NYS Auction Legislation; Not Good Enough
March 8th, 2010 by admin
Presently before the NYS Senate is a bill, passed by the Assembly that is attempting to define how public auctions should operate. My comments below are my view on why this law needs clearer and more direct disclosure of the potentially deceptive and collusive actions presently allowed. Codified with this bill will availed an auctioneer to continue these abuses.
Below, is a link to the legislation and my comments on specific sections of the bill.
http://assembly.state.ny.us/leg/?default_fld=&bn=A01730%09%09&Summary=Y&Text=Y
Section 1 (S29) Requirements For Auction state it is the responsibility of the auctioneer for the truth in any statement relating to the auction.
Comment: The auctioneer should also be responsible for disclosing any relevant information that he knows regarding all lots that are not printed in the catalogue, and that information should be announced at the beginning of the bidding on those lots.
Section 2G Discusses the disclosure of extending a loan to a purchaser by the auctioneer as a general announcement.
Comment: By making a general announcement bidders do not know which lots are subject to loans by the auctioneer. Those bidding with the conditional advantage of obtaining the loan from the auctioneer on those lots have an advantage over regular bidders. Auctioneers should not be “bankers’ and loans should be illegal. This process requires inside information and collusion between the auctioneer and loan bidder. Also, the consignor should know that the auctioneer has made, in effect a side agreement on lots without the consignor’s approval.
Section 2H (VII) Discusses sending checks to the consignor along with a settlement statement.
Comment: This legislation should disclose on the consignor’s settlement statement all actual fees collected and specifically show all commissions (both Seller’s and Buyer’s Premium), along with a separate statement on the collection of sales taxes. If sales taxes were not collected, a form of tax exemption (purchaser resale certificate or shipping out of state bill of lading should be noted as to why the taxes were not collected on the sale. Presently, Sotheby’s and Christie’s do not issue their resale certificates to dealers or anyone consigning to an auction. For a dealer/reseller this income has no legal documentation to prove taxes were collected, yet these auctioneers are protecting themselves with the necessary documents they receive from the purchaser at the auction.
Section 2I Discusses the auctioneers disclosure of loans to potential purchasers or consignors as a general posting.
Comment: This section also fails to specify which lots these loans will be applied. Again, the issue of loans by the auctioneer to a buyer represents a collusive action against other bidders.
Section 2J Discusses insider information as it relates to the bidding process and the disclosure of the status of such bidders in the catalogue or posted signs at the auction
Comment: By making this information generalized and not specific to lots, this inside information is clearly an area for abuse and collusion. Simple disclosure of the fact that a party with inside information is going to bid is not only unfair to the general public but deceptive in its intent.
Section 3B Discusses auctioneer bidding up to the reserve price
Comment: This is the area of greatest potential for the “chandelier bidding” deception practiced by the auctioneer or anyone he may be colluding with to reach the secret reserve price point. It is the single most important reason to start the bidding at the reserve price. Again, the way the legislation is written, a public announcement or conspicuous disclosure of the auctioneer performing consecutive bidding to reach the reserve isn’t specific to lots where this tactic is going to be employed. This is a form of deception and fraudulent bidding perpetrated against the public and should be illegal.
To recap, this legislation while well meaning, has some serious flaws and fails to adequately protect consumers buying at public auctions. Issues like the the consignor’s settlement statement, loans, secret reserves, and insider information are all in need of enhanced disclosure or elimination to properly level the playing field for all participants in the public auction process. It has been crafted to mask these issues and keep the deception methods in place.
One area that the legislation doesn’t discuss is the Irrevocable Bidding process, which actually involves a financial kickback to the individual leaving the Irrevocable Bid, if his bid is superseded in the auction. On many counts, it involves fraud, inside information, deception, and collusive illegal activity. I would refer you to two of my blog commentaries on this matter.
http://newelsantiqueblog.com/?p=83
http://newelsantiqueblog.com/?p=109
Auction Draught; Dealers Rummage Around
February 27th, 2010 by admin
As bad as antiques dealers have fallen, so has the entire auction part of the trade. As I looked over at my group of upcoming Sotheby’s and Christie’s decorative arts sales catalogues, I had to pause at the thin volume and quality of inventory coming onto the market. I have three current (thin) catalogues from the Duopoly, and that includes Europe!
Well, maybe like many forms of market manipulation, these auctioneers methods are experiencing a bubble that is price sensitive. It also has been built on a policy to expand, which it has done by incorporating conflict of interest, double dealing, and deceptive bidding practices. The last time the auction business suffered its last great economic setback was due to speculation by the Japanese in the 1980’s. But the difference this time is that back then, the auctions, and in particular Sotheby’s, made comments to the effect that the decorative arts segment had maintained a consistent profitability. Not this time.
As I look at the slim pickings of goods on the auction market at the “top end”, the rest of that part of the trade is left with low priced, physically expensive inventory to maintain. There are rumors of any number of auctioneers who are in difficult times. As rumors of impending dealer’s leaving the trade abound, so do questions of which auctioneer is goings to shut down. One ex-auctioneer mentioned to me it’s too expensive to enter the auction business today, even with a 20% commission + 20% buyer’s premium. To obtain a 40% return and still not have any inventory equity seems either inefficient or is operating in a flawed manner. If a dealer could make 40% on a large volume basis, they too would be tempted to expand their successful methods.
For decorative arts dealers, this year took its toll on almost every category. The preponderance of dealers found that just staying alive was acceptable. I have to give it to Clinton Howell’s New York Times quotation on his lack of success in selling at the Winter Antiques Show. Honest and well, is it hopeless! You just can’t turn on people, especially young people to antiques. This is now a systemic problem and beyond the financial issue. Where’s the knowledge going?
Even with the Antiques Road Show success, I also enjoy watching the characters in the History Channel show, American Pickers. I would love to run around behind barns and in their rooftops. The people who the pickers visit are real and OK. That’s the magic of anyone who loves what they do and can share an experience. Perhaps that is my secret why I just flat out prefer the experience of talking to a dealer/seller and the place of the sale. As sterile as an antiques show can be, at least you hope to engage the dealers.
As I have always believed, all ships rise in a high tide; auctions and antiques dealers are riding the same wave. The money to invest into inventory is part of the problem. Having an educated public, anywhere near that of a generation ago and who understand more than just contemporary modern design, is the only option for a positive future in this industry.
Hoping For the Best, Antique Furniture
February 13th, 2010 by admin
In the commercial world of decorative and fine arts, the present economic environment has been tough on many areas of the industry, but especially hard on furniture. Is it price, design, or is it not minimalist enough? As one esteemed dealer at the Winter Antiques show lamented to me, was this “English furniture’s Waterloo”? In my mind, perhaps classic French and Italian or even Art Nouveau has seen much better days of demand and appreciation, but not as much as an iphone.
Antique furniture is the most underappreciated, least know areas of the art world. Most design schools give very short and cursory coverage of these basic function forms. The evolution of furniture design is embedded in the social and economic events of its time. But the most important aspect of good design is its ability to evolve and take different shapes and functions. When it comes to comfort the modern reclining chair has no equal in the antiques world; perhaps a Victorian upholstered Turkish chair? But that’s the point, why not a beautifully tufted upholstered Victorian Turkish chair with soft springs and deep green velvet?
Hoping against hope is a challenging position to take. Antique furniture is diverse, decorative, art, functional, and not (usually) free. I trade this commodity for a living and I am in the position of experiencing a down market. It could also be the best buying and holding opportunity. Most successful wealthy developers prefer to build and own for the long haul. Antiques dealers however, don’t have the luxury of a rent check each month to cover their investment overhead.
Ultimately, the survival of antique furniture comes down to a form that can function within an interior design scheme. That quality automatically qualifies them for use, however what makes them special is the curiosity of the buyer. That appreciation factor is quite different than buying modern reproduction furniture at a design center. It’s a shame the industry, both dealers and auctioneers can’t be united on this point. Along with the “Antiques are Green” concept, the public should be made more aware and educated as to antique furniture’s possibilities and value.
As a dyed-in-the-wool antiques aficionado, I want antique furniture to thrive and be lived with and used. It is a special experience of look, touch, and time; it’s a fun, pleasurable pursuit. Money is the means to the end, but not all the time and sometimes when you least expect it. The money issue should only be an excuse for something you can enjoy. Whether it’s a car, watch, or a home, it’s not in stock or bond certificate form. These items only pay the dividends of an emotional attachment to a certain time and place.
The State of the (Winter) Antiques Show
January 29th, 2010 by admin
I started writing this blog when the antiques business was pre “Great Recession” in January of 2007. It was when the venerated New York Winter Antiques Show was on its last legs as an event with past glories. At that time the selection of dealer inventory styles was expanding. The extent that the show has now evolved has made it a shell of its former level of quality and cache as well as a barometer of the present state of antique furniture.
Americana was the historical theme of the Winter Show. Years of diversification of styles have taken its toll on the home made wares. The place now to see more and better Americana is at the The American Antiques Show (TAAS). If this is what you like, this is the place to see it. Auctions aside, it had great diversity, quality, and ambiance for an intimate look at this specific field. No mid-century modern distractions.
What was a smaller, focused show made it a collector’s delight. It was almost like going to a grand Sotheby’s or Christie’s Americana sale in the 1990’s, when the catalogues reminded me of telephone books. The success of those sales was a combination of diversity, quantity, and quality. It is also something that this duopoly can’t quite do so easily anymore. It helps to be able to sell merchandise for a fair price when you don’t have to deal with a secret reserve or buyer’s premium . At a show like this, good dealers should not just explain what he is selling, but listen carefully to what the buyer wants, including price flexibility.
In thinking about this year’s newest form of the Winter Antiques Show, there should have been something for everyone. Whether it was figures from Antiquity or sleek 2nd half 20th Century furniture, this show had some samplings. However the biggest void now in this show use to be one of its hallmarks outside of Americana, great Continental 18th Century decorative arts. Where were all of those dealers whose inventory reeked of opulence and wealth? My friends, times in this industry are moving at light speed, and it doesn’t make a difference anymore if you’re a dealer or auctioneer. The buying public is fair game for everyone.
The great question now facing the direction of the antiques business is where now? Is the mid 20th Century style intractable in its grip on current taste, or is the English Arts & Crafts Movement now ready for a rebirth? Is it now chic to mix Contemporary Art with classical antiques or is there need for any furniture at all? As one dealer mentioned to me at the Show, “what should I be buying, I haven’t a clue” and another pondered is this show English furniture’s Waterloo? My only thought on the matter is, just let them buy anything.
Industry Control; Controlling Inventory.
January 18th, 2010 by admin
Physical possession of a fine or decorative arts item includes an added premium of control. Auctioneers like Sotheby’s and Christie’s have been using this advantage more than anyone in the industry. Their warehouses can be unbelievable experiences to walk through and see such quantity, quality, and diversity (sounds like Newel). But control of the next stop for these objects is really no different than what happens when I as a dealer sell something.
Stocking such quantities of inventory are amazing things to see and the antiques show format is a good try. These shows really do pale a walk-through of any of the duopoly’s warehouses which are spread out all over the world. As an acknowledgement of this need to control inventory, Christie’s is preparing a large, new, state of the art storage facility in New York City. They understand that warehousing offers total control of the movement of the merchandise; for selling or otherwise.
The investment in warehouse space as it presently exists includes public storage facilities used by many dealers to store inventory not on display in a showroom or needs restoration. As a rule they are a very popular small scale dealer approach, but the largest dealers essentially keep their merchandise in no more than 2 or 3 locations that are basically off limits to public access. Outside of Mallett of England, I can’t think of a dealer with an international presents or warehousing capability.
The auctioneer model is set up for holding inventory. Once the space is occupied with inventory, the turnover becomes a mute point. Keeping it filled with product is the challenge and the profits that come from a turnover stocked with a non-negotiable, seller agreed buyer’s premium. For dealers, it is a challenge to buy and hold capital in the form of inventory. While there are profits to be had, profits are less reliable, especially in today’s present economic slowdown.
Christie’s warehouse venture in New York City is quite industry specific. While it is not in an accessible location in Manhattan, the size of the space for the plans to store inventory would stagger one’s imagination of art and antiques value. Museum storage facilities would be comparable. While receiving a storage fee from someone, Christie’s can gain specific knowledge of what is there and who controls it too. That is also part of how they can operate with inside information on merchandise availability to not only sell at auction, but a bigger opportunity for private treaty sales. Call it what you want, the private treaty format (negotiated pricing) defines a dealer’s way of doing business.
The individual dealer model has to change in order to challenge the size, scope, and profits of today’s auctioneering method. The duopoly and Christie’s in particular have taken advantage of what dealers fear, storing inventory. But storing your own or consigned inventory shouldn’t make a difference when you can control the price and movement of the goods.
The opportunity to challenge the auction method of selling requires not just capital, but a new form of dealer organization that is based on a different financial and managerial configuration. It requires the skill of a modern corporation, like a Sotheby’s or Christie’s. Consolidation of dealer operations is the opportunity and challenge for creating such an entity along with their industry knowledge and skills. Most significantly, the internet makes that controlled inventory accessible.
Irrevocable Bid Redux
January 12th, 2010 by admin
As Enron was well versed in the smoke and mirrors of accounting practices, so too has Sotheby’s and of course Christie’s been encouraged with the buyer collusion offered by the irrevocable bid sham. This is now the duopoly’s new form of giving guarantees, and still collecting generous fees. With their intractable buyer’s premium, they will always be able to manipulate the market.
As bad as the gross conflict of interest on getting a seller’s commission and fixed buyer’s premium on an item, the irrevocable bid casts the greatest form of deceit on the buyer. The seller basically is made oblivious to this shenanigan, in the hope of the auctioneer’s ability to cheat the market with a new, higher secret reserve. Oh well, so much for printed estimates; the new secret reserve could be over that printed estimate. Who thinks these things up
If ever the process of rigging an auction were ever so blatant, they attempt to call a disclosure mark in the catalogue “transparency”. If this is transparency I guess you would start the bidding at that irrevocable bid. But the irrevocable bid is designed to generate the collusion with a willing buyer(s) to not just take a “third party interest”, but also potentially collect fees for actually losing the bid. It sounds so much like how outlawed “dealer rings” use to work.
As a competitive bidder against such inside information, why should I be at such a disadvantage? Mixing in “chandelier bidding” with a secret reserve/irrevocable bid, where do you draw the line in the public auction process? The fault lies with dealers and individuals who are seduced with the auctioneers swagger and ability to get the goods. By creatively using a form of manipulation in the pricing process they are in better control of the ultimate disposal of the inventory. However, a stocking dealer should be on equal footing with these auctioneers, without the need for deceptive enticements.
The control of the merchandise that passes from the seller to the point of sale through the auctioneer has become a grey area for manipulation. The buyer’s premium is the money tree; guarantees and irrevocable bids are add-ons to this duopoly’s industry auction design. Go explain this process to anyone outside the industry and they’ll think it can’t really operate that way. Think again.
Industry Evolution
January 3rd, 2010 by admin
I start 2010 with the anticipation that it will be better than the previous year. After reading Niall Ferguson’s book, The Ascent of Money, the road to riches over time has evolved quite dramatically in form and format. So as I look ahead, where have antiques and art come from and fit into the future of money?
Perhaps the greatest hope (and tidbit from the book) for an aspiring member of the art and antiques trade is the fact that the great Rothschild family dynasty started in Austria as an antiques dealer. Why didn’t the antiques market evolve like Dutch tulips, real estate, oil, or government bond? Simple, the Rothschild’s collected, and collecting is personal. Collecting is not underwritten by a market exchange; that would be too simple, but by a form of physical ownership that enhances the pleasure of possessing the object. It seems to me that the pleasure of ownership can be competitive and expensive, but pleasure is also relative.
My time of reference for the art and antiques industry starts in the pre-buyer’s premium era, when auctioneers, dealers, collectors, and interior designers had equal footing in their ability to buy and sell. Values were stable but for a whiff of inflation in the late 1970’s and 80’s however supply to the market was steady. The ability to speculate in the industry started with the beginning of the buyer’s premium, when the adventurous Sotheby’s and Christie’s auctioneers got so confident with their new innovation. That they were convicted of colluding only meant they had lost the battle but still won the war on how they continue to operate in lockstep. But with today’s economic convulsions, opportunities lurk for innovation in the industry.
The magic of the auction extravaganza is undeniable; however their manipulation of the buyer and seller is hidden in the fine print and the smoke and mirrors process of chandelier bidding, commission/buyer’s premium conflict of interest, etc, etc, etc. Those traits which artificially affect market pricing usually at some point come in conflict; the auction market seems to bear out that fact as the Sotheby’s/Christie’s duopoly have been forced to change how they operate (guarantees are now not given out). This is the first of many cracks in their armor. With nimble competitors attempting to change the rules of auction practices, the market will continue to evolve dynamically.
Just as revolutionary and industry shaping as the effect of the buyer’s premium, so too will market forces potentially alter the landscape of trading art and antiques, hopefully without the collusion caveat. As with any commodity, possession has advantages, whether in the ground (oil), in a bank vault, or in a warehouse. To control how and where an item is sold requires knowledge of the market and the ability to deliver the goods. With that, the transparency of negotiation between two parties, including by private treaty relationships offers the next best hope for the dealer model to propagate.
Happy New Year; Looking Forward to 2010!
December 15th, 2009 by admin
I can’t wait for 2010, because it must be better than 2009 for the art and antiques trade. If nothing else, there are changes and underground currents in the industry and wealth in general, that should have an effect on how and why these items are traded. As a matter of some economic thought, financial catastrophes push the evolution of money and its value.
The last year has been more than a challenge in our industry, and in particularly the decorative arts and furniture trade. This segment of the trade never really was influenced with a speculative impulse. When the Japanese speculation abandon the Impressionist market in the 1980’s the effect on fine arts was quite separate from a decorative arts market that was still thriving. This current economic storm has both decorative and fine arts in its grasp, but for different reasons.
In 2009, the decorative arts market realized that a speculative price has nothing to do with the lack of any demand. The churn of auctioneers and dealers was always a given, and the European/American pipeline was solid and time tested. Well, wake up to the New Year 2010! Selling this stuff now requires knowledge and not just money.
For some time, there has been a balance of supply of available inventory around the world; after all, we live in a world market economy where goods are everywhere on the globe. At the end of the day if you don’t have a demand you don’t have anything of value. That is why items of good quality, style, and even functionality, should not be worthless. With the Internet as the most powerful tool for distributing that information, the future certainly won’t go backward. So what other innovations are possible in 2010?
Well, we always have those gala art and antiques shows. There’s lots of glitz, high prices, and usually pretty good inventory on display. I would question why that format hasn’t worked in drawing significant public awareness to these markets. I would give more credit to the Antiques Road Show for creating mass appeal. It is also the impersonal set-up of cookie cutter displays that seem so dry and not as exciting as actually going in a shop. Shops are all so different in presentation and ambiance. For me, it is exciting and is part of the thrill of being introduced to new dealers, with their own knowledge and style of doing business. Perhaps next year we can make dealer shops the go to destination, as encouraged by the National Antiques Week in England.
The last part of my wish list for 2010 is for the creation of a dealer organization that understands and works for dealers towards improvements in the industry and its relationship with the public and government. The opportunities for every aspect of the industry next year are immense; it’s there for those in the industry who are imaginative and unconventional in reaching out to one’s inner passion to own and enjoy these things.
A Classic Small Business Model, the Antiques Dealer
December 1st, 2009 by admin
With all the public discussion on the present state of the economy, it has been stated by many economists, that small businesses are the engine of growth for jobs and recovery. Yet, I find practically nothing in any of our government’s actions that foster such possibilities. Dealers of art and antiques clearly experience what is wrong with the economy and the impediments they face to help bring about an upturn in our general conditions.
Entrepreneurs of small businesses have many similar qualities that have to do with the scale of operation, financial needs, and government regulations that are not easily distributed to separate divisions and departments. It all seems to require a total focus and responsibility of one individual, the owner, who can delegate to a few trusted employees. A “few” in the art and antiques industry is less that 10, and in most cases 2 or 3. However, I’m sure there isn’t a small business operator who doesn’t relish the opportunity to be in a position to expand their staff if business warranted such a need. I for one, would love to hire an additional employee or 2 or for that matter 100, if my business were to prosper. However, some formats of business are designed to work efficiently only on a small scale. Art and antiques are that way.
The challenges of surviving as a small business today make the thought of expansion seem like a far off possibility. Financial considerations aside, dealing with the needs and requirements imposed by the government for each individual employee is daunting. For each one, I must deal with Federal, State & City income tax withholding, Social Security and Medicare withholding, Workman’s Compensation, Unemployment Insurance, NY State’s new Metropolitan Transit Authority Tax (implemented to be retroactive from March), health and dental insurance contributions, Disability Insurance, etc, etc, etc. It would be nice if there was something left to give to an employee retirement or profit sharing plan; but more record keeping is not what I’m striving to do with my precious time.
With our national unemployment hovering over 10%, everyone in our industry is cutting back staff; the Sotheby’s/Christie’s duopoly has left plenty of blood on the street with their staff reductions and department consolidations. Even the best and brightest young people in the museum world are being let go. A turnaround in our industry will not necessarily equate to new hiring so quickly. So if the biggest institutions in our field are cutting back what is the prognosis of growth for the rank and file small operators that make up the largest segment of this industry?
The short answer is that small business operators, like antiques dealers, are resourceful and tenacious individuals who survive with guile, determination, and a passion for what they do. We work in this trade because we expect the unexpected and enjoy doing it as a vocation as opposed to hobby; not too many small businessmen in other industries can say that.
Antiques and the Luxury Market Today
November 15th, 2009 by admin
In the present state of the antiques market, it seems like an eternity since there was a feeling that our products could be bought and sold with any kind of rapidity. Turnover is not happening, and any sale is a welcomed event. Will this ever change; will there ever be a broad based rise in industry activity, and what kind of luxury item are antiques anyway?
While the contraction in the number of dealers at all ends of the market has been increasing over the last decade, the rate has definitely picked up with the present economic recession. You can see it in vacant stores and turnover of dealers participating in shows. You can even see that situation with the Sotheby’s/Christie’s duopoly having fewer and thinner catalogues with combined periods and categories. Another glaring feature of the present state of the economy is the folding of important shelter magazines that featured antiques and interior decorating such as Metropolitan Home and House & Garden. Is this to be a continuing phenomenon or have we hit a bottom?
By many accounts this present economic recession is the deepest since the Great Depression, but many economic analysts have also concluded that we have reached bottom and have started to show some signs of a recovery. My grandfather’s business failed in that period because his customers couldn’t pay him; it was also the time (1938) that he went into the antiques business. With taste as a wild card, antiques should benefit with a recovery, along with cars, watches, and real estate. At least one would hope so, but how much longer can we wait for the turnaround to affect this segment of the market? Antiques and art somehow present a different set of purchasing criteria and methods than buying a car, watch, or a home.
I’ve always felt that the expression “all ships rise in a high tide” is particularly relevant to the antiques industry. Higher dealer turnover has a definite trickle-down effect. For there to be a reversal of fortune in this business an economic turnaround is going to be imperative. The other side of the equation is not the monetary value of the items, but the social demand to want and live with them. Aside from the money, antiques require some knowledge and an appreciation of what they are. It is a different buying experience than purchasing a Mercedes Benz or Toyota, that you intend on getting rid of after the lease or you want to trade in for a newer model. That Rolex watch gives a status level that is different than owning a Chippendale arm chair.
In most cases luxury items have been created with well a thought out and implemented image branding. If you look at how successful industry products and services are sold, both new and old, the shaping of that image is critical. Luxury must be presented as having an added or enhanced value. Need I say more about antiques; but how do dealers creatively present that image? At least the auction duopoly has succeeded in doing that.