Collecting 101: Going Once, Going Twice…Sold!
Auctions and Auctioneers, and Some Tricks of the Trade
by
Anayat Durrani
Collection Series Part III
Much like the artwork they are auctioning off, the art auctioneer is the centerpiece of every auction. Articulate, often charming, the auctioneer is a master in the art of the sale. Skilled auctioneers make auctions lively and fun, yet keep audiences entranced as they move the value of an object to bigger and more lucrative bids. But where do auctioneers come from? What is their background? In fact, the auction house and auctioneer go a long way back.
Brief history of auctions and auctioneers
Auctions have been taking place for centuries. Records passed down from ancient Greek scribes cite auctions occurring as early as 500 B.C. (although these involved the auctioning of women as wives). The Romans are said to be the first to organize sales of goods at auction. The British held regular auctions of books and art in the 1600's at taverns and coffeehouses. These auctions had catalogs printed up as well.
The Dorotheum, established in 1707 in Vienna, is the oldest auction house in the world. Auction firm powerhouse Sotheby's was established in 1744, and competitor Christie's was founded in 1766. The concept of auctions arrived in America along with English immigrants, where everything from tobacco to horses (and sadly, slaves), to eventually land and even credit and debt were auctioned off. Auctioneers traveled far and wide to hone their trade, auctioning off whatever they could to make money, and in the process sullying their image and reputation.
The poor reputation of the auction business remained throughout the 1800s into the mid-1900s but began to change following World War II when businessmen saw the auction method as a new marketing tool, according to the Nashville Auction School (NAS), founded in 1964. The sale of goods and real estate at private sale began to take off and so was born the modern auction business. Well-dressed businessmen took the auction business to new heights and changed the reputation of auctioneers, who now had business ties to banks, attorneys, accountants, the court system, government agencies, and the public, according to NAS.
The concept of auctions in modern times has not changed all that much. An auctioneer presents an object that is up for sale and motivates audience members to bid against one another to obtain the object. However, throughout the years there have been techniques used that go on behind the scenes, even in reputable auction houses. For example, Sotheby's-Christie's six-year price-fixing scandal of 2000 got former Sotheby's chairman Alfred Taubman jail time for plotting with his counterpart at Christie's to fix the commissions paid by sellers of fine art and other priceless objects.
In his book, Art Crime, John Conklin said auction houses try to "sell objects at the highest possible prices, because their commissions are a fixed percentage of the selling price and because higher prices attract more things to sell."
Between them, Sotheby's and Christie's share more than 90 percent of the fine art and luxury object auction market (2006 value = €6 billion).
Tricks of the Trade
Conklin calls auctions "confidence games" where the auctioneer and the auction house create an air of respectability and legitimacy, "use real or imagined shills to bid up prices, and then cool out dissatisfied bidders." Through an auctioneer's body language and tone of voice, he said, they create an atmosphere of fun and excitement that encourages bidding, which pushes prices higher.
Conklin explained that oftentimes unaware outsiders attend auctions with a preconception that it is done in an "open and above the board manner" with those making the highest bids getting the object. House auctions are instead carried out under "unwritten and complex rules that favor insiders." As a result, there have been many complaints to consumer affairs about auction practices such as "bidding from the chandelier" (announcing bids in the beginning when no one in the audience has placed a bid) and the "secret reserve". The "secret reserve" means the seller sets a minimum price at which they will sell the object. The auctioneer starts the bidding on that object far lower than that reserve, and if the highest bid from the floor does not reach that price, the item is "bought in" which means, not sold, explained Conklin.
In 1974, the Art Dealers Association of America lobbied against the secret reserve, saying that the minimum price should be revealed and that bidding should begin at that price, according to Conklin. However, during the 1986 revision of auction sale regulations, New York's Department of Consumer Affairs did not outlaw the practice.
"I think the auction houses in New York City draw so much business to the hotels and restaurants in the city that on those rare occasions when the city tries to regulate them, they can simply threaten to pull up stakes and move out of the city and do their sales at their European offices," Conklin told Fine Art Registry™. "Whether the threat is explicit or implicit, it's something that limits the control the city can exercise."
Who is the Auctioneer?
Becoming an auctioneer can be done through a family auction business, attending auction schools and programs, or through practical experience as an apprentice under an experienced auctioneer. Twenty-seven states require auctioneers to hold a professional license, and there may be other statutory requirements for auctioneers depending on what they auction and where. Some city and county governments may require auctioneers to apply for a permit or local license before conducting an auction. The salary of an auctioneer varies and many are compensated on a commission basis.
"Art auction firms hire auctioneers with extensive background, training and education in art history and the fine arts. Their education must also include training at an auction school," says Chris Longly of the National Auctioneers Association (NAA).
Founded in 1949, the NAA represents the interests of almost 6,000 auctioneers in the United States, Canada and the world. In 2006, the auction industry grew by 7.1% with over $257 billion in goods and services sold. Longly said many art auctioneers specialize in certain areas of art such as European or American art. Longly said the majority of art auctioneers are full-time staff members of auction houses, but at times, art auction firms contract with outside auctioneers as well. While some firms hire art auctioneers, at Christie's, auctioneers are not hired.
"They are 'grown' in house by Christie's through a series of classes, workshops and try-outs where eventual auctioneers are taught rules, regulations and style by the head of our program, currently me," says Jamie Krass, head of the Auction Program.
Sotheby's does not hire auctioneers as auctioneers. They train their auctioneers through an internal training scheme overseen by senior experienced auctioneers. The training takes about six months. Before someone is put through the training, they are auditioned to make sure they possess the basic skills and manner necessary for an auctioneer.
"Such training includes ensuring that our auctioneers conduct auctions in full compliance with regulations and internal company policy governing successive and responsive bidding," says C. Hugh Hildesley, one of Sotheby's primary auctioneers. "Refresher training is also provided annually to auctioneers."
After training, auctioneers go through another audition before each auctioneer gets their New York City auctioneering licenses. Those who are already auctioneers from other auction rooms have to go through the same process.
Are Auctioneers Monitored?
At Christie's, Krass said once auctioneers have passed their in-house exams, they are each given licenses and governed by the laws of New York and Consumer Affairs. [See New York Auctioneer License Application here.]
Christie's in-house exams consist of mock auctions and written and oral quizzes on numbers (incremental counting that represents the amount that's been bid or asked to bid) and footing (keeping with the momentum of the sale) prior to receiving licensing. The training is class-based, and prospective auctioneers do not pass until they have proven their skills in their training rooms. Christie's employs 60 auctioneers worldwide.
"Once licensed, Christie's auctioneers continue to participate in weekly training sessions with their colleagues and all are continuously reviewed by Christie's Auctioneer Committee; myself, Jonathan Rendell and two rotating auctioneers," says Krass.
Hildesley said Sotheby's has a small committee that assigns the auctioneers to the specific sales, which also monitors the progress of auctioneers. He said auctioneers are periodically reviewed to maintain their standards. Sotheby's has about 50 active auctioneers worldwide, 25 in New York.
"The Compliance Department and an independent auditing firm audit auctioneers on a regular basis to ensure that auctioneers are following both internal and external rules and practices," says Hildesley.
While the NAA does not monitor their auctioneers, Longly said that their members "abide by a strict code of ethics that prohibits unethical auction activities like sham and shill bidding."
Based in the UK, the Royal Institution of Chartered Surveyors – RICS – is the largest high profile global "standards and membership" organization for professionals involved in land, property, construction and environmental issues. They have 136,000 members across 120 countries. The RICS regulates its own members who are auctioneers.
"They are called chartered arts and antique surveyors. A RICS regulated auction house abides by certain minimum standards," says Laura Butcher, spokesperson from the Scotland office of RICS. "By using an auctioneer who is a member of RICS, you will receive clear, impartial and expert advice; there are strict codes of conduct that members must adhere to in order to protect you, including proper insurance; you can rely on their expertise as RICS members are constantly updating their skills; there is a formal complaints service if you are not happy with an RICS member."
Butcher said she was not aware of any deliberate scams taking place by RICS members, but said it may happen with unregulated auctioneers. Paul Bagust, RICS product development manager from their UK office, said consumers should look for the mark of RICS membership when they are finding an auctioneer "so the auctioneer will use the letters MRICS, TechRICS or FRICS after their name, they can rest assured that they will be dealing with a trained professional of a high standard."
The next part will explore the practices of second and third-tier auction houses, auction rings, and the training of auctioneers on cruise ships.
Collecting 101, Part I:
The Joys and How To's of Collecting Art, Antiques and Collectibles
Collecting 101, Part II:
The Engine That Drives the World of Collecting
— Anayat Durrani
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October 12, 2007
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