In a preview of the upcoming spring auctions, Carol Vogel says the competition between Sotheby’s and Christie’s is heating up, and "supergenerous" guarantees — "undisclosed minimum prices paid to the sellers regardless of a sale’s outcome" — are playing a central role:
"According to recent filings with the Securities and Exchange Commission, Sotheby’s has promised sellers nearly $300 million in guarantees for property being sold this spring and summer. Since Christie’s is privately held, it is not required to disclose such financial information, but executives there say it has about the same amount of money tied up in [guarantees]."
She adds that, on top of the guarantees, "Sotheby’s and Christie’s are routinely giving consignors a percentage of the fees it charges buyers." One example that's mentioned is a 1950 Rothko being sold by David Rockefeller at Sotheby's. The estimate for the painting is $40 million (nearly twice the previous auction record for Rothko, set in 2005), but Sotheby's has guaranteed Rockefeller $46 million, "not to mention giving him a lion’s share of the buyer’s premium." (He bought the painting in 1960 for less than $10,000.)
I posted on the increasing use of auction house guarantees here and here.
