Art Market Report – Deceptive Deals and Underhanded Agreements

Art Market Report – Deceptive Deals and Underhanded Agreements 

underhand.jpgI receive dozens of emails every day reporting new exhibitions, auction results, gallery openings etc. most of which I just briefly skim over but the other day I received an email that from a highly reputable source that completely blew me away. As a journalist I have the privilege of receiving information about the art market that many people don’t get to know so when I receive information that could effect people that read my blog I feel obliged to pass it on.

The report that I received from the highly trustworthy source who is privy to highly sensitive information on the art market was that some of the auction houses are making agreements with dealers (many of which the auction houses have close relationships with) that basically state that the dealer will make the first bid or bids (rival bids) on an artwork that they are interested in buying in an effort to start the bidding momentum in exchange for a reduced buyers commission if they win the auction. As the bids are actually genuine bids this practice is not illegal but because the auction houses report the final sale price with the full buyers commission (having charged less than the full buyers commission) added on, the reported final sale price will be incorrect and therefore misleading.

Another variation on this tactic that I was also made aware of is that some auction houses are getting dealers to make the opening bid for an artwork that they are interested in buying to encourage others to bid in exchange for a share of the buyers commission if that opening bid that the dealer made is the winning bid (no other bids made). By offering a share of the commission as opposed to reducing the buyers commission the auction house is attempting to make the practice seem less unfair to other buyers by taking the full price including full buyers premium from the dealer then giving some of the buyers premium back as opposed to just reducing the buyers commission.

It is unfortunate that these sort of practices take place but with the increased pressure on auction houses to continue to improve results I am sure that there will be many more similar reports in the future.

Nick**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

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2 Responses

  1. Hi Nick, maybe I have misread it but aren’t those two tactics the exact same tactic? How are they different? In each case the dealer bids and if he is the winning bidder he gets a discount on the buyer’s premium.

    By the way, does something like this have the potential to kill the auction market? Who wants to bid when they know how unfair the market really is.

  2. The tactics are very similar but they differ in that one involves making the opening bid only and the other involves making the first few bids. The pay-off also differs slightly for each as well

    Nicholas Forrest
    artmarketblog.com

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