Thursday, February 01, 2007

Sotheby's wacks up 20 per cent premium threshold

SOTHEBY'S have increased the threshold below which 20 per cent buyer's premium is charged to £250,000, up from £100,000. This further shifts premiums from the seller to the buyer, in line with Sotheby's strategy.

It seems that auction houses are boxing themselves into a corner. They act for the seller, but charge the buyer. Auctioneers are legally protected as sellers of last resort, but now act like they are retailers, so the full gamut of consumer protection legislation should be applied to them, which would increase their costs and premiums even more.

The shift from charging the seller towards charging the buyer is due to auctioneers competing for the better quality lots. They offer sellers increasingly favourable terms, including waiving commission fees altogether. At the top end they now even guarantee the price a lot will make and will buy it themselves if the lot fails to reach that guaranteed amount. When there are big disposals by serious collectors Sotheby's and Christie's compete in offering higher and higher guarantees. This strategy has a trickle down effect which ends with both buyers and sellers at the bottom end of the auction spectrum paying more.


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