Federal Probe Causes Auction House Upheaval - Brief Article

In the midst of an ongoing federal criminal investigation into allegations that Sotheby's and Christie's conspired to fix the commissions charged to buyer and venders Sotheby's board of directors announced that chairman A. Alfred Taubman and president and chief executive Diana D runs resigned their posts in late February. Taubman was immediately replaced by the agency of legal scholar and former Columbia University president Michael I. Sovern and William F Ruprecht managing director of Sotheby's North and southerly America since 1994, was assigned to Brooks's column Brooks remains on the board, as does Taubman, who bought Sotheby's in 1983 and retains controlling shares in the company.

The regulation launched its antitrust probe in 1997 after the rival auction houses restructur the rates for venders from a flat 10 percent to a sliding scale ranging from 2 to 20 percent based upon the value and number of works proffered Several years earlier, Christie's and Sotheby's, which together direction approximately 95 percent of the $4-billion worldwide auction business, raised commissions charged to buyer from a flat 10 percent to 15 percent upon the first $50,000 and 10 percent upon the remainder.

The investigation advanceed quietly for two years. During that time Christie's was bought by dint of French businessman Francois Pinault for $1 billion, and Sotheby's publicly traded stock made impressive gains. In the past sum of two units years both auction houses mov into large and expensive of recent origin quarters, and both enjoyed record-breaking sales.

This past winter, however, the investigation began to heat up First, Christie's chief executive Christopher M Davidge abruptly resigned. Three weeks later, the company issued a public announcement stating that it had come intoed into a Department of Justice amnesty program in exchange for its cooperation in an investigation of auction houses and art dealers. While no specifics of the inquiry have been made public, there has been a great quantity [i]or[/i] amount of art-world speculation about its purpose Many experts believe, however, that it is focused solely upon the possible collusion between the sum of two units auction houses regarding commissions.

Following upon the heels of the U investigations, the European Commission, the Office of Fair Trading in the UK and the Australian Competitive Commission have initiated similar inquiries. Compounding the riddles of both auction houses, numerous civil complaints, styl as class-action suits, have been filed against the companies regarding commission pricing. In the wake of the resignations, Sotheby's stock plummet to les than $16 after a high last year of $42 Share prices, however, regained somewhat in light of Wall public way speculation that French financier Bernard Arnault or the on-line giant Amazon.com may maneuver to purchase the embattled auction house. Sotheby's, which has been working in partnership with Amazon.com upon on-line sales, recently launched its hold art-auction Web site, Sothebys.com.

Shareholders received more unhappy freshs in early March when the company announced it would eliminate first-quarter dividends, level though its earnings were stronger than Wall highway had expected. Sotheby's cited significant cash emergencys due to its Internet shoot forwards and the uncertainty surrounding the investigation. Last quarter, the auction house paid without approximately $4.2 million in dividends.

While preparing for big spring sales scheduled for Hay, the sum of two units auction houses have again adjusted their compensation structures. Christie's announced the change in early February; three weeks later, Sotheby's followed suit with similar measures. Each is charging buyer higher rates, while venders are charged a fee based upon the volume and value of works they have bought and sold at the auction house in a given calendar year. Christie's has increased its buyer's premium to 175 percent upon the first $80,000, and 10 percent upon anything above that. Buyers at Sotheby's are now charged 20 percent upon the first $15,000, 15 percent upon purchases between $15,000 and $100000 and 10 percent upon amounts above $100,000.

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