists in an area got together and agreed to lower their prices for certain drugs to the same level in an effort to financially help their customers, such as the elderly, who are on low and fixed incomes. This would be a noble gesture that would comport with important virtues (e.g., benevolence, empathy, generosity, and an unselfish concern for others), but it would also be price fixing and, thereby, illegal.
Because of the difference in virtues that people do or do not embrace and their sensitivity to these norms, some are more attuned to ethics and ethical conduct than are others. So what one sees as being unethical, another might not. The compass varies from person to person. Consequently, an individual will not be deemed by others to be ethical simply because the actor believes that he or she holds such values or acted in such manner. Instead, the determination of whether conduct is ethical will be made by those who observe it. Ethics is a subjective compass that is subject to an objective reading.
Here’s the big point. When others judge conduct as being ethical or not, they are not making a judgment on the actor’s internal values. The judgment of others comes from their perception of the conduct witnessed, and perception is reality, no matter what the actor believes or intended to do.
Next month we’re going to see why ethics is important to both individuals and society. Until then, remember the importance of virtuous conduct in all matters. You can bolster that thought with the advice of H.L. Mencken, who once cautioned: “Conscience is the inner voice that warns us somebody may be looking.”
Certainly that has never been truer than today.
That’s it until the April issue of M.A.D. Until then, good bidding.
Steve Proffitt is general counsel of J.P. King Auction Company, Inc., Gadsden, Alabama. He is an auctioneer and instructor at the Reppert School of Auctioneering in Auburn, Indiana, and at the Mendenhall School of Auctioneering in High Point, North Carolina. The information in this column does not represent legal advice or the formation of an attorney/client relationship. Readers should seek the advice of their own attorneys on all legal issues. Proffitt may be contacted by email at <firstname.lastname@example.org>.
Originally published in the March 2014 issue of Maine Antique Digest. © 2014 Maine Antique Digest