Auction Season

We're into the thick of the art world's auction season, and on May 4th a painting by Pablo Picasso, "Nude, Green Leaves and Bust" went for more than $106 million, at Christie's.

What do you do after you (as a private person, not a museum) purchase a Picasso for that kind of price? Do you hang it above your mantle, or put it away in a climate-controlled and well-guarded storage facility? I suppose if you think of it as an investment, in the hope that somebody will pay even more at Sotheby's a year from now, you put it in storage. If you bought it for the aesthetic experience, it goes on the living room wall.

This raises further questions in my mind. Didn't I read at some point that there was an antitrust investigation underway involving Sotheby's and Christie's? Checking ....

Yes, I did. But that isn't exactly news. The reason my memory of it was so vague may be that it all happened nine years ago. An indictment charged A. Alfred Taubman, Chairman of the Board of Directors of Sotheby's from 1983 to 2000, and Anthony J. Tennant, a member of the Board of Directors of Christie's from 1993 to 1998 and Chairman of its Board of Directors from 1993 to 1996, with conspiring to fix auction commission rates.

Taubman was convicted in December of that year, fined $7.5 million and imprisoned for ten months.

Tennant was never tried. He is a citizen of the United Kingdom, and extradiction arrangements between our two countries don't provide for such cases.

That link will get you to an intriguing article in the Journal of Competition Law and Economics says that the Taubman trial "provided detailed evidence as to how the price fixing worked, and the economic conditions under which it was started and began to fall apart." Specifically, the price-fixing conspiracy came about as a result of a downturn in the art auction market, and began to fall apart during and as a result of the subsequent upturn.

Alternative theories of cartel formation appear to have different views as to whether things should happen that way. But that is the way they did happen in this matter, theory schmeary.

Happy Mother's Day.