Finally, after preaching this type of legislation in my blog since I started it in January, New York State legislators have taken the high ground on the auction process as is now practiced. Of all the opportunities to level the playing field with the present auctioneering process, this proposed legislation is the correct 1st step to stop sham bidding by the deceptive use of the secret reserve. An article on the legislation, including a feeble rebuttal by Sotheby’s can be read at: http://www.maineantiquedigest.com/stories/index.html?id=88

 

This legislation will allow for a fair base or floor for the auction pricing process, and then let the market forces take hold, not the other way around.  The manipulation of the consigner by the auctioneer can be blunted and the buyer can be sure of a fair opportunity to bid.  An auction should be about bidding against another bidder, not the bidder against the consigner, where the auctioneer has a stacked deck. I have a new respect for these legislators as having the insight to understand the manipulation and “chicanery perpetrated by auction houses”, and recognizing that “the marketplace has no need for such fraudulent and deceptive practices”.

 

However, if you want to really get to understand how the Sotheby’s/Christie’s duopoly operate, analyze Sotheby’s memo responding against the bill.

 

  1. They label it “unnecessary” but acknowledge “the existence of reserve bidding and guaranteed prices” which is not disclosed in the bidding process.  Just because they “inform auction participants of the bidding methods”, it doesn’t make their deceptive practice justifiable.
  2. Sotheby’s assertion that the legislation will negatively impact the New York City economically and as a center of art and auction activity is so patently PR is nature that it’s laughable.  They said London would loose market share because of legislation in England and it never happened.  Their “premier auctions” are social events, as buyers can now bid and watch the whole auction on the internet.  You can be at a restaurant, hotel, or your home and bid on line.
  3. Sotheby’s cites the Department of Consumer Affairs of the City of New York’s regulations as applicable to their auctions.  Those regulations need to go further:
    1. An auctioneer should not just disclose the existence of a reserve, but reveal its amount without the clever manipulation of language.
    2. They should give details of the total sale results, including the buyer’s premium to the seller (who the auctioneer technically makes authorize it).
    3. Require disclosure of their financial interest in any item they may auction.
  4. Their weakest argument claims that reserve disclosure would cut any incentive for an opening bid.  I find that makes a good case for a reasonable reserve, or no reserve at all.  With no reserve, you are sure to get competition.  The bargain hunters will not let a good deal go unnoticed, and the market makers will compete.

 

If I can modify a comment by someone (Jim) to my blog, this legislation deals directly with the perception that today’s auction process perpetrates the reality of deception and fraud; this bill can change that reality.

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