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New York City has lifted regulations it has adapted to govern the auction industry in a sudden turn in policy, part of a sweeping effort to improve conditions for businesses in the wake of the economic damage from the coronavirus pandemic.
The changes, designed to help small businesses by reducing bureaucracy and reducing penalties, will also have the effect of easing restrictions on large companies like Sotheby’s and Christie’s, which sell billions of dollars of artwork and other items each year.
Regulations had been enacted for decades to increase an arts industry’s long-standing oversight. seen as opaque — while buyers and sellers were often shielded from the public — and essentially required the disclosure of certain information, such as whether an auction house had a financial stake in a business that was up for sale.
Representatives of several auction houses said they were surprised by the wholesale removal of the rules and only recently learned of the changes allowed by City Council legislation last year.
as set by new lawAuctioneers will no longer need to obtain licenses from June 15. Industry-specific regulations established in response to various scandals and the explosive growth of the arts industry. already sunset.
City officials have championed the elimination of the rules as a beneficial arrangement that would work to improve New York’s business climate. But some art market experts said they were worried the city had gone too far.
“Regulations in effect ensure that there is a level playing field in the auction room and that all participants play by the same rules,” said Thomas C. Danziger, an art market lawyer who advises collectors on shipments to auctions.
“Without regulation, there are no rules of the road,” he added.
The repeal of the regulations was part of a larger package that also eased restrictions in a number of other industries, including laundries, sidewalk cafes and entertainment venues. To increase the transparency of other government agencies, the US art market, and anti money laundering. US Department of the Treasury in February a report saying although the market was vulnerable to money laundering, there was no need for immediate action.
The city’s regulations governed a different aspect of the art market, namely the protections offered to auction-bidding consumers for paintings and other works of art. Some of the rules are designed specifically for the art market to ensure that bidders are given the information they need to make informed choices. So, for example, auction houses were required to make an announcement when they had a financial stake in a sold item.
But auctioneers of other products were also subject to repealed regulations.
Comprehensive approach to helping businesses adopted under legislation known as Local Law 80 last july during the waning months of de Blasio’s rule. City officials said there have been few consumer complaints about auctions in recent years, and they believe the industry can be effectively regulated by more general consumer protection laws.
“As part of a larger commercial aid bill, which also includes reduced fines and opportunities to treat multiple crimes, the Council has considered feedback from the administration on outdated provisions and unnecessary licensing programs,” a council spokesperson said in a statement.
The statement continued: “Based on the minimum number of complaints about this industry and the fact that most consumer complaints about deceptive selling practices and misleading advertising may be harmed, the Department of Consumer and Labor Protection (DCWP) has recommended that the auction license requirement be removed. It will be dealt with in the Metropolitan Municipality Consumer Protection Law.
Some art market experts said the state’s Uniform Commercial Code and other general labor laws will continue to provide protection, but these do not specifically define prohibited conduct and required disclosure of information in auctions, as do city regulations.
Many companies, including auction houses Christies’, Sotheby’s and Phillips, said they are not lobbying for changes in regulations they must face as their May sales approach. On any given night, grand homes can sell hundreds of millions of dollars of art under long drawn-out bidding procedures to comply with the city’s regulations.
Christie’s and Phillips have said they intend to continue as though regulations are still in place, at least for now.
“Despite the repeal of auction regulations, Phillips is committed to conducting its auctions fairly, transparently and in the best interest of our customers,” the statement said.
Sotheby’s declined to comment on whether it would continue to operate under the old rules.
Some of the old regulations were designed to oversee a long-standing practice called “chandelier bidding,” in which auctioneers announce a series of fictitious bids on an artifact to help the crowd gain momentum.
Although the city is allowed to bid on the chandelier, regulations prohibit auctioneers from placing any additional fictitious bids after they reach the “replacement price”, which is the minimum price at which the sender of a work agrees to sell it. The regulation was intended to prevent auctioneers who earned a percentage of the final sale price from continuing to produce bids to falsely increase the price.
Another regulation designed to encourage transparency said that when creating sales catalogs, auctioneers cannot publish an estimated value for an artifact that is below the reserve price already set by the sender. It would be a misrepresentation to do so, as the sender and the auction house have already decided that an item will not sell so cheaply.
Auction house leaders have long argued that, as logical as the regulations may sound, most buyers at auctions are affluent collectors who are highly knowledgeable about the nuances of the market.
But Daniel Squadron, a former state legislator working to strengthen art market regulations in Albany, said such restrictions are beneficial. “The way forward for New York auction houses is not to turn them into the wild west,” he said. “It’s the same for ten years — expanding the guards that make the city a great market.”
Alberto Mugrabi, a major collector, also said he was concerned about the effects of the changes.
“It wouldn’t be good for them if the auction houses didn’t disclose them,” he said. “Today, you want to give people as much information as possible so they can make their own decisions.”
Jo Backer Laird, an arts attorney at Patterson Belknap Webb & Tyler and a former general counsel at Christie, said she agreed that repealing the regulations could undermine consumer confidence.
“Without regulations, I think it’s a blow to the auction houses,” he said. “Immediately they may think it gives them more freedom, but ultimately this leads to an erosion of trust that is why the regulations are there. If you don’t trust, don’t ship or buy there.” He said he wondered if deregulation of major auction houses had been given enough thought.
“If that’s the case, it will be reversed,” he said.
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