It's most common for rookie drafts to be conducted using a straight draft format, but because auction drafts are so much more fun, I've been thinking about how to make it work for rookie drafts. Here are some ideas. If you have any experience with rookie auction drafts, please share your own ideas.
Adjust Team Budgets
The most obvious way to level the playing field is by giving lower ranking teams a bigger budget, but how much is fair? You don't want the 1st-place team to drop their entire budget and win the top prospect, so it's rightfully a very complicated decision to make.
The reverse could also be an obvious solution: subtract dollars from the league champion's draft budget.
Merge Draft Budget with FAAB
If your league uses FAAB during the season for free agent transactions, you might directly translate the FAAB into their draft budget, and vice-versa: add any leftover draft budget as bonus FAAB when the season starts. Over time, perennially good teams won't have much FAAB or draft budget to work with, while regularly poor performing teams might have a surplus to buy more top prospects that will help them stay afloat in future seasons.
Make sure FAAB money is tradeable.
Stagger Bidding Based On Standings
Another option might also put a restriction on when champions can start bidding, disallowing bids from top teams for a period of time.
Think about a race like the Tour De France, where the cyclists take a break every night to sleep. The following day, they all start from the same place which wouldn't be very fair to the leaders from the previous day if everyone restarted the race at the same time. Instead, they stagger the racers so that the leaders get a head start.
For example, the bottom 4 teams are allowed to start bidding immediately when the draft starts. Let the next two bottom teams may begin bidding 5 minutes later, another two teams after 5 more minutes, and so on. The league champ and other good teams will miss out on the players who get nominated first.
Alternatively, the bidding freeze for top teams could be based on a fixed number of auctions, so the 7th- and 8th-place teams could start bidding after 5 auctions, the 6th-place team after 6, etc.
This is probably a strategy best paired with budget adjustments to appropriately deter the top performing teams from acquiring top prospects.
Disclaimer
Admittedly, I've never heard of a league taking this approach with a rookie auction format but it seems feasible, unique, and fun in principle alone.