When we buy tea or coffee at the grocer, we pay the same prices as everyone else. When we buy a share, we hope to pay no more than others would at that moment. In an auction, whether at Christie’s or on eBay, the outcome is very different. Buyers need confidence in their own judgment, whether they are buying an antique cup and saucer or a £6 billion steel company.

The buyer always pays over the odds because you only win an auction if you are prepared to bid more than anyone else present. Even by these standards, however, the auction for Corus, the Anglo-Dutch group once called British Steel, was spectacular. Tata Steel’s winning price of 608p per Corus share was higher than anyone else expected.

On March 11, 2003, you could buy Corus shares for 25p each. The date, at the very bottom of the bear market, was significant. Many shares were cheap. Steel was in recession and Corus was not a low-cost producer. It might not have recovered.

The more remarkable feature is that Corus shares have more than doubled over the past year, when its board had already informally set out to find a partner. When India’s Tata Steel offered 455p a share on October 20, it was generally hailed as fair. Competitors might counterbid, as Brazil’s CSN eventually did, but the board’s decision to promote a 455p bid did not seem crazy. When the final auction started on Tuesday evening, CSN’s 515p bid was the highest on the table. Come midnight, bids were 18 per cent higher.

In the event, the board’s backing for the original Tata bid proved critical for Corus investors. As in so many foreign takeovers arranged by global investment banks, the bid-for company agreed to promote a scheme of arrangement to effect the takeover. This avoids UK stamp duty, forcing many poor British taxpayers to make up the lost revenue. A scheme of arrangement is promoted by the company being bought, rather than the bidder. It uses court procedures, so the bid timetable in the creaking Takeover Code does not fully apply. There is no Day 46, by the end of which final offers must be made. There is no Day 60, when offers must end. The Corus saga dragged on past St Crispin’s Day until the new year, no end in sight.

So the City Takeover Panel invoked powers to agree a date for a final auction between rival bidders. Both offered cash, so the auction was straightforward: up to four bids each, followed by a final sealed bid. Even then, there was a sneaky provision. Instead of bidding their maximum in sealed bids, rivals can offer to outdo whatever their competitors offer by, say, 5p a share, up to a declared maximum.

Not that Corus shareholders will complain. They have seen the benefit of a genuine formal auction. The sealed bid rules should deliver a higher price than anyone else would offer. Every other shareholder should have the same chance.

Merger activity has mushroomed and mutated in the generation since the code was set up to address the scandals of its own day, such as investors being paid different prices. Boards are under pressure to agree to offers, on the assumption that big investors want them. They are pressed not to talk to other parties and even to guarantee a break fee if a preferred bidder is trumped.

In the cheap-money era, a large majority of bids are in cash, so there is no need for weeks to evaluate rival offers. Time is needed mainly if the board wants to defend its independence. Otherwise, a company board should be free, with prior general shareholder approval, to conduct its own auction on the same lines as the City Takeover Panel did this week, and as many groups do when selling a subsidiary.

Every time there is competition between rival bidders, it becomes clear that most uncontested bids are agreed at needlessly low prices that are not in the interests of the bid-for company’s investors. Most bidders would be prepared to pay far more. The code should be updated to encourage more auctions. Tata’s seemingly high price for Corus may turn out to be the norm.