NYTimes: As Art Values Rise, So Do Concerns About Market’s Oversight
Pretty much convinced now that EVERYTHING in this world is fake - Lance Armstrong, boobs, and now the fine art world.
Turns out the major auction houses use two types of tricks to inflate and obfuscate the price of fine art.
First, they employ “chandelier bidding,” a
bit of art-market theater in which auctioneers begin a sale by pretending to spot bids in the room. In reality the auctioneers are often pointing at nothing more than the light fixtures.Second, they arrange "third party guarantees."
When someone offers a piece for auction, the house will sometimes guarantee that the seller will make at least a minimum amount by arranging with a third party to purchase the work for a specific price, undisclosed to the public, should it fail to sell for more. In exchange for putting up the funds, the guarantor, whose name is also not revealed, gets a cut of any proceeds above the guarantee. So if a third party commits to a $10 million guarantee, and the bidding reaches $12 million, the third party receives a piece (often 30 percent to 50 percent) of the additional $2 million.The problem, some dealers, collectors and art advisers say, is that the neutrality of an auction is lost when these underwriters can bid on a work they’ve guaranteed. Critics argue that the guarantors have an undisclosed interest in the outcome and an unseen advantage over other bidders because a buyer who wants the work might wind up competing against someone who only wants to bid up the price.Read the article for more info....