Competition Matters

A foreclosure auction is a public sale of property triggered by the former property owner’s inability to pay off a mortgage and other debt attached to the foreclosed property. This sale is meant to generate funds to pay off the outstanding financial obligations and, if possible, distribute the remaining funds to the former property owner. At auction, bidders are expected to compete for the foreclosed property. The more vigorous the competition, the more likely that funds will be generated to satisfy the relevant interests. Nevertheless, a public real estate foreclosure, like all auctions, may be susceptible to the bidders’ anti-competitive practices.
 
In 2018, a federal grand jury in Mississippi indicted nine real estate investors for their roles in a conspiracy to rig bids at public real estate foreclosure auctions in violation of federal antitrust laws. According to court documents, the bidders would secretly meet ahead of time before an auction to determine which one of them would win certain foreclosed properties and arrange to have payments made and received in exchange for an agreement not to bid. The bidders engaged in this anti-competitive scheme at various times between 2009 and 2017.
 
By subverting the competitive bidding process, the bidders were able to cheat the foreclosure system by artificially lowering the price paid at auction for certain foreclosed properties.
 
To date, the nine real estate investors who engaged in the conspiracy to rig bids at public real estate foreclosure auctions in Mississippi have been sentenced in federal court to each serve four months in prison and pay fines that range from $20,000 to $48,000 and restitution, according to the United States Department of Justice.
 
If you suspect that a public real estate foreclosure auction has been impacted by this type of collusion or if you would like to speak with the Antitrust Section of the Ohio Attorney General’s Office about any other type of anticompetitive activity, please call 614-466-4238.