that experience happened to me I am afraid.I put in a good offer on a house in the uk a few years ago, when I was viewing the house the vendors made it very clear to me they were very interested in what I had to offer as I was a FTB funds in place and ready to go. They really needed to sell and they said to me there was a couple interested, however the other couple was in a chain and they were far more interested in my bid.
I (doing things by the book) left their house had a good think about it and put in an offer via the agent, the EA told me another "single" person was interested and had put in higher offer to mine, I went higher and this went on for 3 bids.In the end I pulled out as it was getting stupid and I was beginning to think this other person didnt exist, if he had said it was a couple I would have been none the wiser as I would have assumed it was the couple the vendors had told me about.
I wrote the vendors a note telling them that I had placed a number of offers, but unfortunately had to pull out due to the price going to high and what a shame it was as I loved the house , money ready etc etc... put my mobile on it.I slipped it through there front door. (naughty I know)
They called me the next day and said they had never knew I had offered and they had been disappointed as they had been sure I would offer. the vendor went back to EA and made him call me to apologise,
they accepted my first bid (which was the asking price!) which I thought was very decent of them and I belive they reported the EA.
I have a number of friends who are or were EA and the phamtom bidder was certainly common practice about 5/6 years ago!