ARTFUL DODGERS
The genteel reputations of Christie's and Sotheby's have been shattered by the discovery
of sharp practice, says Martin Vander Weyer THE world's two great auction houses, Sotheby's and Christie's, founded respec- tively in 1744 and 1766, have long pre- served the illusion of being elegant West End aesthetes who dabble in trade. In fact, they run cut-throat businesses and carve up the art market between them while doing each other down whenever they can.
This week, that veneer of gentility has been permanently scarred. These highly polished corporate antiques (in Christie's case French-polished, since it is owned by Francoise Pinault, France's leading luxury- goods entrepreneur) are looking more than a little distressed. Indeed, in a rapidly changing auction world, one or other of them may be heading for firewood.
Three weeks ago, the Financial Times broke the news that Christie's had supplied evidence of commission fixing between the two houses to antitrust investigators at the US Justice Department, which has been looking into the case for the past three years. In return, Christie's has been granted conditional amnesty from criminal charges — which, under the Sherman Antitrust Act, once wielded against such mighty combines as John D. Rockefeller's Standard Oil, can result in substantial fines and even three- year jail sentences. By supplying the allegedly damning evidence, Christie's immediately dumped Sotheby's in what American lawyers call deep doo-doo, with the implicit excuse that, since the Justice Department was talking to both houses and the two clearly could not collude in their response, Christie's felt it had to jump in case Sotheby's was about to do the same.
Whatever the machinations, the revela- tion provides the only convincing explana- tion for the sudden departure, on Christmas Eve, of Christie's chief execu- tive, Christopher Davidge, a 34-year veter- an of the firm who had always been regarded in the art world as, shall we say, more of a businessman than an aesthete. Christie's has not fingered Davidge person- ally, but oblique references to the actions of previous management make the point clear enough. Davidge has been followed into the dole queue this week by Sotheby's chief executive, the New York socialite Diana `Dede' Brooks. Sotheby's chairman and major shareholder, the bouffant- haired, real-estate tycoon Alfred Taubman (the man credited with inventing the con- cept of putting convenience kiosks in petrol stations, and said to have bought Sotheby's as a wedding present for his second wife, a former Miss Israel) has also stepped down.
Meanwhile, outraged clients of the two firms are queuing up to sue. Some 40 suits have already been filed, among them one against Sotheby's by the multimillionaire Canadian copper trader Herbert Black, who was already in dispute with the firm over a pair of 'antique' chairs bought for £2.7 million last year which turned out to be recent reproductions. Since the allega- tions of collusion go back to 1992, hun- dreds of other suits could follow.
Expressions of disgust have been loud. (`Shocking, absolutely shocking,' declared one New York art-market player. 'It's going to reinforce the idea that you can't trust the art world.) But it is not the exis- tence of the cartel that comes as a surprise to seasoned observers so much as the fact that it may actually have been criminal in nature. The two firms were first challenged by London dealers over collusion in the 1970s, when, within three days of each other, they introduced buyers' commis- sions — by which the buyer pays the auc- tion house a fee on top of the bid price. The case was settled out of court. Before 1992, when selling commissions were ofti- cially supposed to be fixed at 10 per cent, it was well known that both houses would negotiate down to zero if necessary for the most valued clients and prestigious sales. But that, of course, was cutting their own throats, and it was more comfortable for both from 1992 onwards first to increase their buyers' commissions almost in tan- dem and then, in 1995, to move to a non- negotiable sliding scale, from 2 per cent to 20 per cent, of sellers' commissions.
A fortnight ago Christie's announced a new scale of sellers' commissions — the move was said to have been 'accelerated' by the antitrust investigation since, clearly, the two houses could no longer offer iden- tical rates — offering better terms for regu- lar big-ticket clients. This temporarily gives Christie's a market advantage, but the irony of the situation is that the only option now open to Sotheby's is to follow suit; if it seriously undercuts Christie's rates, howev- er, both houses will suffer in profitability. So the likelihood is that, without collusion, the two houses will finish up once again with uncannily similar commission scales.
But they may finish up with a lot less business on which to charge those commis- sions. Disgrace for the two ancient houses could not have come at a worse time. They are also under investigation by the Euro- pean Commission for anti-competitive practices — which, if proven, could result in fines of up to 10 per cent of turnover. And in London they are about to suffer a savage blow from the introduction of the EU `droit de suite' levy (setting a slice of auction proceeds aside for the artist), which will have the effect of driving a sig- nificant portion of trade in 20th-century works outside the EU. (DTI officials are thought to have given in to Brussels on the droit de suite, despite the threat to 5,000 art-market jobs in and around Bond Street, as a pawn-sacrifice in the chess game over eurobond withholding tax, which threatens even more jobs in the City.) Some London auction sales will be driv- en to Switzerland, others to New York. But in the Big Apple it is the third-ranking Phillips (owned by another wealthy French investor, Bernard Arnault, and apparently untainted by the commissions scandal) that is now making the running, with a major sale of works by Monet, Matisse and Henry Moore planned for May.
More fundamentally, as in every other sector of business, the Internet is now threatening to change the rules of the auc- tion game. Sotheby's has invested £40 mil- lion to gain a foothold in the new medium, including a link with the online retailer Amazon, but Christie's so far seems to have turned its back on this epoch-making devel- opment of commerce. Meanwhile, eBay, the leading online auctioneer — helped by a £20 billion market valuation and by substan- tially lower commission rates than the tradi- tional houses — is rapidly moving upmarket from its initial success in trading Beanie Babies, and has bought the established San Francisco auction house of Butterfield & Butterfield. No one is so far suggesting that the eight-digit Old Master trade is heading into cyberspace soon, but a lucrative slice of the market for lots of £10,000 downwards could be swiftly redistributed to the disad- vantage of the traditional houses.
The nearest parallel to Sotheby's and Christie's today is Lloyd's of London, the insurance market: old-style gentlemen- traders, proud of their history but playing by their own rules, smooth-talking their posh acquaintances into doing business with them while repeatedly stitching them up; then finding themselves sinking under a mountain of lawsuits and their business being drained away by smarter, less tainted, more modern operators. Lloyd's has sur- vived, but in a much diminished and altered form; all talk of 'my word is my bond' quietly forgotten. What will be the shape and standing of Sotheby's and Christie's in five years' time? If they were under the hammer today, the plum-voiced auctioneer's eyes would be darting shiftily around that oh-so-grand saleroom, as he is forced to take bid after bid off the wall.
'You've seen his cubist period — this is his giving-up-smoking period.'
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