Wed, Nov 04, 2015 - Page 9 News List

How auction houses manipulate the prices of works of art

Auctions are increasingly ‘choreographed’ events, with auctioneers whipping crowds into frenzies, and sellers offered guaranteed, undisclosed minimum prices for their artworks

By Judith Dobrzynski  /  NY Times News Service, New York

Illustration: Mountain People

The frenzy begins in days. From today through Friday next week, Christie’s, Sotheby’s and Phillips are set to auction hundreds of impressionist, modern and contemporary artworks worth — they hope — nearly US$2.8 billion, each one in a matter of a minute or two, sometimes in seconds. Dozens of people labor for months to put together and pull off these twice-a-year bellwether auctions.

“The buzz in the sale room is a high point, but a lot goes on before the auction that leads to the evening,” Sotheby’s Asia chairwoman Patti Wong (黃林詩韻) said.

However, in recent years a troubling element of this meticulous planning has emerged. Frequently, it involves rounding up specific artworks to meet collectors’ particular demands. To attract sellers, the auction houses promise them a guaranteed, undisclosed minimum price; then, to hedge their risk, they line up clients who agree to buy those works at guaranteed, undisclosed floor prices, a practice known as a third-party guarantee. Therefore, the evening’s results are increasingly predetermined.

“Auctions are purely staged events, choreographed in advance,” veteran art adviser Todd Levin said.

The auction houses, whose booming sales last year climbed to a new height of more than US$14 billion, freely admit to many theatrical tactics. Within a sale, artworks are not positioned in a sequence that honors art history or chronology, as they used to be, but rather to spark excitement. The perfect “Lot 1” doubles or triples its presale estimate, igniting high spirits in the salesroom that encourage enthusiastic bidding.

Christie’s global president Jussi Pylkkanen, whose photograph was in May used by media publications around the world when he sold Pablo Picasso’s Les femmes d’Alger (Version ‘O’) for a record US$179.4 million, is a showman who uses direct eye contact and expectant, outstretched arms to coax higher bids from dithering bidders. He likens his preparation to that of stage actors.

“They get in the zone, and I’m by myself, getting in the zone, getting loose,” he said.

Meanwhile, although demand for tickets to the evening sales is growing — many registered bidders must stand or are relegated to “overflow” rooms — most actual buyers are not in the salesroom: They bid by telephone or use a proxy bidder — also often on the telephone. At least 80 percent of those well-dressed people who break into applause when a price soars are spectators, the auction houses say.

“It’s not the auction, itself, in terms of my buying something that I go for,” said Martin Margulies, a real-estate developer who has collected for 30 years. “It’s that you see collectors from all over the world, and you get the undercurrent of what’s happening in the art world beyond the auction.”

That is understandable, as even experienced collectors have trouble discerning what is actually happening at an auction — and not just because of the prearranged, minimum-price guarantees. At the auction, guarantors might well be bidding on the very works they have already underwritten, sending the price higher than the prearranged floor. In addition, dealers — usually sight unseen, on the telephone — might be bidding on works by artists they represent to protect their prices.

“It’s a very opaque financial environment,” Levin said.

Here is how it all happens.

Six months elapse between the big sales in New York each May and November, but the drive to secure material for them never ends. Less than 48 hours after an evening sale concludes, Sotheby’s cohead of worldwide impressionist and modern art Simon Shaw and the firm’s cohead of worldwide contemporary art Alexander Rotter sit down with their business teams to analyze the results.

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