When I was trying to relax this past Sunday morning, I picked up the latest edition of The Art Newspaper and was stunned when I came upon an article explaining how the new English Regulatory Reform Act of 2013 would exempt the auctioneer’s from being a party to a public sale. At auction, the restrictions and disclosure of financial arrangements are only applicable to dealers who form a “ring” or limit the number of potential buyers, but not on the auctioneer’s side of a deal.
I can’t image how proud I would feel if I were a member of the British trade. First they blinked at challenging the auctioneer’s buyer’s premium back in the mid-1970s, and now your own government in coming down against the dealer trade. When you read about the restrictions and new regulations, I am totally in favor of them. I think that disclosure of inside information is good for the market. Since governments can’t control or regulate the financial markets from a meltdown, let us start in my unregulated industry. Great, but why not level the playing field for disclosure of auctioneer collusion with another interested party.
Disclosure of a transaction within the auction world is of course, the biggest joke that Wall Street envies. The way this new Reform Act works, the info on the irrevocable bid somehow does not need to be disclosed in the same format required by non-auctioneers. It seems strange that the auctioneer, the consignor, and another party (or more) does not have to disclose the same information requirements of the new law.
To be fair, I think the British trade has been a good model for the US, who have an even more flawed structure as a representative organization. It really comes down to the classic duopoly approach that leaves one two-headed monster (guess who they are) running their own show. I would love to lead the charge to dismember them, and would suggest that only a class action be initiated to demand equal status as the auctioneer who is running the event in question, with these new rules.
The Sotheby’s/Christie’s duopoly has had its share of publicity regarding hedge fund activity, record prices at their auctions for contemporary art, and having made a major push into the private treaty/dealer space for transactions. They pride themselves on being the most egregious offenders of conflict of interest in their major transactions and way of doing business.
These new Regulations requires that the “ring” dealers submit a written contract to the auctioneer, so the auctioneer is aware of the pending transaction. But what of the dealers or other bidders who does not have the privilege information that an auctioneer may have with its consignor and or an interested third party? This is a fundamental flaw in the regulations and with their international scope, will allow them to funnel contracts to auction merchandise in the country that best serves their and their interested 3rd party’s interests.
This leads me to the point that dealers must and will have to evolve in the face of the unregulated, manipulative, and fraudulent methods employed by auctions. Secret reserve and chandelier bidding are blatant deceptions; the British government condones that and leaves dealers like myself with another excuse to not partake in their farcical way of operating. Unfortunately, this is the power they exercise.