Auction Houses Sold on $512-Million Price-Fixing Settlement
Sotheby’s and Christie’s, the world’s two dominant art auction houses, have agreed to pay $512 million to settle a class-action civil lawsuit that accused them of collaborating to fix fees charged to clients while also sharing lists of elite customers who were given special deals.
Sotheby’s also said it is close to reaching an agreement with the U.S. Justice Department’s Antitrust Division, which has been conducting a criminal investigation of the price-fixing.
“We are in serious negotiations. . . . That’s probably going to be the next thing,” Sotheby’s spokesman Matthew Weigman said Monday, a day after the company’s board approved its portion of the civil antitrust settlement and also agreed to pay $70 million in cash and stock to settle a separate civil suit brought by shareholders who complained that the illegal practices depressed the value of their Sotheby’s holdings.
While Christie’s offered an official “no comment,” it privately confirmed the shared $512-million settlement. The board of the privately held company is expected to endorse the pact any day.
The settlement, if approved by U.S. District Judge Lewis A. Kaplan, would spare the two British-based auction houses even higher damages that might have been imposed if they contested the allegations brought by thousands of their clients.
The agreement comes just as the New York City branches of the two companies are preparing their annual fall sales of Impressionist and modern works by the likes of Picasso and Van Gogh, which often set price records.
Though the two auction houses still face an investigation by European authorities, Michael Sovern, chairman of Sotheby’s Holdings Inc., said his company was most eager to resolve the legal actions that carried “the greatest financial exposure.” The antitrust civil action, which consolidated dozens of suits that were filed starting in February, was being led by the same lawyers who targeted Microsoft with antitrust complaints.
“Our goal over these last several months has been to put behind us the litigation clouding Sotheby’s future,” Sovern said in a statement after Sunday’s emergency board teleconference that approved the settlement.
Of the $256 million owed by Sotheby’s, $156 million will be paid by its former chairman, A. Alfred Taubman, who resigned along with Sotheby’s President Diana D. Brooks on Feb. 20--in “the best interests of the company.”
“I endorse and am contributing to these settlements to facilitate the resolution of all matters and to minimize the impact on Sotheby’s, a company I care about deeply,” said Taubman, who could still face criminal charges.
Sotheby’s spokesman Weigman would not say whether the company itself was willing to plead guilty to some criminal charge, or charges, as part of its pending deal with federal prosecutors.
Christie’s and Sotheby’s together control more than 90% of the world’s $4-billion-plus auction trade and these days peddle not only paintings and sculpture but French wines, diamond jewelry and Hollywood memorabilia. They are fiercely competitive on some levels, like when they vie for the right to sell the works accumulated by prominent collectors.
But the Justice Department’s antitrust division three years ago began looking into the way the companies seemed to cooperate--at the expense of customers--in setting their commissions: first increasing in 1993 the “premium” that buyers paid on top of winning bids, then in 1995 changing the way they took cuts from sellers. They also allegedly agreed that neither would negotiate discounts with people seeking to auction their art, except for a select list of elite customers, who might be charged nothing.
Until 1993, winning bidders paid a 10% surcharge to the auction houses, above the “hammer price.” Then, within less than two months of each other, Sotheby’s and Christie’s adopted the same sliding scale--15% on the first $50,000 and 10% for amounts above that.
Officials of the companies said there were harmless explanations for the similar fees, comparing them to the prices advertised by gas stations, which watch what the competitor across the intersection is charging then try to keep pace.
But the situation became a full-blown scandal in January when Christie’s, which is privately held, announced that its top officials had begun cooperating with the criminal investigation in return for “conditional amnesty,” a status granted to suspects who report “illegal activity . . . with candor.” In plain language, the 234-year-old auction house had confessed its role in secret meetings and agreements in a bid to secure leniency.
The investigation quickly claimed three of the biggest names in auctioneering last winter: first Christie’s CEO Christopher M. Davidge, then the leaders of Sotheby’s, Taubman and Brooks. Brooks, who personally conducted many of her company’s auctions from the podium, reportedly has begun cooperating with prosecutors, also in a bid for leniency.
Despite the blot on their reputations, both companies reported brisk sales during last spring’s New York auctions. “All my old friends were out there,” said Christie’s chairman and chief auctioneer Christopher Burge, after one packed sale.
Sotheby’s already has announced that a prized painting by Edouard Manet, valued at $20 million to $30 million, will highlight its Nov. 9 Impressionist auction.
