It’s auction season in NYC, and that means that in the next few months hundreds of millions of dollars will be traded by the city’s most privileged people. But this season begs a question: do auction houses need more monitoring and regulations? Some say yes, but others disagree. But with that much money trading hands, the lucrative art trade seems an appropriate place for regulations to be put in place and obeyed.
Art sales in NYC generate about $8 billion every year, but auction practices and regulations have not seen any significant changes in over twenty years. Some feel that monitoring at auction houses needs to be increased as the value of art has become more lucrative—today art brings in more than double what it did two decades ago.
One of the top practices under scrutiny by critics is called “chandelier bidding,” which is essentially a fictional bid auctioneers pretend to spot to get the sale going. They point at chandeliers or into a corner of the room and call out a number, as if someone really had bid.
“The time has come to give up this fiction that there are actual real bidders,” gallery owner
David Nash said. But the practice is legal, so long as auctioneers stop before reaching the sale item’s reserve price. And auction houses say the practice is well understood and harmless.
One practice that galleries are required by law to follow is the conspicuous posting of prices for any art for sale. But since the law is not enforced regularly at art galleries, most don’t have prices posted—and often don’t even have a price list available, according to a New York Times article. It is, however, enforced against other retailers.
Lastly, concern is rising over third-party participation in sales. Guarantors can be brought in to ensure a piece sells for a specified commitment. If a piece sells for more than the price a guarantor committed to, they get a cut (30%-50% generally) of the sales. This is not the case for most sales, but many of the most expensive works are sold with guarantees. This creates a discord in the sale—it tilts the playing field makes it so that not everyone is paying the same price.
“If the price is not the price because the guarantor has bought it and gotten a discount, there is no longer any transparency in the market,” said Michael Moses, who was a NYU professor.
There have been a number of attempts to revise laws surrounding auction houses and galleries over the years, but they have been continually shot down in legislation. It’s certainly still being pushed for today, but many do not believe the market needs adjusting.