Public sale in which items are sold to the highest bidder. Until the 20th century the major trade in works of art was carried out primarily through dealing, with the dealer and the Marchands-merciers acting as middlemen between the vendor and buyer. However, the sale in October 1958 at Sotheby’s auction house, London, of seven Impressionist paintings from the collection of Erwin Goldschmidt (1882–1954) for £681,000 shifted the balance of power. After this sale the auction houses, particularly Sotheby’s and Christie’s, managed, through their large marketing and promotional machines, their ability to offer financial deals to both prospective sellers and buyers, and their development of international networks, to cream off much of the trade that had traditionally passed through dealers. Dealers are still, however, the biggest customers of the auction houses, both as sellers and as buyers.
1. Early history.
Auctions have existed for at least 2500 years. Herodotus (?484–c. 427 bc) 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). The roots of modern fine art auctions, however, can be traced to the Netherlands, where, in the late 16th century and throughout the 17th, paintings and prints were sold by ‘Dutch’ auction in which the price of a lot is set high and then lowered until a bid is accepted (see Art market). General auctions were being held in London by the late 17th century, encouraged by the arrival of William III from the Netherlands in 1688. Any works of art on offer might well be the former possessions of bankrupts and be included alongside more homely objects. By the end of the 18th century Sotheby’s and Christie’s, 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.
The organization of an auction has changed very little over the years. The auctioneer has total discretion during 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. Most catalogues contain estimates to guide potential buyers, and the reserve price is often at the level of the low estimate, although in weak trading conditions vendors will have been persuaded by the auctioneer to accept bids below the low estimate. The auctioneer will also carry a list of commission bids from potential buyers who cannot be present at the auction. The auctioneer raises bids by fixed price bands and can turn away 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 law relating to auctions, they now come under the scrutiny of local authorities and consumer bodies. In the past, auctioneers were reluctant to admit that an object was unsold as it could suggest that the market was weak, so deterring buyers. Instead, they would make up the name of a fictitious buyer, but they are now required to make unsold lots public. Although the auctioneer works for the vendor, most of his income can derive from the buyer. This situation arose following the introduction in 1975 by Sotheby’s and Christie’s in London of a buyer’s premium of 10% on top of the hammer price, subsequently raised to 15% for most lots by 1993. This extra revenue dramatically changed the way auctions operate: the major auction houses will sometimes compete to secure large collections by reducing their charge to the seller to a figure approaching zero. Buyers might contribute most to the turnover of the auction houses, but the drive to secure goods to sell makes the vendor supreme. The introduction of the buyer’s premium was greatly opposed by the dealers, the main customers of the auction houses, but they have accepted it and enjoy certain benefits over private buyers at auction in terms of credit facilities. Dealers have been known to form ‘rings’ at auctions where, having agreed beforehand on the top price that should be paid for various lots, they buy the best items very cheaply and then share the extra profit later. Rings usually operate either at regional salerooms or in certain specialist markets, in particular rugs and carpets, silver and jewellery.
Different auction houses tend to have different terms and conditions of sale; there are also vast variations in the tax burden of art auction houses in the industrialized world and the free movement of works of art (see Art legislation). The relative absence of government legislation enabled auction houses in London to enjoy a long period of international supremacy. In France, entrenched legislation has given the limited number of commissaires-priseurs a monopoly over the holding of auctions. The single European market should enable such British houses as Sotheby’s and Christie’s to hold auctions in France, which should greatly increase the prestige of French auction sales. In Germany, the autonomy of the various Länder and major cities has prevented the development of one international auction centre. The purchase of Sotheby’s by the American businessman Alfred Taubman (b 1925) in 1983 led to a period of great expansion for the company. In the latter part of the 20th century New York was the main auction centre in terms of turnover, while London remained the centre for sales of Old Masters, antiquities and books. Sotheby’s, and later Christie’s, held important auctions in Hong Kong, and there were a few tentative sales in Tokyo. In 1990 both Christie’s and Sotheby’s set record prices for the sale of works of art at auction, respectively selling van Gogh’s portrait of Dr Gachet for £82.5 million () and Renoir’s Au Moulin de la Galette for £78.1 million to a Japanese businessman. The economic recession of the 1990s soon precipitated a collapse in the art market, and by 1992 Sotheby’s and Christie’s were struggling to make a profit on turnovers that had halved.
See also Investment.
- W. Roberts: Memorials of Christie’s, 2 vols (London, 1897)
- G. Reitlinger: The Economics of Taste, 3 vols (London, 1961–70)
- G. Keen: The Sale of Works of Art: A Study Based on the Times-Sotheby Index (London, 1971)
- F. Herrmann: Sotheby’s: Portrait of an Auction House (London, 1972)