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`AS YET no general study of auctioning on a historical basis
`
`3 has appeared. The miscellaneous material available, how-
`
`ever, suggests that auctions have had a long and colorful
`history.
`
`Auctioning in Ancient Times
`According to Herodotus, auctions existed around 500
`B.C. in Babylon, where once a year women of marriage—
`able age were sold on condition that they be wed.1 When
`beautiful maidens were oflered, bidding among well—to—
`do swains was lively; but when less attractive girls were
`put up for sale, those seeking wives accepted them only
`in return for monetary compensation. In a kind of inverse
`auction, the plainer lasses went to impecunious, or per—
`haps miserly, persons who agreed to marry them in ex—
`change for money (see fig. 2). Payment took the form
`of dowries, presumably derived from the premium prices
`obtained for the handsome maidens, and the rivals made
`successive reductions in bids until they reached the mini—
`mum amount they would be willing to accept in return
`for the acquisition of less comely mates.
`
`I Herodotus, The Historic: of Herodotur, trans. Henry Cary
`(New York: D. Appleton and Company, 1899), p. 77.
`
`
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`Desirability of chattel
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`Absence of desirability of chattel
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`Prices-
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`Fig. 2 Orthodox and reverse procedures in Babylonian wife auctions.
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`28
`
`Auction: and Auctioneering
`
`Auctions were also used by the ancient Romans in commercial
`trade, at least to some extent. They were held in what was called an
`atrium auctionarium, where samples of the goods were probably dis—
`played prior to the sale. Trading activity was usually carried on by
`four functionaries: the dominur, on whose behalf the property was
`sold; the argentarius, who organized, regulated, and possibly even
`financed the auction sale; the praeeo, who advertised and promoted
`the auction and conducted the bidding; and the emptor, who, as
`the highest bidder, purchased the goods?
`Few details are available concerning the modm operandi of
`these Roman auctions. It is not known whether the bidding pro‘
`cedure followed an ascending or a descending pattern, or an entirely
`different one. It
`is
`likely, however,
`that
`the bids increased in
`amount, for the word “auction” is derived from the Latin root
`auezur, “an increase.” Attention was called to a forthcoming auc-
`tion in public announcements made by the praeeo (herald) and
`through a written proscriptio (notice). The praeco, acting as auc-
`tioneer, then put up the lots for sale, stimulated and acknowledged
`bids, and finally “knocked down” each lot to the highest bidder.
`Bidding reportedly took the form of a wink or a nod instead of
`public outcry.3
`Apparently the Romans, when in financial straits, employed the
`auction also in the liquidation of property. Caligula, for example,
`auctioned off the furniture and ornaments belonging to his family to
`help him meet his debts and recoup his losses.4 To cover a state
`deficit, Marcus Aurelius is even said to have held an auction of
`royal heirlooms and furniture which lasted for
`two months.5
`Roman soldiers reportedly put up their loot at auction sub harm, or
`“under the spear.” In fact, the word “subhastation,” now rare, came
`to mean “a public sale or auction.” Because of this practice, Roman
`_ business agents were said to have accompanied military expeditions
`in order to bid in the war booty at public auction.6
`2 I. A. C. Thomas, “The Auction Sale in Roman Law,” Im'idz'crzl Review,
`Pt- I (April, 1957), p- 43-
`3 Ibid.
`4 Tenney Frank, ed., “Rome and Italy of the Empire,” Vol. V of An
`Economic Survey of Ancient Rome (Baltimore: Iohns Hopkins Press, 1940),
`pp. 39—40 n. 12.
`5 Ibid., p. 77.
`6 117121., p. 26 n. 47.
`
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` Historical Perspectives
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`29
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`
`Perhaps the most preposterous auction in history was held in
`193 A.D., when the whole Roman Empire was placed on the block
`by the Praetorian Guard. After having killed the preceding em-
`peror, Pertinax,
`the leaders of the guard announced that
`they
`would bestow the crown upon the Roman who offered the largest
`donation. When Didius Iulianus outbid all his rivals by promising
`each man 6,250 drachmas, the guard declared him emperor. After
`Didius had been in power for only two months, however,
`the
`legions under the command of Septimius Severus seized the capital
`and beheaded the emperor.7
`Even less is known about auctioning in other ancient civiliza—
`tions. In China, four institutions were utilized to raise money for
`Buddhist
`temples and monasteries: pawnshops, mutual financing
`associations,
`lotteries, and auction sales.8 Apparently the personal
`belongings of deceased monks were auctioned 0H as early as the
`seventh century AD. The monk who acted as auctioneer had to
`know the normal price and announce whether the item was new,
`old, or worn out. If bidding went too high, he reminded his fellow
`monks: “Better be thoughtful. You might regret it later.”
`Despite the paucity of information, it is clear from the foregoing
`that the auction was employed as a sales mechanism in ancient
`times. Precise auctioning methods and the extensiveness of their
`use, however, remains shrouded in mystery. All we really know is
`that this way of selling property is not a modern phenomenon, but
`has its origins in antiquity.
`'
`
`Early-Day Auctioning in England
`
`I
`
`It is diflicult, if not impossible, to determine when the auction
`method of selling was first employed in England. The earliest
`reference to the term in the Oxford English Dictionary is dated
`1595, although admittedly this is simply a straw in the wind. It is
`known, however, that toward the end of the seventeenth century
`sellers of pictures frequently met in coffeehouses and taverns to
`
`7 Will Durant, Caesar and Christ, The Story of Civilization, Pt. III (New
`York: Simon and Schuster, 1944), pp. 620—621.
`8 Lien-sheng Yang, “Buddhist Monasteries and Four Money—raising In—
`stitutions in Chinese History,” Harvard [ouraal of Asiatic Studies, XIII (June,
`1950), 174-191‘
`
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`30
`
`Auctions and Auctioneerz‘ng
`
`auction their wares. A 1682 issue of the London Gazette referred to
`the “daily attendance” at the “Auction-house,” clearly suggesting
`an auction operation. Before such sales, catalogs were often issued.
`The announcement in one of them reads:
`
`. on Thursday 12th Friday
`.
`[The goods] will be exposed to sale .
`13th and Saturday 14th of this instant March, at Mrs. Smythers Coffee
`House in Thames street, by the Custom House: The Sale beginning each
`Morning precisely at Nine of the Clock. The said Paintings are to be
`viewed from this day forward until all be sold. Catalogues may be had at
`the place of sale.
`Pray read me, but do not take me from the Table.9
`Sales of certain types of chattels were also conducted by the auction
`method, at least occasionally, in seventeenth—century England; for
`example, Samuel Pepys witnessed an auction sale of ships in 1662.10
`It may reasonably be assumed that other types of property were
`auctioned as well.
`The firm of Sotheby’s, world—famous auctioneers, was estab—
`lished in 1744, and Christie’s, similarly renowned, had its begin-
`nings in 1766. These firms may, of course, have conducted business
`in other ways than auctioning, and may have been antedated by
`other auction houses of which we have no knowledge. It was
`not until years later that announcements of auctions appeared in
`the public prints, although posted announcements may have been
`prevalent. The oldest English legal action developing from an
`auction of any kind appears to have been Daniel v. Adams, 27
`Eng-Rep; (Amb) 495 (I764)-11
`_
`_
`_
`Little 18 known about the methods of auctioning 1n early-day
`England, but it appears that conditions of sale were as common
`then as they are today. One extant list of eighteenth-century operat-
`ing rules indicates the type of auction employed as well as the terms
`of sale:
`
`9 Quoted in Peter Ash, “The First Auctioneer: Origin of Sales by Auction
`of Real Property,” Estates Gazette (Centenary Supplement), May 3, 1958,
`P 3?) Diary and Correspondence of Samuel Pepys, Esq., F.R.S., with a Life
`and Notes by Richard Lord Braybrooke, Deciphered, with Additional Notes,
`by Rev. Mynors Bright, M. A. (New York: Dodd, Mead, 1887), II, 327.
`II Ash, op. cit, p. 33.
`
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`Historical Perspective:
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`31
`
`I. The high bidder is the buyer and, if any dispute arises as to
`which bid is the highest, the goods will be put up for sale again.
`2. No bidder may advance another’s bid by less than sixpence
`when the amount offered is less than £ I, or by less than one shilling
`when the price is ,5 I or more.
`3. The merchandise for sale is warranted as perfect, and before
`removing the goods from the premises any buyer may accept or
`reject them.
`4. Each buyer must give his name and make a deposit of 5 shil-
`lings on each pound sterling (if demanded); no deliveries will be
`made during the sale.
`5. All purchases must be taken away at the buyer’s expense, and
`the amount due must be paid at the place of sale within three days
`after the purchase.
`6. Any would—be buyer who is unable to attend the sale may
`have his commission executed by a representative of the auction
`firm.12
`
`A statement found at the beginning of an early-day catalog may
`throw further light on early English auction operations: “And that
`I may remove the Prejudices of some, and the Misapprehensions of
`others, as to the sincerity of the management, I have printed the
`Conditions of Sale with an additional one,
`that no Person or
`Persons shall be admitted to bid for his, or their own Pictures.
`3) 13
`
`As to the type of auction employed in the eighteenth century, it
`cannot be assumed that
`the English, or ascending, system was
`always used simply because of its prevalence today. Certainly some
`sales were conducted on that basis, as evidenced by the original
`wording of the second rule listed above: “That no Persona advance:
`less than Sixpence each bidding, and after the Book arises to One
`Pound, no less than One Shilling [emphasis added].” 14 There is
`little question, also, that in some early auctions the candle method
`was utilized. For example, Samuel Pepys reported such an auction:
`“After dinner by water to the office, and there we met and sold the
`Weymouth, Successe, and Fellowship hulkes, where pleasant to see
`
`12 Adapted from the original as given in James Brough, Auction! (Indiana-
`polis and New York: Bobbs—Merrill, 1963), pp. 26—27.
`13 Quoted in Ash, op. cit., p. 33.
`I4 Brough, op. cit., p. 26.
`
`
`eBay Ex. 1007 - App. D, Page 8
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`32
`
`Auction; and Auctianccrz'ng
`
`how backward men are at first to bid; and yet when the candle is
`going out, how theyrbawl and dispute afterwards who bid the most
`first [emphasis added].” 15 This type of auction was evidently the
`English type, with the added feature of an allowance for a specified
`time interval. To a limited extent, it is still used today when speed
`of transaction is not requisite and when it is helpful to buyers to
`know approximately the amount of time they will have to consider
`the maximum amount they wish to bid.
`a
`One
`seventeenth-century catalog mentioned “mineing,”
`“Method of Sale not hitherto used in England,” 16 undoubtedly
`imported from Holland. In this type of auction,
`the auctioneer
`apparently put up each lot at a high price and kept reducing the
`price until someone called “Mine!” In the early British system,
`however, another bidder presumably could advance on the bid, so
`that a blending of the Dutch (descending) system with the English
`(ascending) system would have resulted. The available evidence
`suggests that auction fees were charged on a percentage basis, and
`that they were upward of 5 percent, graduated downward with the
`increase in sales prices.
`Between I660 and 1740 auctions in the form of “peremptory
`sales,” held either by court order or privately, were apparently quite
`common in England. Although the auctioning of chattels seems to
`have preceded the auctioning of land, both types of property were
`offered in an advertisement appearing in the London Evening Post,
`March 8—10, 1739. After listing some merchandise items (including
`threads, sacks, gold and silver lace, and brocaded waistcoats), the
`auctioneer announced that in “the first Day’s Sale will be sold two
`Houses belonging to the said Bankrupt’s Estate, situated at Pad—
`. dington, and adjoining to the Churchyard.” 17 The first announce—
`ment of a sale devoted only to land appeared in the same news—
`paper in the 1740’s. It is not known what method was employed in
`auctions of real property.
`The best evidence is that auctioning of estates in England origi—
`nated with a gentleman named
`
`
`
`Christopher Cock, of the Great Piazza in Covent Garden. This man seems
`to have been a “live—wire.” .
`.
`. We are lucky to possess the Daily Ad—
`
`15 Diary and Correspondence of Samuel Pepys, p. 327.
`I6 Quoted in Ash, of. (1)., p. 33.
`17 Quoted in z'bid., p. 35.
`
`:3
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`Historical Perspective:
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`33
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`vertiser of April 25, 1735, because it contains the earliest advertisement of
`his I have been able to discover. This announces three chattel sales ”at
`Mr. Cock’s Great Room,
`in the Piazzar, Covent Garden." One of the
`sales was by order of the South Sea Company, and another was a post-
`poned sale of Arabian horses. The contents and style of the advertisement
`make it plain that Cock was already in a very substantial way of business.18
`
`Auctioning in Early-Day America
`
`It might be expected that institutions as well as ideas would
`emigrate with the people who move from one country to another.
`In this way, no doubt, the auction found its way from England to
`America, where from an early date the colonists used this method
`of selling to dispose of property under the judicial process or to close
`out stocks of merchandise. In early—day America the auction was
`used to liquidate capital goods and inventories, to unload unsalable
`goods remaining in importers’ hands at the end of the season, and
`to sell secondhand household furnishings, farm utensils, and d0-
`mestic animals. As auctioning was evidently considered a discredit—
`able way of selling goods, various methods of concealing the
`owner’s name were employed.19
`Use of auctioning by American importers—The use of auction—
`ing in early—day America was widespread, particularly at the pri—
`mary market level.20 As population increased and larger areas of
`the East Coast became settled, auctioning made rapid progress.
`Information is lacking as to which auctioning method was most
`prevalent, although apparently it was the English or ascending-bid
`system.
`In the early eighteenth century, a British manufacturer or ex—
`porter customarily consigned his goods to an agent in some Ameri—
`can port. The agent then bonded the merchandise, landed it in the
`United States, and sold it at auction, usually accepting in payment
`promissory notes which were discounted at banks. The agent then
`would deduct his commission and remit
`the remainder of
`the
`
`
`
`
`
`
`
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`18 117221. For a discussion of early—day auctions in France, see Octave Uzanne,
`“The Hotel Drouot and Auction Rooms in Paris before and after the French
`Revolution,” The Connoisseur, III (Aug, 1902), 235—242.
`19 Ray Bert Westerfield, “Early History of American Auctions: A Chapter
`in Commercial History,” Transactions of the Connecticut Academy of Art:
`
`
`and Sciences, XXIII (May, 1920), I64.
`
`20 Ihz'd., p. 165.
`
`
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`34
`
`Auction: and Auctionccrin g
`
`money to his principal in Britain. The usual procedure in these
`auctions was to exhibit the goods for a day or two prior to the sale,
`giving prospective purchasers a chance to appraise the articles in
`which they were interested and check them off in the catalog pro—
`vided by the auctioneer. Most auction firms of any size held sales
`on two or more days each week.21
`When American ports were closed to direct importations from
`Europe during the War of 1812, British merchants established
`extensive depots of goods in Halifax, Bermuda, and other British
`possessions so that they might be ready to supply the American
`market as soon as peace was declared. After the close of the war,
`the British found auctions the most profitable and the quickest way
`to turn their goods into cash. The market was soon glutted with
`merchandise, and by 1816 prices had fallen so far that they scarcely
`covered the duties.22
`
`As auctioning became prevalent in early—day American com—
`merce, orthodox importers and jobbers were circumvented;
`they
`raised loud cries of protest and began to demand protective legisla—
`tion. To complicate matters, prices were much lower in Britain
`than America, enabling foreign merchants to undermine American
`production and marketing operations by exporting British goods to
`America. The dumping of foreign goods on American markets,
`which was merely expedited by use of the auction method, created
`serious public resentment and culminated in a strong campaign
`against auction sales generally.
`The auction system, however, did have some advantageous
`commercial effects in America. For one thing, auctions facilitated
`the introduction of new foreign and domestic products; goods were
`forced onto the market by the simple expedient of price—cutting,
`and in time the prejudices against the introduction and promotion
`of
`such goods were overcome.23 Auctions also assisted small
`domestic manufacturers to gain a position in the market. Finally,
`merchants and retailers from the interior increasingly patronized
`auction sales in the port cities, especially those in New York, and
`thus made imported items available to inland markets.
`Auctiom'ng of slave: in the Old South—Any historical account
`
`21 117221., pp. 173—177.
`22 15221., p. 165.
`23 111121., p. 18L
`
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`Historical Perspective:
`
`35
`
`0f auctioning in America would be incomplete without mention of
`the infamous sale of slaves in the Old South before the Civil War.
`At that time slaves were considered as chattels and were sold at
`auction, though occasionally they were bought at a fixed price set
`by the vendor, or after individual negotiation between seller and
`buyer.
`The demand for slaves varied, depending on sex, age, and
`physical condition. Healthy young men were much sought after
`and thus commanded high prices, sometimes as much as $1,750;
`men who were not so young but who had been trained in a trade
`were also very desirable. Women,
`too, were in demand—some as
`mothers of future children, some as servants, and some as fancy
`women. Children were acquired for the purpose of keeping families
`together and as speculative purchases which were expected to pay
`off at a later time.
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`Slave trading was unrestricted until 1808, when a federal statute
`was passed proscribing the importation of slaves into the United
`States. Up to that time importers offered slaves for sale to plantation
`owners, their agents or brokers, or secondary traders who acquired
`the property for subsequent resale. After 1808, or at least after 1818
`when the penal clauses of the restrictive legislation were strength-
`ened, the primary slave market presumably ceased to exist. Trading
`in slaves did continue, however, among hard—pressed plantation
`owners who had to sell to professional traders,
`the latter were in
`the business of buying slaves and selling them to farmers needing
`additional help or to dealers acquiring the property for resale. After
`the Emancipation Proclamation,
`the slave trade was completely
`outlawed, at least in most jurisdictions.
`‘
`though
`Available descriptions of the slave-auctioning process,
`sketchy, suggest that the English, or ascending—bid, method was
`Used. The auctioneer gave his opening spiel to a “crowd gathered in
`the marketplace, and the first lot, consisting of one person or pos—
`sibly of a whole family, was put up for sale.24 He also made full
`use of the practice of displaying the “merchandise,” even at the cost
`of embarrassing the individual up for sale, and much good—natured
`but often crude banter was engaged in by the crowd. The auc—
`tioneer would suggest an opening bid, but sometimes had to slip
`24 Frederic Bancroft, Slat/e Trading in the Old Sour/z (New York: Fred—
`erick Ungar Publishing Co., 1959), pp. 109—110.
`'
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`36
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`Auction: and Auctioneering
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`back in order to obtain a firm offer; after receiving a starting bid he
`would lead the buyers upward, enunciating not only the actual bids
`that were made but the advance he was aiming for.
`When slaves were sold in family groups, the bidding was often
`based on an average price per person. The value placed on the
`father might be $1,200 and that on the mother $950, and three
`children might be valued at $725, $650, and $475, for a total
`estimated family value of $4,000. Actual bids might start at $200 per
`person and move up to approximately $700, or a total of about
`$3,500 for the family. This method of selling multiple units, not
`uncommon today, was undoubtedly adopted because it was ex-
`pected to maximize returns. Not only did it emphasize the smaller
`individual figures instead of the larger total amount, but it placed
`the “value of the best slave in the group .
`.
`. uppermost in the
`bidder’s mind.” 25
`In slave auctioning, when the price approached the maximum
`demand prices of the buyers, it was the practice of the auctioneer to
`narrow the amount of the advance from, say, 50 dollars to 25 t0 IO
`or even 5 dollars. Finally, when it was apparent that bidders had
`about reached their limit, the auctioneer would say “Ah you-all
`done? Seven—hundud—an’——five—dollahsl Once—twice—third—
`an’—lart—-call; goin’, goin’," and then "Sold fo’ SCI/€72 hzmdud an’
`five dolla/zs to Mr. Ienks.” 26 Although the existing superficial de-
`scriptions of American slave auctions give no information about the
`use of a reserve price, it is clear that lots were withdrawn from sale
`When bids were considered unreasonably low.
`
`Latter—Day; Developments in Auctioning
`
`Despite the long tradition of price making by the auction
`method, the use of auctioning is relatively new in many areas and
`fields.
`Netherlands.—The practice of auctioning fruits and vegetables
`in the Netherlands, so prevalent
`today,
`is only eighty years old,
`even though the method had been previously used in other fields
`(for example, the sale of porcelain ware). It was in 1887 that the
`sale of produce by auction first replaced sale by private treaty in
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`25 117121., p. 230.
`26 Ibid., p. III.
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`eBay Ex. 1007 - App. D, Page 13
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`Historical Perspective:
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`37
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`Holland. Before the days of auctioning, produce dealers would
`either buy from the grower, acquire goods on commission, or make
`advances to producers for crops still
`in the ground. Often the
`grower needed cash advances to enable him to implement cultiva-
`tion, but this practice obviously placed him at a disadvantage in
`relation to the dealer, and “he frequently could do nothing but wait
`passively for the final settlement which might bear no relation to
`current prices.”27 As in certain localities and commodity areas
`today, the distributor controlled the producer.
`In 1887 there occurred a significant event that was to have a
`tremendous effect on the production phase of the industry. One
`midsummer morning a grower by the name of Iongerling arrived
`with his bargeload of vegetables at the quay of the inland harbor
`Brock op Langendijk in North Holland. Here it was customary for
`producers to sell to dealers or to physically transfer the produce for
`sale on a commission, but on this particular morning demand was
`very brisk and the farmer—vendor found it difficult
`to decide to
`which of
`the eagerly competing buyers he should allocate his
`limited supply of goods. A passing boatman reportedly suggested
`that Iongerling put his produce up for sale at auction, which he did
`with gratifying results. Thus it was that the first auction of horti-
`cultural produce in the Netherlands took place. From that
`tiny
`beginning developed the present-day vast
`system of auction
`markets, with all their auxiliary services.28
`.
`Gcrmcmy.—Auctioning of fish developed in Germany at almost
`precisely the same time as auctioning of produce in the Nether-
`lands. Until
`the latter part of
`the nineteenth century, German
`fishermen personally delivered their catches to consumption centers.
`At first they sold the fish themselves, often having to stay in port
`for long periods of time in order to do so; later the middlemen took
`over the selling, thus releasing the fishermen for more productive
`work.
`
`specialization of effort was basically sound,
`Although this
`the distributors frequently took advantage of the absentee owners,
`using their strong position in relation to that of the individual
`
`27 The Auction System of Horticultural Marketing in the Netherlands
`(2d ed.; The Hague: Central Bureau of Horticultural Auctions in the
`Netherlands, 1959), p. 6.
`28 11:121., p. 7.
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`eBay Ex. 1007 - App. D, Page 14
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`38
`
`Auction: and Auctioneering
`
`fishermen to bring primary market prices down. Sometimes whole
`lots spoiled after fishermen refused to deliver their catches to the
`dealers at the going prices. Eventually, however, a system of firm
`contracts between fishermen and distributors developed, but the sale
`of fish by private treaty was still unsatisfactory.
`Some type of open—market operation was required to establish a
`price that would reflect current and prospective demand and supply
`conditions, and thus eliminate the price-depressing tactics of the
`distributor—buyers. Consequently, the first fish auction took place in
`Hamburg on May 1, I887, when the fishermen sold their catches to
`dealers on a competitive—bid basis.29 Other fish auctions soon fol-
`lowed—in Geestemunde in 1888, in Bremerhaven in 1892, and in
`Cuxhaven in 1908. The Kiel market apparently was not established
`until 1947.
`Iapan.——The problem of distributor-dominated selling of fish by
`private treaty is brought into bold relief by examples from the
`Orient. Until about a century ago, exploitation of Iapanese fisher—
`men by their distributors seems to have been a common, if not
`universal, phenomenon. Under Japan’s feudal organization the
`rulers gave fish merchants a monopoly of marketing, the so—called
`Ura-ukeoi
`system, which intensified the dominance of
`large
`capitalist—distributors over
`scattered small-scale fishermen. The
`favored merchants paid tribute to the overlords as a quid pro quo
`for the exploitation rights they enjoyed.
`The first step in the reform movement came with the collapse of
`feudalism and its monopolistic structure. The process, beginning in
`1869, was accelerated during the period 1910—1930, and formerly
`monopolistic activities were opened to competitive enterprisers. The
`old market system was replaced by keen competition among dealers
`for markets and supplies, which might well have paved the way for
`another type of control—capital advances to fishermen by distribu-
`tOrs in exchange for exclusive purchasing agreements at distributor-
`determined prices during the period of the obligation. Under this
`system, exploitation of the fisherman developed through distributor
`credit control and private—treaty buying and selling negotiations.
`When control over
`suppliers is effected through a debtor-
`
`29 Klaus—Hinrich Krohn and Arnold Alewell, Sea—Fish Mar/(sting in the
`Federal Republic of Germany (Rome: Food and Agriculture Organization of
`the United Nations, 1957), p. 105.
`
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`eBay Ex. 1007 - App. D, Page 15
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`39
`Historical Perspective:
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`creditor relationship, there is little or no competition for the goods
`produced; there would exist, in fact, numerous little monopsonies,
`
`or “buying monopoly” situations, for suppliers would be permitted
`
`to trade only with those to whom they owed money. The buyer-
`creditor might be able arbitrarily to set the price and thus gain the
`IIIIIII1umn’unyIIIuIIMImmmummu
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`advantage not only of keeping supply costs low but of depressing
`prices to fishermen. The latter would find it diflicult, if not impos-
`sible, to extricate themselves from their predicament,30 especially in
`the absence of antitrust laws.
`Not until after World War II was the modern wholesale market
`system established throughout Japan. The key to equitable treat—
`ment of producers by distributors is an open—market system, such as
`the auction, which permits buyers to sell
`their goods at market
`prices and thus prevents exploitation by distributor—buyers.
`In
`Japan,
`the relationship between seller and buyer, an important
`aspect of which is
`the auction system of selling goods at
`the
`primary level, is completely free.
`Hong Kong—Control of the fishermen by the 146112, or middle-
`man, prevailed in the Hong Kong market until just after the ter—
`mination of World War II. The merchant-capitalist provided the
`fishermen with needed supplies and credit and, in return, required
`the fishermen to bring their catches to him, the creditor, until the
`debt was paid—which, of course, might never happen. Legislation
`enacted in the Crown Colony in 1940, however, subsequently led to
`the replacement of 162472 control by self-governing cooperatives.31
`The latter assumed the fishermen’s financial obligations and paid
`OH debts owed the merchant-distributors, many of which had been
`passed on from father to son and might have gone on forever in the
`absence of such legislation.
`The producers were thus free to sell their goods under competi—
`tive market conditions rather than to the monopsonist. This open-
`market mechanism took the form of public auction for the sale of
`fish and, oddly enough, of individual negotiation (bargaining be—
`
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`30 See Akira Hasegawa and Hirohiko Watanabe, “Distributive System
`
`and Cooperative Marketing of Fishery Products in Japan” (Tokyo: Fisheries
`Research Institute, 1958), mimeographed.
`31 “The Hong Kong Fish and Vegetable Marketing Schemes” (Hong
`
`Kong: Co-operative Development 8: Fisheries Department, Dec., 1962), mimeo—
`
`graphed, p. I.
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`40
`
`Auction: and Auctioneerin g
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`in the sale of
`tween the buyer and the cooperative salesman)
`produce. Because all producers were required to distribute their
`goods through the public market, forestalling was precluded. The
`auction had become an effective tool in implementing a progra