ARTS
Sale-rooms
Neither a buyer nor a vendor be
Nicky Bird ponders Sotheby's decision to raise their buyer's premium Was it panic? Last week Sotheby's announced that on 1 January their buyer's premium will jump from 10 per cent to 15 per cent for lots under £30,000 (95 per cent of items sold, 50 per cent of turnover). Christie's won't decide whether to follow suit until the end of the autumn season in five weeks. You may think it madness to hand the competitive edge to rivals who already claim 49 per cent of market share. But there is method in it.
The Society of London Art Dealers called the move 'inept'. This was the politest response I have heard. One dealer moaned: 'Another example of Sotheby's biting the hand .. . I've got two fingers for them left. The usual oafish mixture of arro- gance and crassness. They whinged that the new 5 per cent import tax on works of art outside the European Community would destroy the London art market because they'd have to pass it on to buyers. Then, unilaterally, they impose an extra 5 per cent surcharge themselves. And claim it's good business!' Another dealer called it 'a stupid, ill-considered, desperate measure'.
Sotheby's say the move is necessary and overdue. The art market is driven by supply and it is drying up. Divorce, death and dis- aster are all, happily for Sotheby's, still with us, but widows and victims of Lloyd's are not consigning their treasured goodies for sale while confidence remains depressed. The traditional collecting fields of furni- ture, silver, European and Oriental porce- lain and Old Masters have withstood recession, but Impressionist and modern sales, which contributed disproportionately to profits, have collapsed.
There is a further worrying trend. Sothe- by's announced a third quarter net loss this year of $13.2 million compared to a net loss of $11 million for the same quarter in 1991. Yet turnover actually increased by $15 mil- lion. To attract vendors Sotheby's are cut- ting their selling commission; to compen- sate, they now aim to whack the difference on to the hammer price, an increase passed on to the buyer. `It is iniquitous,' says the distinguished George Levy of Blairman, and a past presi- dent of the British Antique Dealers Associ- ation. 'You can only charge a fee for services if services are on offer. What ser- vice does Sotheby's provide to buyers? Peter Wilson, their late chairman, looked shifty when asked and muttered something about supplying the gold chairs and electric light. No, the service is entirely to sellers. They should be aware that 30 per cent of the sale price, including VAT, will now go in commission!'
George Levy believes it is a great pity that the legality of the auctioneers impos- ing both a buyer's and a vendor's commis- sion has never been tested. A senior direc- tor of Christie's once told me privately that the percentage basis of the buyer's premi- um could not be justified as it implied a service which could compromise their duty as agents to the vendor. 'If the buyer is charged for service then surely he must get it — including advice on quality, invest- ment and bidding that may and often will conflict with the interests of the vendor.'
The action brought by the dealers against Sotheby's and Christie's over the introduc- tion of the buyer's premium was settled over cocktails at Claridges 15 years ago. The Office of Fair Trading let them get away with it. Of course the two auction houses deny publicly to this day that they colluded. But Mrs Thatcher's government baulked at the implications for the auction- eers of an adverse OFT judgment — they would have had to return four years' worth of buyers' commissions, an expensive administrative chore. And they were all good pals: Christie's had even provided Mrs T. with a young man during her lead- ership campaign.
Naturally, some cynics believe that Christie's have already decided to follow Sotheby's example on 1 January. David Tyler, Christie's finance director, says they were 'totally surprised' at the news. 'We `Buy it. And spend your way out of the recession.' haven't ruled it out and we haven't ruled it in. We are always looking at our pricing.' Chris Davidge, Christie's managing direc- tor, says he is 'understanding' of Sotheby's position. 'It enables them to approach ven- dors aggressively and offer highly competi- tive rates. It's all about attracting sellers without them you haven't got a business.'
True. But is it fair, legality apart, to bur- den the buyer with paying sometimes the total commission charged? Auctioneers may argue that the burden is shared, but this is not quite so, as Mr Davidge implicit- ly concedes. These 'highly competitive rates' can mean zero for the sellers, with the buyer stuck with the bill.
When I worked at Christie's 20 years ago they thought of themselves as gents, and frowned upon the spivs of Sotheby's. The posture was absurd, part of an irritating tradition that included calling senior direc- tors Mr Peter and Mr Charles, etc. But though Christie's now adopt fancy market- ing and banking techniques that would have surprised past chairmen it was Sothe- by's who led the way into the brash world of telephone link-ups, printed estimates (which slyly imply a value), overblown cata- logues and black tie auctions. Momentum generated by hype can never be sustained. As Anna Somers-Cocks of The Art Newspa- per says: 'Bubbles burst. Auction houses cannot be run like multinationals. Sothe- by's are over-extended but can't shut down a whole office without disastrous loss of face. Having built up the machine they have to feed it. Hence this desperate attempt to barter for customers.' Innovation is part of Sotheby's recent history. They invented the wizard wheeze of advising collectors what to buy at auc- tion and charging a commission, while also receiving their percentage of the resulting sale. Then they went into the banking busi- ness and lent millions to clients so they could buy expensive pictures. The collater- al was the pictures themselves. But it was not a good idea to lend money to dodgy coves like Alan Bond. 'At least Maxwell didn't collect Impressionists,' said a Sothe- by's expert.
The new 5 per cent surcharge is a gam- ble. If it does deter buyers, particularly trade buyers, then sellers will benefit little from negotiable commissions. But, say Sotheby's, buyers whined when the premi- um was introduced in 1975 and soon flocked back when more and better lots appeared. If Christie's do ape their rivals, fearful of losing vendors, then Sotheby's, with grumpy shareholders and too many offices to feed in too many countries, will have to think again.
Or perhaps Mr Taubman, their kindly American owner, glumly rattling his dimin- ishing piggy bank, will think for them and wield his little axe.
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