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International |
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CHRISTIE's
and SOTHEBY's
Tattle-tale
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24 February 2000
-NEW YORK.- Michael I. Sovern, the new chairman of Sotheby’s, predicted
that an extensive federal antitrust investigation and various class-action
lawsuits would be “expensive but not life-threatening”. “The company is
in sound shape and the management team is intact except for the two top
people,” he said.
Mr. Sovern, was
just named to replace A. Alfred Taubman, as chairman at a board meeting
Monday. Mr. Sovern stated he had been approached less than a week ago to
take over the chairmanship by two old friends, Ira Milstein, a senior partner
at Weil Gotschal & Manges, and Henry R. Kravis, a Sotheby’s board member.
He said there would be no further shake-up of management,
see:
SOTHEBY'S
BOARD OF DIRECTORS ANNOUNCES MANAGEMENT
CHANGES
23 February -2000
- LONDON.- Art collectors in Britain and the rest of Europe are
expected to follow the lead of American buyers who have filed alawsuits
against the world's two leading auction houses following accusations
of price-fixing of commissions. Jeffrey Klafter, one of the lawyers in
a class-action suit in New York, said he expected litigation against
Sotheby's and Christie's to extend to Europe in the coming weeks
as the result of a criminal anti-trust investigation in the United
States that has rocked the art world. The two auction houses are
the target of a federal grand jury investigation in New York into
possible collusion in setting the levels of commissions as far back
as 1992.
21st February 2000
- Two giants of the industry resign. SOTHEBY's loses its Chairman Alfred
Taubman and CEO Dede Brooks in one day. Both Taubman and Brooks have stepped
down from their posts acting, "in the best interests of the company and
colleagues." See our lead up story below (published 7th February 2000)
on the commission fixing scandal that led to their resignation. Both names
are indicated in the secret agreement between Sotheby's and rival auction
house Christie's to limit competition on commissions charged, which is
being viewed by the US Justice Department as a criminal act.
The next question
is...who will fill their shoes? ARTnewsroom.com will be updating this page
with news on the story, please visit us again and we invite you to send
in your comments to our OPEN
FORUM.
 Market
reaction - Watch the Stocks - real time quote - SOTHEBYS HLDS (BID)Sotheby's shares, which sold for $42 dollars, last spring,
where costing $17.75 dollars last Friday, and started this week selling
for only $15.62 dollars. Problems are visible in this share prices lowering
more each time, but only time will decide if this art market
tradition will survive.
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| The US JUSTICE
Department is currently examining evidence that the world's two leading
auction houses are guilty of striking a deal to fix commissions.
ARTnewsroom.com says - so what? It only sounds shady in theory, in practice it is almost commendable. Lost in the jargon of justice department regulations, eager to see these two giants that hold the monopoly on the world's auction business brought to their knees, the paper press has neglected to examine what the implications of commission fixing really are. Art dealers and experienced collectors rely on Christie's and Sotheby's for much of their trade, they simply have the best paintings, the best collectibles far surpassing the smaller competitiors in quality and quantity. The idea that the two rivals made a 'gentlemen's agreement' to freeze the commission on sales for both buyers and sellers is extraordinary when you think how fierce their rivalry is. What this meant for their clients was that if they were going to face the same charges at either auctionhouse then they could choose freely between the two. The rivals would have to make other features of their service attractive in order to lure clients. That both charge too high a commission on sales is obvious, when you consider that competitors such as Phillip's and Bonhams charge much less, but fixing the commissions made the whole business simpler for everyone concerned. Except for wine, there is a minimum commission of £50 on each lot sold payable by the seller. A reward scheme graduates the commissions payable thereafter on an increment scale of a steep 15% on lots up to £2,500 rising to 2% of the hammer price for big league players that consign lots obtaining more than £3,000,000 in one year. The buyer on the other hand pays 15% premium on top of the final bid price up to lots of £30,000 and 10% for lots in excess of this amount. Of course VAT is payable on the premium. There was an outcry when these high premiums were introduced in 1992 and for a while, Phillip's and Bonhams enjoyed a rise in popularity as angry clients sought better deals. It is quite galling to consign a painting that is knocked down for £40,000 and you only end up with £34,000 knowing that Christie's or Sotheby's are also making a handsome profit from the buyer. However the art world soon settled down to the new regime and returned to the main arenas as dowager duchesses and the widows of industrial tycoons still brought their treasures to the dynamic duo. The trouble started
back in 1997 with what is called "the anti-trust investigation" into the
industry by the US Justice Department. Government investigators visited
both Sotheby's and Christie's in New York and seized quantities of documents
relating to commission fixing.
Thinking themselves untouchable, the
auction kings relaxed - Alfred Taubman the Detroit tycoon controls Sotheby's
and the CEO Dede Brooks is a New York socialite also director of the top
investment bank, Morgan Stanley Dean Witter - but in the closing
months of 1999 Christies' Christopher Davidge informed Pinault he had conclusive
evidence of a commission-fixing arrangement with Sotheby's.
Whilst the US Justice Department have declared that "Christie's now have their immunity", it is not known if the UK and European Competition Commission will be so lenient. The worst scenario is that the EU Commission could charge both auctionhouses with a maximum 10% penalty on total revenue. This is unlikely to eventuate and even if it did, the two giants would survive and flourish again. They have been in the business of selling people's belongings for two and a half centuries and weathered many scandals. Countless ex-employees have written about the underhanded goings on in Christie's and Sotheby's. We all know the auction business and the art world is one big con game, that behind the pin-striped suits and public school accents of the 'experts' are minds that only see dollar signs when they shake your hand - but if you are a collector passionate about Meissen, Guardi, netsuke or chippendale - where else do you go?
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