The UCC, a model code adopted by most state legislatures, says that all auctions are presumed to be "reserve" auctions unless advertised as "no reserve" or absolute.  "Reserve" means the seller has the right (i.e. he "reserves" the right) to bid on the assets himself or via the auctioneer. 

If an auction is advertised as "no reserve" and the auctioneer begins taking bids, the asset must sell regardless of the amount of the bid received.  If no bids are received within a reasonable time after commencement of the auction, then the asset does not sell.  In a no reserve auction, once the auction has commenced the seller is making a binding offer to sell the asset and each bid from a bidder, once accepted by the auctioneer (i.e. once the auctioneer moves up to the next bidding increment), creates a binding contract for purchase/sale.

If an auction is reserved, or presumed to be reserved as a matter of law, then the asset does not sell unless/until the auctioneer declares "sold," at which time a binding contract for purchase/sale has been formed.  In a reserve auction, the auctioneer is asking for offers and no contract is formed until he accepts it on behalf of the seller by indicating "sold."

 In addition to UCC-based law, most states have deceptive trade practices and consumer protection laws as well as common law (which is based on the precedents set by that state's courts in their rulings) that bear on shill bidding and other games that are, unfortunately, played by some auctioneers and sellers.  Whether shill bidding is illegal depends in many cases on the circumstances.  IMO, whether legal or not, shill bidding (and auctioneers running bids and taking phantom bids, etc.) is a waste of everybody's time and an antiquated tactic that anybody who values auction as a way to discover market prices via true competitive bidding should not tolerate.

Jerrod at Purple Wave Auction