January 2009

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This is the second hike in 10 months. Sotheby’s and Christie’s increased premiums on sale prices up to $20,000 from 20% to 25% in September last year. The 20% rate had been around only since the end of 2004, when the two auction houses last hiked the buyer’s premium. Again, they did so at roughly the same time.

Buyer’s premiums are nothing new – both firms introduced this form of commission in London in 1975, when the rate was set at 10% for all lots, regardless of value. Before then, they had charged only sellers for their services. Other auction houses cottoned on to the wheeze and commissions have been climbing ever since. Even hardened industry veterans admit to being continually taken aback by how much commissions add to sale prices – and there is VAT to be added on top of the buyer’s premium (in the UK), and quite possibly delivery charges too.

Certainly, the burden of the costs has shifted dramatically to the buyer in the recent boom. Auction houses have been waiving the commissions sellers traditionally pay in an attempt to ensure a steady supply of high-quality pieces for their sales. In some cases, a portion of the buyer’s premium has been passed on to the seller by the auction house so that they get more than the hammer price for their wares.

Auction houses argue that a lot of the work they do – and for which they are remunerated by the commissions they charge – is, to a certain extent, hidden from view. This ranges from sourcing the works they sell, research and cataloguing – all of which require large teams of skilled specialists.

However, it could be argued that these are all services that a seller should be paying for. What a buyer gets for the commission they pay, beyond the chance to buy an expensive work of art, is harder to ascertain. Indeed, if one works from the premise that an auction house is trying to achieve the highest possible price for a work of art, which seems far from unreasonable, then it is working in direct opposition to the interests of the buyer. To then pay a huge commission for the privilege seems a bit galling.

But pay they do. Auction houses would argue that their role in the sale is made clear to both the buyer and seller and that providing the opportunity to buy often extremely rare works is not to be sniffed at. The question becomes whether the higher rates will hurt the auction houses if the market dips and buyers become scarcer than sellers – for all the auction room’s glamour, buyers may be increasingly drawn to dealers.