"bidding of the wall" is totally legal in many countries and common. It is usually specified in the terms of agreement. All auction houses are practicing bidding of the wall, so indeed setting the reserve right is the most important. "shill bidding" is a common practice also; it is similar to "bidding of the wall"...
I think the only difference is that "bidding of the wall" is more or less regulated or official (done by professional companies with clear terms, no hiding) while "shill bidding" underlines someone is hiding or using fake profile, etc. to inflate price.
Note that shill bidding is also very common; many collectors/shops will bid on items they own, only to ensure that price remains high and their stock get a higher value. Shill bidding is annoying for sure, even more annoying when allied it with stock control.
For expense stuff/fine art, auction houses partner with underwriters/fine art insurances. They are the one setting the reserve price (they need to do it for insurance purpose; we are talking big money here, 1M+) and they are doing the bidding of the wall to meet the set reserve. They are OK taking all liability; some underwriters will even go further, guaranteeing a sale (meaning if not sold, they will buy it at reserve). For sure, sellers appreciate this. In fine art, the insurances/underwriter are the one running the market and basically setting assets value - They will do the valuation, set the reserve price, guarantee a sale, buy the stuff if no sale, and redo an evaluation of client stock with inflated price; this is great for companies to inflate their art assets without paying tax (let not forget, purchase of art for companies usually fall under special VAT regime (not taxed basically; only gain tax applies) and lastly fine art price are usually set in USD (just like the petrol or gold - Bretton Woods system). Well, art is perfect to clean dirty money and do other stuff...
