Public sale in which items are sold to the highest bidder. Auction houses, the organizers of such sales, act as intermediaries between buyers and sellers and, in return, typically charge one party or both parties a percentage of the price attained for their services. As a type of commercial transaction, auctions are not unique to the trade in art and antiques, but they play a major role in art-related business because they establish benchmark prices and because they make the price formation process transparent. Art auctions have a long and varied history, going back to Classical antiquity. The modern history of auctions, as a major commercial platform for art buying and selling, begins at the turn of the 18th century in Flanders and Holland, before taking root a few decades later in Paris and London. In Paris, for many years any type of auction could only be administered by state appointed ministerial officials, the commissaires-priseurs. The French auction monopoly, which goes back to King Henry II, was abolished in 2001 under legal pressure from the European Union. The art auction market in Britain became concentrated, at an already early stage, in the hands of the global players Sotheby’s and Christie’s.
Traditionally, auction houses stand in competition with private dealers. Although such opinions are difficult to verify, auctions are believed to account for slightly less than one half of the international market volume of the art business. Major auction centers are London, New York, and Paris; locations in China have assumed an equal importance in the 21st century, although the Chinese art market is notorious for its lack of transparency. The accelerated pace of digitization, since the beginning of the 21st century, has unlocked, for almost all auction houses, a global market that was previously inaccessible. In 2018 Sotheby’s announced the acquisition of Thread Genius, an artificial intelligence firm, to further improve online marketing capacities. However, pure Internet auctions remain the preserve of inexpensive items offered on platforms such as eBay, whereas more expensive and prestigious items are still being sold through brick-and-mortar auction houses, which use the Internet principally as an advertisement and marketing tool (see also E-commerce and the art market).
Auctions have existed for at least 2,500 years. Herodotus (?484–c. 427 bce) wrote of auctions of nubile women held annually in Babylon, and the Romans had a well-organized auctioneering system, which included works of art, for instance when legionaries sold off loot sub hasta (lit. beneath the spear; asta remains the Italian for auction). Cicero’s second oration Against Verres (70 bce), an indictment of a corrupt politician and obsessive art collector from Sicily, contains specific references to auctions in ancient Rome, which the lawyer and rhetorician cites as institutions that allow for the establishment of objective benchmark prices for artworks. During the Middle Ages, auctions seem to have fallen into disuse. The roots of the modern fine art auction business can be traced to the Low Countries, where, in the late 17th century and throughout the 18th, paintings, prints, and other objects were sold by “Dutch-style” bidding, in which the price of a lot is set high and then lowered incrementally until a bid is accepted (see Art market).
The Parisian gallery director and auction impresario, Edmé-François Gersaint, whose shop on the Pont Notre-Dame in Paris was painted in 1720 by Antoine Watteau, turned auctions into a form of luxury consumption, as his richly adorned catalogs attest. Gersaint had first observed auctions in the Netherlands, but opted for “English-style” bidding, which privileges the highest bidder. General auctions were being held in London by the late 17th century, encouraged by the arrival of William III from the Netherlands in 1688. By the end of the 18th century Sotheby’s (est. 1744) and Christie’s (est. 1766), who, between them, account for around two-thirds by value of all works of art sold at auction throughout the world, were well established in London, as were Phillips (est. 1796) and Bonhams (est. 1793), the other two leading British auction houses.
Different companies tend to have different terms and conditions of sale; there are also vast variations in the tax codes of art auction houses and in the laws governing the movement of artworks (see Art legislation). The relative absence of government legislation enabled auction houses in London to enjoy a long period of international supremacy. Sotheby’s essentially became an American company in 1983, when it was purchased by shopping-mall magnate Alfred Taubman (1925–2015), who not only initiated a period of great expansion for the company but also embroiled it in a price-fixing scandal involving competitor Christie’s, which in 1998 was acquired by the French businessman François Pinault. Compared to the global reach of many originally English auction houses, Germany’s auctioneers never attained global standing: the country’s oldest auction house, Schopmann in Hamburg (est. 1823), had to close in 2010. In Asia, on the other hand, the spectacular growth of the Chinese economy in the 21st century propelled the native market leader, Beijing Poly International Auction Company, into a position of a global player, while concurrently in France, the rise of Artcurial brought new luster to the Parisian auction scene.
2. Structural organization.
The organizational principles of auctions have changed very little over time. The auctioneer has total discretion over the sale. Every lot usually has a reserve price, fixed in consultation with the vendor, which is the minimum for which the work of art can be sold; reserve prices may be different from estimates and, if so, estimates are established at a slightly higher level. Most catalogues, whether print or online, contain estimates to guide potential buyers. At the sale, the auctioneer will also carry a list of commission bids from potential buyers who cannot be physically present at the auction. Similarly, phone bidding has become very popular since the 1960s, especially with seriously invested absentee bidders. The auctioneer raises bids by fixed price bands and can refuse a bid that does not reach the next increment level. An auctioneer may take bids “off the chandelier,” forcing the prices up when there is no competitive bidding in the room, thus pushing the bids of a single buyer up to the vendor’s reserve, or registering commission bids from absent participants. Although there is still relatively little legislation affecting auctions specifically, business practices of auction houses have now come under the scrutiny of local authorities and consumer bodies more frequently. A famous example was the price-fixing scandal involving commissions raised in lockstep and through secret collusion between Christie’s and Sotheby’s. It culminated in 2002 and resulted in major fines leveled against the market leaders as well as commensurate damages to the companies’ brands.
In the past, auctioneers were reluctant to admit that an object was unsold, as this failure could suggest that the market was weak, thus discouraging buyers. Instead, they would make up the name of a fictitious buyer, whereas they are now required to make unsold lots public. Although the auctioneer works for the vendor, most of his income derives from the buyer. This revenue structure was established following the introduction, in 1975, by Sotheby’s and Christie’s in London of a 10% buyer’s premium on top of the hammer price, subsequently raised to 15% for most lots by 1993. The new income stream dramatically changed the way auctions operated: the major auction houses will sometimes compete to secure large collections by lowering their seller’s fee to close to zero. Auction houses now use sliding scales for both the buyer’s and the seller’s commissions. The buyer’s commission of the two market leaders, for instance, runs from 25% to as low as 12.5% but can be further negotiable for truly outstanding lots. Moreover, financial guarantees and “irrevocable bids”—a gamble in which a buyer promises to buy the object at a fixed amount or else participates financially in any bids exceeding his own—and other similar constructs are occasionally used to secure the sale of high-value lots even before the bidding begins. Buyers may well contribute most to the turnover of the auction houses, but the drive to secure desirable goods puts the vendor in a privileged position.
3. Subsequent issues and developments.
For the longest period of their history, auctions principally catered to dealers, who obtained their stock through bidding, before selling individual objects to private collectors. Although many exceptions existed, auction houses were generally wholesale suppliers, and dealers acted as retailers. This model became increasingly obsolete as auctions became media events in the 1980s, especially with the emergence of Japanese buyers acquiring with fanfare Post-Impressionist works, such as van Gogh’s Sunflowers, for unprecedented record prices, which changed the nature and the public perception of auctions (see also Record prices). These activities culminated in 1990, when both Christie’s and Sotheby’s set new records, respectively selling van Gogh’s portrait of Dr. Gachet for £82.5 million (see fig.) and Renoir’s Au Moulin de la Galette for £78.1 million to a Japanese businessman. The economic recession of the 1990s soon precipitated the collapse of the art market, and, by 1992, Sotheby’s and Christie’s were struggling to make a profit as turnovers had halved. The crisis of the top-end of the art market at the end of the millennium changed into an unprecedented auction price rally during the first two decades of the 21st century, yielding, for instance, a sales volume of almost €374 million for the Yves Saint Laurent and Pierre Bergé collection in February 2009.
Undoubtedly, the $450 million paid in fall 2017 for the Salvator Mundi painting attributed to Leonardo da Vinci and acquired for the newly opened Louvre Abu Dhabi museum represents a new paradigm shift in the auction business. In a bravado act of marketing, the panel was not only offered, anachronistically, in a contemporary art sale together with a Last Supper by Andy Warhol, but it also signaled that record-breaking art auction results can take on new levels of distinctly geo-political dimensions.
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- “Who Bought That $450 Million Leonardo after All?” NY Times (Dec 12, 2017) https://www.nytimes.com/2017/12/12/opinion/who-bought-that-450-million-leonardo-after-all.html (accessed May 23, 2018).
- Capon, A. “Sotheby’s Buys AI Start-up in Bid to Connect Images with Buyers,” Antiques Trade Gazette (Jan 27, 2018) https://www.antiquestradegazette.com/news/2018/sothebys-buys-ai-start-up-in-bid-to-connect-images-with-buyers/ (accessed May 23, 2018).