Auction Houses Told to Improve Transparency in Reporting Pricesby
New York’s Department of Consumer Affairs clarifies the law
Firms must disclose prices net of fees if guarantor is buyer
Auction houses, whose public sales are often obscured by undisclosed fees, have to report the prices of the artworks they sell in New York with more transparency.
The city’s Department of Consumer Affairs, in a recent clarification to its law on auctioneers, outlined how companies should disclose prices for works that were guaranteed by third parties. The fees paid to the guarantors who end up buying the art must be subtracted from the total price reported to the public.
The disclosure of the selling price net of fees “reflects the true price paid by the bidder and promotes greater transparency in the auction process,” the department said in the letter dated Sept. 9.
“It levels the playing field,” said Mary Hoeveler, an art adviser in New York. “It’s important that the selling prices are not distorted by backroom transactions that are not made public. It’s not accurate representation of the actual price.”
Christie’s and Phillips have been reporting auction prices that consist of the hammer price and the commission paid by the buyer -- even when they later pay a third-party guarantor a fixed fee for ensuring that the work sells. This practice results in inflated prices when the guarantor buys the work and receives a fee, which effectively amounts to a discount.
Christie’s said it will change its practice and “publish the price realized inclusive of buyer’s premium and net of any financing fee,” according to a spokeswoman.
“These prices will be posted on the Christie’s website in the results section for the relevant sale,” the auction house said. “While Christie’s views payment of the third party guarantee fee as a separate transaction to the purchase of the lot, we are happy to comply with the DCA’s September 9 interpretation of the applicable regulations.”
Michael Sherman, a Phillips spokesman, said the company is “aware of the letter from the Department of Consumer Affairs. Phillips is transparent in its disclosure to the public about the existence of any guaranteed lots in our sales, and follows all reporting requirements as written in the rules. Guaranteed lots are identified as either being in-house or through a third party.”
Sotheby’s has been reporting prices net of fixed fees since May. The department’s clarification was in response to Sotheby’s letter seeking guidance on how prices should be reported, since there was a discrepancy among the auction houses.
“It was important for the market that the reporting obligations of auction houses were clarified and universal,” said Lauren Gioia, a Sotheby’s spokeswoman. “We followed a helpful process offered by the DCA for businesses to obtain guidance on the interpretation of the regulations governing their industries. We are pleased that DCA found that Sotheby’s existing reporting practices were correct.”