Thursday, September 29, 2011
Sale commissions and recovery fees: how much is too much?
The delay in resolving that seemingly epochal transaction prompted a number of European auction houses to initiate new regulations at their sales of Asian art, requesting Asian bidders to pay a deposit prior to the sale. Whether those requirements will now be relaxed in the light of the apparent settlement of the Ruislip account remains to be seen.
The sticking point for the Chinese buyer who bought the vase at Bainbridge's was the auctioneer's commission. The hammer fell at £43 million but once the commission and VAT had been added, the bill soared to £51.6 million. On paper at least, that staggering buyer's premium (which includes VAT) made the auctioneer Peter Bainbridge an instant millionaire. But it now seems that the Chinese buyer only agreed to settle the account after re-negotiating the auctioneer's fees.
The hammer price for the vase was extraordinary in itself, but arguably even more bizarre is the idea that an auctioneer can suddenly find himself almost £10 million richer simply on account of having been fortunate enough to receive instructions to wield the gavel for an object about which he knows next to nothing. Nice work if you can get it, but how fair and reasonable is that?
There are no rules and regulations on auction fees, nor indeed on an art dealer's commission. It is widely known that dealers in contemporary art generally take up to 50% of the sale price of works they sell on the primary market, with the other 50% going to the artist. These percentages may change in favour of the artist as his or her reputation grows. That traditional arrangement — often open to negotiation — is regarded as broadly fair given the risk the dealer takes to promote the artist — the cost overheads of running a bricks and mortar gallery, catalogue publishing, and so on. But it has also encouraged some artists — Damien Hirst perhaps most famously — to demand a larger slice of the cake once fame and celebrity has properly kicked in.
The academic Olav Velthuis, who conducted extensive research on the the economic and social structures of the art market (Talking Prices: Symbolic Meanings of Prices on the Market for Contemporary Art), found that some dealers considered their own 50% cut to be too much once an artist had reached a certain price point. From that moment it suddenly seemed disproportionate — and unfair to the artist — for the dealer to be taking such a large percentage of the transaction.
Today, vendors consigning high-value goods to auction can often negotiate the auctioneer's sales commission right down, sometimes playing one auction house off against another to do so. Auctioneers are prepared to cooperate because they know they will gain on the buyer side through the premium set out in the conditions of sale, and which is generally non-negotiable.
And yet, in the case of the Ruislip vase, the Chinese buyer has indeed finally succeeded in negotiating a more favourable premium. Presumably Bainbridge's were only too willing to cooperate given the alternative of continued delays and perhaps even the possibility of not being paid at all (the spectre of the Yves St. Laurent/Pierre Bergé Chinese rat and rabbit still haunts the market).
As prices continue to rise, are we likely to see more of this kind of thing? Will auctioneers come under increasing pressure to put a cap on their buyer's premium? Somehow £10 million seems an unreasonable amount to levy for a few minutes work. And so it has indeed proved.
why it cost Michael Bakwin $3.1 million to get his stolen pictures back (including his Cézanne, shown right)? Exactly what is the cost breakdown behind that sum? Understandably, Bakwin is suing for recovery of those costs. But is he suing the right people?
When it comes to recovery fees and commissions, how much is too much?