The Role of Art & Antique Dealers An Added Value
While many dealers complained about auction houses pursuing private sales, possible conflicts of interests in working for buyers and sellers, their inflationary influence on the market, ethics and other issues, others felt it was time to stop complaining and for dealers to become more proactive in the market place. The main ways to do this were seen as through greater collaboration and providing more recognizable and differentiated added value through specialised services. This was seen by dealers as the most effective way to tackle auction houses, who they felt tended to be mainly interested in increasing turnover.
Many dealers noted also that despite their competitive differences, the two sides of the market have a symbiotic relationship: auction houses are very important to dealers for buying and selling, and dealers are key buyers at auction, especially when the market is flat. Some dealers had very positive working relationships with auction houses, although these varied between types of dealers. For example, there tended to be a generally more positive perception of auction rivals by dealers who had lower inventories versus a more competitive dynamic for the more traditional dealer working from a retail premises.
The discretionary way in which credit and other financial facilities were given to only select dealers or groups of them by the major auction houses was also cited as an example of how collaboration with auction houses worked better for some than others. Some dealers also felt that auction houses enabling or encouraging certain dealers to bid at auction in partnership with other dealers potentially created an environment that could stifle competition. It is important to note, however, that most legal jurisdictions distinguish between illegal “auction rings” and genuine joint acquisition agreements between dealers.14
Finally, some dealers also felt that there were signs that the aggression of the 1990s between the two sides of the market would give way to a new more collaborative relationship in future.
14
Auction rings involve a group of dealers agreeing not to compete against each other at auction in order to keep prices artificially low. One dealer from the ring is chosen to bid on a lot, and at the end of the auction, the dealers in the ring conduct a second auction among its members in which the lot is re-sold to the highest bidder, with the difference between the public auction price and the second, private auction price, divided amongst the members according to a pre-agreed formula. This practice is illegal in most major art markets (and a criminal offence in the US and UK) due to its stifling effects on competition and detrimental effect on sellers and auction commissions. There are, however, for the most part, genuine joint purchase agreements between dealers who want to purchase at auction but may not have the financial capacity to do so alone. These legal transactions can help to reduce costs and spread risk, and can promote competition by allowing more dealers access to the market. Joint acquisition agreements can be illegal if their object or effect harms competition. See Withers (2006) Bidding Practices At Auction (at
www.withersworldwide.com) for a discussion on the topic.
Historical & Future Perspectives 47
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