I want to start off saying EXPLICITLY that I am NOT supporting or against Andy or James Booth with this comment. I do in fact think they are putting their foot in their respective mouths with the way they are responding to these accusations whether they are true or not. But thats not the point.
With that being said, from a more philosophical point of view and a matter of interest and best practices; and a topic I give a lot of thought to, I personally do not find any fault or problem with an owner bidding on his own domain or other property in auction.
Here is a comment I just posted on TheDomains article about this topic which explains my perspective (I will comment and criticism as long as constructive. The first person to act like a troll I'm out and will no longer participate in this dialogue). Here are my thoughts:
If a domain is listed for sale with no reserve I actually donโt see the problem with an owner bidding for the domain. In a city tax auction or any other type of asset forfeiture auction it is standard that creditors or prior owners would be bidding in the auction right up against other unrelated bidders. Very standard.
As long as they have to pay cold hard cash to buy the name back like everyone else, then where is the problem? They are creating no economic damage, in fact they are actually creating benefit to the overall market. In fact it is just another form of โreserveโ pricing and actually is more economically accurate and beneficial to the market.
With a reserve auction, nobody wins if the auction doesnโt hit reserve. You do not even get an accurate picture of the market value of the asset because the bids donโt mean ANYTHING until they are over the reserve. At least with a no-reserve auction where the owner is allowed to bid, you have real economic advantage and productivity. The owner must authentically create a value threshold. If owner buys it back, the auction house still gets their commission creating economic benefit. The market gets a true picture of the value of the asset. And the owner re-acquires the asset that they value higher than the market does.
When you have any deal for ANYTHING and you have a bonafide buyer and a seller at the table then one of them will walk away with the property and one will walk away with the money; but BOTH the property and money are on the table and up for grabs by either party.
Read that again because its important.
If the โSellerโ doesnโt accept the offer from the buyer than, in essence, they have just paid whatever price the buyer offered to buy their own property back. Quite literally, there is no buyer and no seller, there are only two parties (or more in the case of an auction) who assign value to a particular piece of property. One party has money (or other consideration) and one party has the property. At that exact moment in time, you have two equal parties who each need to decide if they value the offered money or the property higher. One walks away with the property and one with the money. Its really that simple. Either party has an equal chance at both.
Example:
Lets say that we put Murphy.com for sale in auction or in a straight listing and we receive an offer of $150,000 for the domain. We have have only two options and possible outcomes:
1. We accept the offer, transfer the domain and walk away with $150,000 (in this case we become the Seller).
2. โBuyโ the domain for $150,000 ourselves (In this case we become the Buyer; by turning down the bonafide offer of $150k we in essence bought it ourselves for that price).
This may not be immediately obvious to most folks but
every time you say โNOโ to an offer, what you did was buy your asset or property or contract for whatever the offer price was that you turned down.
If an auction has a reserve price and the owner is bidding below the reserve price then that is a totally different story. I actually donโt necessarily see the issue with an owner bidding below the reserve either just to create โmomentumโ in the auction, but since the domain can not be sold below the reserve anyhow, it is not financially harming anyone involved. But I fully understand that this practice is more controversial and does create some false illusion of the value of the asset in the event it does not sell.
Outside of the domain industry it is common practice that an owner would be able to bid for their own asset in lieu of setting a reserve. If they buy the property back they still have to pay the full commission to the auction house or broker. Again, that is real money paid and keep in mind that if they had let the #2 bidder win, that would have been real money in their pocket (opportunity cost). So the price paid by the owner is actually HIGHER than anyone else would have paid because they are paying the purchase price (opportunity cost) PLUS the auction commission (actual out of pocket cash). If that makes any senseโฆ
So while Iโm sure my post will cause controversy, I must say, I think it is silly to worry about owners bidding on their own domains in either scenario. The only ones you need to worry about are the auction houses themselves and making sure there is no INTERNAL shill bidding (like Halvarez). But Namejet is NOT a problem and in my opinion the single most liquid marketplace in our industry and an incredibly valuable asset to this industry.
@NameJetGM
