Going? Going? Gone!

Is the Art World’s Cult of Secrecy About to End?

Why fix the commission rate at all? To guarantee profitability, the cornerstone of stock prices. The new commission rates boosted Sotheby's stock from $14 a share in 1995 to a high of $47 in 1999. On the London Stock Exchange, Christie's stock went from $2.50 a share in 1995 to $5.24 in 1998. (Christie's, bought by French venture capitalist François Pinault for $1.17 billion in 1998, is now a private company with no obligation to report its financial results. However, Pinault is currently under a separate investigation in California for false filings in various businesses.)

As negotiations around commissions were limited, attention shifted to publicity deals, explains one former auction specialist. The high-profile sales of the 1990s—the $206.5 million Ganz sale, the $34 million Jackie O sale, and, of course, the $13 million Marilyn Monroe sale—were no accident. They were created through marketing plans, advertising campaigns, and cocktail parties. At the least, it was naive for Christie's and Sotheby's to expect to generate unlimited publicity without inviting unbridled public scrutiny.

Now the auction houses are scrambling to keep doing business as usual. New directors have already been appointed, and both houses have revised their commission fees, being careful this time not to arrive at identical figures. Alfred Taubman will probably be forced to sell his shares. One rumor circulated that eBay would pick up the company. More likely, Bernard Arnault, a chief rival of François Pinault and current owner of two smaller auction houses, Phillips and L'Étude Tajan, is in the running. But once the door has been opened for this level of oversight, can it ever be closed?

The art world still has a few tricks up its sleeve. Some dealers are gearing up for an expected shift to private sales, boasting that they can offer collectors true privacy, untainted by the auction-house inquiry. Others, worried that increased regulation will harm the art market, predict a completely "underground" arena, where top players trade among themselves. It is unlikely that the public, including the gossip-addicted mavens in the New York art world, will tolerate a totally hidden art market. An equally savvy entrepreneur will soon find a way to meet the demand for information. Only this time around, let's not read the prices at face value. How about a new profession: art-price analyst, anyone?

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