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Unfair Advantage? New Artists Royalties Bill Still Exempts Dealers

Congressman Jerrold Nadler

Congressman Jerrold Nadler

The new American Royalties Too [ART] Act of 2014, introduced today by U.S. Congressman Jerrold Nadler (D-NY) and Senators Tammy Baldwin (D-WI) and Ed Markey (D-MA), tweaks a number of provisions that were contained in the dead-in-the-water Equity for Visual Artists Act of 2011.

It takes into account some recommendations in Resale Royalties: An Updated Analysis—a report issued in December by the U.S. Copyright Office, which reversed its previous anti-resale royalties position. The Copyright Office now acknowledges that “certain visual artists may operate at a disadvantage under the copyright law relative to authors of other types of creative works.” because they “typically do not share in  the long-term financial success of their works.”

One wonders if the anti-royalty views of the Association of Art Museum Directors have similarly evolved.

The new bill doesn’t cure the inequity that I criticized last time around: It still applies only to auction houses, not dealers. An alternate title for the proposed law could be “The Art Dealers Relief Act,” because it would encourage profit-minded collectors to sell through private galleries, thereby avoiding the royalty.

The fact that auction-house prices are more transparent than dealer sales (and therefore easier to monitor) is no excuse for exempting gallerists from paying resale royalties to artists (which I have supported at least since the 1973 Robert and Ethel Scull auction where I witnessed, directly in front of me, the infamous Scull-Rauschenberg blow-up).

“American artists are being treated unfairly,” Rep. Nadler declared in his press release summarizing his new bill. His remedy, though, would substitute one unfairness for another. The fact that many people believe that the auction houses wield too much art-market power doesn’t make this legislation appropriate.

Here are some of the tweaks in the latest proposal: Under the new bill, artists or their “successor[s] as copyright owners[s]” (i.e., heirs) would get net proceeds from a 5% royalty on resales of at least $5,000 (previous bill: net proceeds from a 7% royalty on resales of at least $10,000). The royalty would apply only to transactions at auction houses that sold at least $1 million in visual art during the previous year (down from $25 million in the previous bill, making this bill even more disadvantageous to auction houses).

The amount of the royalty payable on a resale would be capped at $35,000. This is a major collector-friendly change: There was no cap in previous bill.

Under the new bill, the royalties would go to a “visual atists’ copyright collecting society” (such as VAGA or the Artists Rights Society), which could deduct “reasonable administrative expenses as determined by regulations.” The previous bill explicitly allowed those organizations to charge a commission as high as 18%.

Royalties under the new bill would be payable by U.S. auction houses not only to U.S. citizens or residents, but also to citizens or residents of other countries that provide resale-royalty rights to artists.

Another big change in the new bill: It omits a previous provision that would have funneled 50% of net resale royalty proceeds to a new fund supporting museum purchases of works by artists living in the U.S. In my critique of that provision in my 2011 post, I noted that this 50-50 split and the commission to a collecting society of up to 18% could have effectively reduced the artist’s cut to a mere 2.87% of the resale price.

This means that although the new bill reduces the royalty from 7% to 5%, a greater portion of the take would actually get to the appropriate beneficiary—the artist.

Resale royalty proposals have been kicking around since at least the time of the Scull sale. Back in the day, artists-rights advocates (anyone remember lawyer Robert Projansky, dealer Seth Siegelaub, accountant Rubin Gorewitz?) were calling for a 15% royalty on resale profits, if any, not on the total price paid. That makes more sense (although it may be more complicated to administer), given the fact that many artworks are sold at a loss. Collectors shouldn’t have to pay royalties on those.

Maybe the dream of a national artists royalties program will eventually become reality. But for that to happen, I think we need a better bill.

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