Marc Porter, chairman of Christie’s Americas
While I was at Christie’s covering the Crichton auction, I took advantage of my encounter at the postsale press conference with Marc Porter, the chairman of Christie’s Americas, to get his response to this post about what I regard as a tilted, rather than level, playing field among bidders for certain lots at Christie’s auctions.
I had noted in my post that third-party guarantors at Christie’s, who receive a financing fee from the auction house whether or not they are the successful bidder, have an advantage over other bidders because their net price, after deducting their fee, is less than the final price for non-guarantor bidders—in effect giving third-party guarantors a discount off the final price.
In addition to the record-breaking Picasso at Christie’s Impressionist/modern evening auction, two works (a Lichtenstein and a Basquiat) offered the following week at Christie’s evening sale of contemporary art had third-party guarantors who (as auctioneer Christopher Burge announced at the sale) had “fully financed” the guarantees on those works, might be bidding at the sale, and would receive a financing fee. That information was not disclosed, however, in the print catalogue.
Here’s what Marc Porter said when I asked for his response to my criticism of the tilted playing field:
Porter: We are paying, in that kind of guarantee situation, for assuming a market risk several months in the future….Our position is that so long as the public is properly informed that there is a third-party guarantor, and that the person earns a fee for having taken the guarantee risk, that there is a full disclosure. It’s a better practice, in fact, that a guarantor earns her fee both when she buys something and when she doesn’t. Our view is that it’s a better practice not to only compensate someone who is an underbidder, because one thing that the public would actually worry about is that the guarantor has an incentive not to buy the object but only to underbid the object.
Rosenbaum: But what about the idea of not allowing that person to bid at all?
Porter: I don’t see why they should be precluded from bidding.
Rosenbaum: Because the bidding is not on a level playing field.
Porter: The bidding IS on a level playing field. The fee that they earn can be applied against any purchase at Christie’s. So you could be a third-party guarantor on three, or four or five objects, and you ended up buying only one object. You could apply the fee that you earned on those five objects against that one. So in fact the direct relationship between the buyer’s premium and a level playing field on the purchase is an artificial one, I think.
There is a slightly different situation with “irrevocable bid” arrangements: There you should get a fee if you agree in advance to place one bid at a particular price. If you continue bidding above the level of that irrevocable bid, there should be no fee paid to you: You should stand in the same shoes as other bidders. Nor should you get a financing fee if you win the auction at the level of the irrevocable bid. That’s the only way to keep the playing field reasonably horizontal.
And above all, these arrangements (that there is a third-party guarantor who may be bidding and will receive a financing fee whether or not he is the purchaser) need to be fully disclosed on the pages for the affected lots in the printed catalogue, not merely announced at the sale and/or published in the online catalogue but not the printed one.
Only then would the public, in Porter’s words, be “properly informed.”
[A clarification of this post, pertaining to third-party guarantees, is here.]