Heads Roll as Sotheby's and Christie's Accused of `Fixing'

Article excerpt

A JUDGE in New York will begin hearings this morning to sort through a torrent of civil lawsuits filed against the world's two leading auction houses, Sotheby's and Christie's, as concern deepens that both companies could face charges that they colluded illegally for years to fix prices and protect profits.

In London, meanwhile, the Office of Fair Trading (OFT) said that it was "making inquiries" into the UK activities of both Christie's International and Sotheby's Holdings in the light of the US allegations.

Sotheby's New York office was keeping silent yesterday, hours after announcing late on Monday that its two most senior executives were resigning their positions at the request of the board. The company's shares were battered in New York trading yesterday, fuelling speculation that it may soon be put up for sale.

The affair may be the worst crisis faced by Sotheby's in its 256- year history. It has catapulted the normally cosy world of art sales and dealing into a salivating frenzy of speculation and gossip.

Leaving through the revolving doors of its York Avenue headquarters in New York - now undergoing a $110m renovation - will be Alfred Taubman, the chairman of Sotheby's Holdings Inc, as well as Diana Brooks, the firm's chief executive and president.

A shopping mall magnate from Detroit, Mr Taubman took control of Sotheby's in 1983 and quickly transformed it from a fusty institution that was the preserve of a few dealers and collectors into an emporium of art, offering services from valuation to evening classes.

Now aged 75, he has also become a fixture of society gatherings in London, Paris and New York. Ms Brooks, 49, became in recent years the public face of Sotheby's, wielding the gavel at such auctions as the Jackie Kennedy Onassis sale two years ago. She has also emerged as one of New York's premier society hostesses, frequently overseeing sparkling gatherings at company headquarters and charity auctions.

Questions about price- fixing between the two rival houses, which together control 95 per cent of the auction market worldwide, have been simmering since 1997 when the US Justice Department began a formal investigation. Then last month Christie's said it was co- operating with the probe, admitting that it had "recently become aware of information relevant to the anti-trust investigation".

Christie's, which was bought by the French business tycoon Francois Pinault in 1998, was seeking to buy itself a degree of protection. In return for its cooperation, the auction house will get limited immunity from the justice department. The Christie's manoeuvre sent the shares of Sotheby's spiralling. From a high of $47 last spring, the company's share price was near to $14 in trading yesterday.

It is now the job of a grand jury, which is working in secret in Manhattan, to decide whether charges should be brought against Sotheby's. If such charges are filed, the firm could face a fine of tens of millions of dollars while imprisonment could be possible for individual executives.

At issue is whether the two firms secretly fixed the levels of commission that are levied at the both ends of a sale - on what the seller gets and on what the buyer pays. The inquiry is believed to stretch back as far as 1992, when the first signs of possible co- operation between the houses began to come to light. In that year, for example, Sotheby's announced it was increasing the commission charged to buyers to 15 per cent on sales beneath $50,000 and 10 per cent on sales over that amount. …