I have to admit, I never thought an auctioneer could so clearly elaborate on some of the critical issues that plague the auction process in our industry. Robert Brooks, Bonham’s Chairman, displayed candour and truthfulness in stating “The minute an auction house moves away from simply being an intermediary between buyers and sellers and takes on the role of financier, it starts to change its core character as well as the relationship between the seller, his agent and the buyer.”
His comments, however, were directed not just to the public, but specifically towards the Sotheby’s/Christie’s duopoly and how they attempt to blur the lines of “agency” by acting as a financier in the transaction. Mr. Brooks understands that only this duopoly can pull it off at the expense of his firm’s inability to compete on their level. But if you can’t compete, at least try to do the right thing, and that is what he is betting on. He brought out many significant points, like the unsophisticated practice of not properly segregating client funds and surmised “use of guarantees among some auction houses must ultimately erode the credibility of the industry and thus its stability”.
This final statement is the most significant point he makes, because it is a recognition that deception is not in their best interest. Whether it is a non-disclosed reserve, sham bidding, commissions from the seller and buyer (non-negotiable buyer’s premium), and even the practice of offering special payment terms to selected buyers (blog 11/19/07), credibility can become something that will become more recognizable. Of course the irony is that if the auction process was totally transparent, it might upset the stability of the industry, but for the better.
But Mr. Brooks, I hope you know that dealing with this duopoly is not just making a fuss over the next round of buyer’s premium increases. François Pinault, owner of Christie’s and William Ruprecht, President of the NYSE listed Sotheby’s are seasoned corporate leaders who know how to direct and guide their firms through these public relations issues. They both have survived quite nicely after both firms were convicted on price fixing and collusion back in 2000. With the use of guarantees and such, their ability to separate themselves from the pack is all the more glaring and now so accepted by the public’s attraction to their every press release.
The rest of the auction industry lives off their precedent setting methods. I am at a loss to think of who has such financial and political capital in their industry to protect and expand their interests. This is isn’t a local issue in New York, London, or Singapore; they have made it a world wide practice. The irony is they are in the best position to enjoy the financial benefits of doing it right. However, the duopoly won’t want to give up their control of the industry unless someone (auctioneers, dealers, buying public, or government regulators) is willing to stand up to their practices and force a change.