Sender: Rare book and manuscripts <EXLIBRIS-L@LISTSERV.INDIANA.EDU>
> Subject: Re: [EXLIBRIS-L] NY Auction Bidding Legislation
>
> As long as it is disclosed there is no illegality in taking
> commissions from both sides.
>
> Paul F. Helfer
>
> Attorney at Law
>
>> Not illegal, but is it immoral?
>
> Gabriel Austin
That depends...
The presumption is that the disclosure that a buyer's premium will be
charged makes the consignor aware that two fees will be calculated based
upon the hammer price and deducted from the total proceeds of the sale. One
fee is deducted from the hammer price; the other fee is added to it.
Regardless of what the auctioneer calls these fees, they are fees paid to
the auctioneer out of the total proceeds paid for the item by the buyer. It
should be mentioned that the auctioneer is acting as agent for the consignor
(not the buyer) and under the law of agency has a fiduciary responsibility
to the consignor. Although the auctioneer has no fiduciary obligations to
the buyer, the auctioneer is allowed to calculate a fee that is added onto
the hammer price and call it a "buyer's premium."
The problem (immorality) is that mere "disclosure" of a "buyer's premium"
does not fully disclose to the consignor how this second fee will directly
and sometimes profoundly reduce the monies that the consignor will receive
from the sale. If the consignor is an experienced buyer or consignor at
auction, this is not a problem --but it's a problem for most other
consignors, who are not experienced at buying or selling at auction. If you
are an auctioneer acting as somebody's agent, it seems immoral not to fully
explain the impact of all of the fees you charge them from the proceeds of
the sale.
Here's how buyer's premiums affect the proceeds of a sale-- Most buyers
have an idea of the amount they are willing or able to spend on an item at
auction (if they didn't, they'd never stop bidding would they?). Some, like
libraries, have strict budgets or other restraints. If something is being
auctioned with a buyer's premium, that extra fee must be taken into account
when a bidder calculates what they are willing to bid. For example, if you
have a budget of $120, and the item being sold is being sold with a 20%
buyer's premium, the most you can bid is $100 (hammer). If the consignor is
being charged a commission of 20%, and the hammer price is $100, then the
total proceeds are $120 (paid by the buyer) from which the auctioneer
deducts his two fees totaling $40, and the consignor gets $80. Precise fees
vary slightly from one auctioneer to another, and some charge slightly lower
fees as the hammer price increases, but this is a reasonable example. Some
of us might not worry too much about the extra fee for something for which
we bid $100 (but pay $120). But if you take my example and add a few zeroes,
it begins to matter more. Let's say you bid $10,000 (but pay $12,000) and
the consignor gets $8,000, and the acutioneer gets $4,000 for his trouble.
If you don't think that $2,000 matters, you can make your checks out to Mac
Donnell Rare Books and mail them to the address below, where I'll be waiting
by my mailbox. Or you can keep adding zeroes to the example until it pinches
your pocketbook.
Most consignors do not stop to consider the way buyers formulate their bids,
and no acutioneer that I know has ever taken time to explain it to them.
Perhaps a law eliminating buyer's premiums altogether would solve this
problem. That's the simplest solution. If buyer's premiums were eliminated,
consignors would clearly understand the affect of the commission they are
charged by the auctioneer, and easily make comparisons between different
auction house's commissions. At the very least, laws requiring full
disclosure of the impact of the buyer's premium should be enacted. Let's
hope such a law would be better written than the similar laws that require
lenders to disclose the impact of interest rates on loans. Those laws didn't
prevent the subprime loan crisis, so maybe those laws need tightening too.
Such a law would better inform consignors, and would also make it easier for
consignors to compare fees and commissions between different auction houses,
fostering competition instead of collusion. We've seen enough collusion
haven't we?
Why would any honest auctioneer, or any other honest agent, oppose full
disclosure?
And dishonest auctioneers would still have shill-bidding, calling bids off
the wall, collusion, breach of contract, overcharging commissions,
self-dealing, conversion of property, failure to separate funds, etc., to
keep them busy.
Kevin
@
Mac Donnell Rare Books
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Austin TX 78730
512-345-4139
info@macdonnellrarebooks.com
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