ART
SCANDAL OF THE YEAR: Shame…Shame…Shame!!
Sotheby's fined £13m for price fixing
Sotheby's auction house has been fined more than 20 million euros (£13m) by
the European Union for operating a price-fixing cartel during the 1990s.
But
rival Christie's escaped a fine, despite being implicated, because it "was
the first to provide crucial evidence", said the European Commission. The
pair handle 90% of the auction market and have been under investigation by
the commission for breaking fair trade rules. They were accused of inflating
commission fees and defrauding art sellers out of £290m. It was a "highly
damaging cartel", a commission spokeswoman said. "This case again shows that
illegal cartels can appear in any sector - from basic industries to
high-profile service markets such as the one at hand," said competition
commissioner Mario Monti. The fine of 20.4m euros represents 6% of the
annual Sotheby's turnover. The European Commission had the power to impose
fines of up to 10%.
The ruling followed a $45m (£30m) fine on Sotheby's after a separate United States investigation. Christie's had immunity in that case after coming forward with information. Sotheby's former chairman, Alfred Taubman, was jailed for one year and fined another $7.5m (£5m) after the US investigation. A preliminary European Commission report, released in April, accused Sotheby's and Christie's of entering into an anti-competitive cartel agreement in 1993. The auction houses were accused of agreeing to raise commission paid by clients and colluding over sellers' advances, auction result guarantees and general payment conditions. The report said the cartel was sanctioned at the highest level and designed to end fierce competition between the two auction houses. Mr. Taubman and Christie's chairman Sir Anthony Tennant are said to have met a dozen times from 1993 through 1996 in London and New York. It was at these meetings that the two men allegedly agreed to fix the commissions they charged their clients, who included some of the world's richest people. The arrangement ended early in 2000, it said, "when the parties appear to have recovered their freedom to set prices independently". The commission began its inquiry after Christie's approached both the US Department of Justice and the European Commission with proof of a cartel between itself and Sotheby's. Although Christie's has avoided fines from the authorities, it has agreed to share the costs of a $537m (£345m) settlement of lawsuits brought by customers. Mr. Tennant has refused to go to the US for trial and cannot be extradited on anti-trust charges.
Downgraded
to junk status
In a blow
to its prestigious image, auction house Sotheby's has had its debt rating
downgraded to "junk" status. Credit-rating agency Standard & Poor's (S&P) cut
the auctioneer's long-term corporate credit and senior unsecured debt ratings
two notches to BB-plus. This rating officially makes Sotheby's debt into junk
bonds - a class of debt considered too risky for many investors to hold. S&P
said that a price-fixing probe into
the auction business had caused art buyers and sellers to become "less
aggressive" over the last couple of years, and that US economic and stock
market weakness may leave auction participants "relatively reluctant" in the
foreseeable future.
The downgrade is likely to
make it more expensive for Sotheby's to raise money in the financial markets.
S&P said it may change its ratings, depending on whether Sotheby's resolves
its ownership status. The auction business is currently in the grip of mild
merger mania. Last week Phillips confirmed plans to merge its UK operations
with those of rival firm Bonhams & Brooks, creating a third force to rival the
long-standing duopoly of Sotheby's and Christies.
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