‘Anticompetitive Conduct’: Lawsuit Claims Car Buyers on ACV Auctions’ Platform Overpaid Due to Shill Bidding

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A proposed class action claims ACV Auctions, Inc., Sun Auto Group Inc. and an individual have engaged in anticompetitive conduct by using shill bidding to drive up the prices of vehicles sold on an online auction platform.

Per the lawsuit, ACV and Sun Auto Group have knowingly allowed the individual defendant, Brian Malchak, to place phantom bids on used automobiles being auctioned by Sun Auto on ACV’s online auction platform with no intention of actually purchasing the vehicles. The practice had the effect of driving up the price of the cars so the plaintiffs, two upstate New York used car dealerships, and others using the platform would be forced to pay more than they otherwise would have, the suit argues.

The case claims the defendants’ conduct has violated federal antitrust statutes and New York law.

Buffalo, New York-based ACV Auctions operates an online platform that allows used car dealerships to view, bid on, and purchase cars for sale through an online auction, the lawsuit begins. For each online auction, the seller sets a floor price, i.e., the minimum price at which the vehicle will be automatically sold to the buyer, that remains unknown to bidders, and the auction runs for 20 minutes during which dealerships can bid on the vehicles, the case says. ACV’s platform also allows bidders to place a proxy bid for a particular vehicle before the auction begins that remains unknown to other bidders, the lawsuit explains.

If a bid is surpassed by a competing bid during the 20 minutes, the bidder is told that their bid was unsuccessful, and whenever a bid exceeds the seller’s floor price, the ACV system executes an automatic sale to the highest bidder, according to the suit.

Per the case, Sun Auto—a used car dealership and ACV’s largest customer—used ACV’s platform between January 2015 and June 2019 to sell vehicles to other dealerships, including the plaintiffs. The lawsuit alleges that ACV, Sun Auto and Malchak during that time frame participated in “shill bidding,” a tactic through which a bidder places bids to drive up the price of a vehicle with no intention of purchasing the car. According to the suit, Sun Auto disclosed the floor price of its vehicle to Malchak, who then placed “phantom” proxy bids at a price below the floor price with the intention of causing competing bids to “shill up,” or increase. Any legitimate bids below Malchak’s proxy bid would be unsuccessful and bidders would be forced to offer a higher price, the case explains.

“In order to outbid the Malchak shill bids and purchase the vehicles being offered for sale by Sun Auto on the ACV online platform, bidders had to bid at prices higher than they would otherwise bid, and purchasers of the vehicles would have to pay a price higher than they would otherwise pay without the Malchak shill bids,” the complaint states.

The lawsuit claims the fact that Malchak had no intention of purchasing Sun Auto’s vehicles is made clear by his refusal to purchase them whenever his bids won. According to the case, if bidding does not reach a seller’s floor price during the auction, the highest bidder is offered the opportunity to purchase the vehicle at the floor price. Although on many occasions Malchak was the highest bidder on Sun Auto vehicles, he repeatedly declined the offers to purchase the cars at Sun Auto’s floor price, the case says, indicating he never had any intention to buy them.

The lawsuit alleges that ACV was fully aware of Malchak’s unlawful conduct given it not only had data advising it of his bidding irregularities but was also specifically informed of such by an ACV employee. Nevertheless, ACV did not suspend or terminate Malchak’s account, according to the case.

Per the suit, the shill bidding practiced by the defendants “was predicated on wrongful conduct” and “fraudulently concealed” from legitimate bidders using ACV’s platform.

The lawsuit looks to cover anyone who, between January 2015 and June 2019, used ACV’s platform to bid on motor vehicles offered for sale by Sun Auto without knowledge of the dealership’s floor price while Malchak made shill bids on the same motor vehicles with knowledge of the floor price.

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