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Issue #208  10/20/2014
 
Christie's Takes Additional 2% Share of Hammer Price from Sellers if Auction House Beats Estimates

By Alex Novak


A few years ago, I wrote an April's Fools story about how Sotheby's and Christie's had a plan for "100% buyer's premiums and 100% seller's fees (plus even higher illustration fees, insurance fees, buy-in fees, etc.). This effectively doubles nothing, but it didn't stop the two companies from touting their newest idea for profitability to the press. In a nearly joint press release, but of course not joint at all, the two companies simultaneously explained that by charging 100% of both fees they will make sure that no one will ever make any profit except themselves. Of course, that will only happen whenever there is a profit."

Well since my tongue-in-cheek article, auction fees have continued to go up at both houses and—unfortunately—at a lot of their smaller brethren. The latest from Christie's is a real insult to sellers who consign with this house. According to the New York Times, the Art Newspaper and other sources, Christie's has snuck a new commission into its contracts with consignors: an additional 2% of the hammer price of a work that meets or exceeds its high estimate. In other words, when you try to be a reasonable consignor, you are punished for it by Christie's.

This new commission, which apparently came quietly into force in late August, guarantees Christie's a cut from both sides of the equation when all works sell well, even if the auction house has cut its seller's premium or eliminated it completely, as it often does on higher priced items and/or collections.

According to the Art Newspaper, Paddy Feeny, Christie's head of communications told their reporter that "the purpose is to incentivize and reward high performance that exceeds consignors' expectations." The paper's article notes that interestingly the fee does not apply to online-only sales.

Sotheby's claims that it has not standardized a performance-based fee in its contracts but does say such incentives "are one of the topics discussed with consignors on an individual basis", according to the Art Newpaper.

One commentator on the article was Martha Macks, a Baltimore art dealer who wrote: "Collecting from both the buyer and the seller is egregious enough. But to then add a charge for performance makes for a three-tier tower of greed. Keeping estimates purposely lower than the possible market value is auction house strategy, in order to get early bidders raising their paddles. Thinking they might get a good deal, bidders come in earlier. The practice of lower estimates often leads to an excited bidding frenzy, with a hammer price well above the printed estimate. And now the auction house wants to reward themselves for doing their job? Their job is to get the best result for the consignor. The company should reward deserving employees with a bonus based on outstanding work. It is not up to the buyer or seller to reward Christie's employees who are creating bigger profits for the executive partners. Raising the bar for continued greed will eventually drive both sellers and buyers from the auction room."

Then separately Lewis Baer, an arts and antiques dealer at Newell's, wrote for Art Antiques Design: "Their new 2% fee comes as an added expense for those consignors lucky enough to get them to sell their merchandise. If during an auction sale, a consigned item hits or beats the high estimate, Christie’s (and they are the experts) will tack on an additional 2% commission 'to incentivize and reward high performance that exceeds consignors’ expectations.' Only in this industry can such unconscionable actions be a generally accepted way of doing business. The duopoly reinvents ways to fleece a buyer or seller, even as secret reserves and other deceptive practices still openly function."