E-Photo
Issue #11  2/18/2000
 
Antitrust Investigation Continues, Prompting Suit

By Alex Novak

Numerous sources report the U.S. Justice Department is continuing its antitrust investigation of Sotheby's and Christie's New York operations and is also continuing to investigate whether prominent art dealers coordinated auction bids in an effort to suppress the sale price of certain works. And, in related action, Bernstein Litowitz Berger & Grossmann LLP has filed a class action lawsuit against Christie's International, Sotheby's Holdings, Inc. and Sotheby's Inc.  "The Plaintiff," say the attorneys in a release to the business press, "brings this action on behalf of all persons who sold" items through Christie's and Sotheby's auctions during the period March 1995 through the present, and on behalf of purchasers of such items during the period January 1, 1992 through the present. 

Christie's recently released a statement indicating it was cooperating with federal investigators, giving the Justice Department information about "possible conduct" at Christie's that was relevant to their investigation of antitrust actions in the art world.  In exchange for this "cooperation", Christie's was "conditionally accepted" into the Justice Department's amnesty program, according to a statement from the auction house's general counsel, Jo Backer Laird.  Christie's claims the conduct took place prior to the sale of the firm over a year and a half ago.

The investigations began three years ago when the U.S. Attorney's office for the Southern District of New York began subpoenaing documents from Christie's, Sotheby's and reportedly more than a dozen top NYC art dealers.  The investigation is said to be far ranging, including allegations of possible collusion by Christie's and Sotheby's in setting commission fees of sellers and possible collusion among art dealers buying at auction.

Ms. Laird did not provide details of the information given to the Department of Justice or what the amnesty deal would mean for Christie's.  Legal sources say targets of criminal prosecution often receive more lenient treatment after volunteering information about their actions, although Christie's still denies any wrong-doing in its official statements, saying "Christie's believes that it has acted properly at all times."

Christie's action comes just about a month after the abrupt resignation of its former chief executive of six years, Christopher M. Davidge.

Sotheby's also confirmed that it had documents subpoenaed by the Justice Department.

The action against art dealers relates to the possibility of "bid-rigging" or "bid-pooling" by art dealers. Some feel the practice keeps prices down and allows dealers to resell art work at high profits, although most dealers question whether this would be possible in today's competitive environment with so many collectors involved and bidding at auction.  Some art dealers even point to partnerships actually boosting the prices at auction, allowing partnerships to pay more than a single dealer could afford to risk.

According to AP reports, Justice Department spokeswoman, Jennifer Rose, confirmed the agency's anti-trust division "is looking into possible anti-competitive practices within the (fine art auction) industry."

Meanwhile Bernstein Litowitz Berger & Grossmann LLP filed its lawsuit on behalf of a seller through the Christie's and Sotheby's auctions, who alleges that on or about January of 1992, the major auction houses conspired to fix the price of commissions they charged to buyers at 15% of the first $50,000 of merchandise purchased and 10% of any amount over $50,000.  Prior to that time, buyer commissions were a flat 10%.  The Plaintiff further alleges that on or about March 1995, Christie's and Sotheby's conspired to fix the prices of the commissions paid by sellers.  At that time, both adopted identical detailed sliding-scale commission rates to sellers, according to the attorney's release.

The release says,  "the action was filed following Christie's public admission that it has supplied evidence of the price fixing of auction commissions to the United States Justice Department, which has bee investigating anti-competitive practices in connection with Christie's and Sotheby's auctions." 

Jeffrey A. Klafter, who is the partner in charge of the Antitrust Practice Group at Bernstein Litowitz Berger & Grossmann LLP, is also the contact at the law firm for this case.  Prior to joining the firm, Klafter was an attorney with the U.S. Department of Justice, Antitrust Division, where he served as a member of the trial team in the landmark antitrust case United States v. IBM.  Klafter asks anyone who has information on Christie's and Sotheby's commission practices to call him at 800-380-8496 or 212-554-1400.

Novak has over 47 years experience in the photography-collecting arena. He is a long-time member and formally board member of the Daguerreian Society, and, when it was still functioning, he was a member of the American Photographic Historical Society (APHS). He organized the 2016 19th-century Photography Show and Conference for the Daguerreian Society. He is also a long-time member of the Association of International Photography Art Dealers, or AIPAD. Novak has been a member of the board of the nonprofit Photo Review, which publishes both the Photo Review and the Photograph Collector, and is currently on the Photo Review's advisory board. He was a founding member of the Getty Museum Photography Council. He is author of French 19th-Century Master Photographers: Life into Art.

Novak has had photography articles and columns published in several newspapers, the American Photographic Historical Society newsletter, the Photograph Collector and the Daguerreian Society newsletter. He writes and publishes the E-Photo Newsletter, the largest circulation newsletter in the field. Novak is also president and owner of Contemporary Works/Vintage Works, a private photography dealer, which sells by appointment and has sold at exhibit shows, such as AIPAD New York and Miami, Art Chicago, Classic Photography LA, Photo LA, Paris Photo, The 19th-century Photography Show, Art Miami, etc.