Auctioneers vs. commissaires-priseurs: the carnival mirror of profession regulation in the international art market.

AuthorLazzaro, Elisabetta
PositionSpecial issue on: "The comparative economics of regulated professions" - Report
  1. Introduction

    In the early 1960s the overall turnover of the French auctioneer Etienne Ader was twice as much that of Christie's and Sotheby's combined worldwide. Nowadays, the turnover of French auctioneers altogether is less than one half of Christie's or Sotheby's alone. In 2010 the total annual revenue from the sale of art and collectibles was, including fees, 3,366 millions [euro] for Christie's, and 3,308 millions [euro] for Sotheby's. For the 345 French auction houses it summed up to 1,528 millions [euro], where the turnover of the first French house was 102 millions [euro].

    Could the 1556 royal edict on French auctioneers' status have some responsibility for such a decline. In 1556, a royal edict by King Henry II had established in each town "formal and permanent offices for chattels official appraiser, so that they could manage the valuation, the appraisal, the sales and the dispersal of chattels, to stop abuses, fraud, malpractices and other embezzlement" (Quemin 1997: 28). This monopoly went on more than four hundred years. During this period, French auctioneers have been subject to an array of censorious rules and regulations, while their main competitors in Great Britain and, later, in the United States, seem to have benefited of a relatively minimal and liberal system. This paper aims to analyse these differences, and to discuss whether, as a possible outcome of them, during the 1970s French auctioneers have been sheltered from competition to the advantage of their Anglo-Saxon counterparts. In addition, our analysis contributes to shed light on the growing rivalry between Christie's and Sotheby's on an internationalised art market, and their leadership based on expanded activities, new business practices, management, and contractual rules.

    The recent reform of the French auction market has introduced some liberalisation and put the public-officer status of French auctioneers (commissaires-priseurs) more in line with that of their Anglo-Saxon private counterparts. Such a reform took place in two steps. First, a 2000 decree, implemented in 2001, suppressed the monopoly of commissaires-priseurs on volunteer sales at public auctions. (3) Fees were partially liberalised, and rules of conduct were loosened. In this new legal framework, auctioneers have been allowed to adopt a wider range of market strategies and to choose more freely the formal organisation of their business. The law also set up a new institutional body, the Council of Voluntary Sales (Conseil des ventes volontaires), to control the behaviour of auctioneers and auction houses. Second, on July 6th, 2011 the French parliament approved a draft bill, which transposed the European Directive on Services and established the principle of free practice of public auctions. Since then, commissaires-priseurs's model has basically adhered to the Anglo-Saxon one. After centuries of separate history, and, more recently, of antagonism, the mirror images of commissaires-priseurs and Anglo-Saxon auctioneers finally look alike.

    The purpose of profession regulation is to lower asymmetrical information between professional quality and consumers, and to incentivize professional human capital (Kleiner 2006). The Anglo-Saxon and French models respectively position themselves rather at the extremes of profession regulation, which corresponds to three increasing levels of entry barriers and profession discipline: registration, certification and licensing. Registration is being included in professional lists, usually compiled by professional associations. Certification adds examination requirements, usually performed by academia, professional associations and/or government agencies. Uncertified individuals can still exercise the profession, though at a lower level. Licensing imposes that all professionals are tested on given requirements. In particular, Anglo-Saxon auctioneers are subject to registration and certification (depending on countries and states), while French commissaires-priseurs are typically bounded by licensing. In terms of efficiency, certification's advantages toward licensing may include labour market differentiation, lower monopoly and hence lower costs for consumers (Friedman 1962). On the other hand, only licensing would foster trust, and hence demand and supply, and welfare, differently from weaker forms of regulation (Arrow 1963).

    The comparison between the Anglo-Saxon and the French regulations on art auctions also constitutes a stimulating illustration of the general debate on regulation policy in economic theory. To some extent, the French regulation of the auctioneer profession can be interpreted following a logic of neutrality, as modelled by Walras (1874) in his analysis of market pricing. Additionally, it can be interpreted in a logic of intermediary, arbiter, or middleman, as in the liberal or libertarian Austrian framework. Hence, possible causes of market failure, such as informational asymmetries and intermediaries' opportunism, would be reduced, at the benefit of those buyers unable to discern the true quality of offered goods, and those sellers compelled by personal contingencies to sell their assets. Conversely, the Anglo-Saxon loose-regulation model is rather reflected in Stigler's (1971) 'capture theory', where regulation is considered worse than the failures it fights, since it would protect the interests of politically stronger groups.

    The Anglo-Saxon argument would be supported by some evidence about French commissaires-priseurs' behaviour during the nineteenth century. Guillaumin (1886) provides curious examples of the about-faces of some commissaires-priseurs, just to prove their loyalty to the political establishment, and personal links between major auctioneers and political leaders. For instance, after the 1830 revolution, some commissaires-priseurs removed the bust of King Charles X from their offices, and voted a FF4,000 credit in favour of the families of those citizens "gloriously dead for freedom". When King Luis Philip II was restored in power, commissaires-priseurs immediately asked for an audience, and on August 20, 1830 the president of the auctioneers' (public) chamber made a praise of the monarchy. (4) On the other hand, the Anglo-Saxon system has also given rise to dysfunctions, as in the case of the huge collusion scandal between Christie's and Sotheby's in 1995.

    This paper provides a comparative analysis of profession regulation of art auctioneers in France and the UK and, later, the US, before the recent French reform, and its impact on the market in terms of economic efficiency. In addition to typical entry barriers imposed by licensing with respect to registration and certification, we also study the professional rules shaping the way to exercise the profession. For this purpose, we apply Stephen and Love's (1999) framework of legal professions regulation. After introducing the early establishment of the status of commissaires-priseurs in France in 1556, we focus on the recent development of the profession from the nineteenth century on, when the monopoly of commissaires-priseurs took place in Paris in 1801. (5)

    In the next Section, we compare the Anglo-Saxon regulatory model with the French one through the main competition aspects of entry barriers, advertising, applied fees, fee contracts and organisation forms. In Section 3, for the two models, we consider efficiency effects in terms of observed market shares, and price-distortion and speculative effects, also illustrated by judicial cases on key scandals. Section 4 concludes the paper.

  2. Auctioneers and commissaires-priseurs: Two names and two regulations for one activity

    In France, the profession of auctioneer has been the steady and specific object of licensing, opening up to liberalisation only in recent years. Commissaires-priseurs are gathered in regional companies, each being supervised by a regional disciplinary chamber, depending on a national chamber (Chambre disciplinaire des commissairespriseurs), established by the French Ministry of Justice. The latter controls this quite stratified network, especially for concerns of conflict resolution. (6) On the contrary, in Great Britain and, later, in the United States, this profession has been relatively free or self regulated, only subject to registration or certification, hence bound to general commercial law.

    Stephen and Love's (1999) framework of legal professions regulation is particularly useful to compare the Anglo-Saxon and the French auctioneers' regulatory models. According to this framework, public authorities usually intervene at five main levels of the organisation of the profession: Entry restrictions, advertising, fees, fee contracts, and organisational form. As we show in the four subsections below, for each of these levels, the rules for French commissaires-priseurs and Anglo-Saxon auctioneers diverge considerably. In particular, we can observe a dichotomy in terms of self vs. government regulation, and scope of regulation.

    2.1 Entry barriers

    The French profession has been the object of a quite early licensing, where the public authorities fixed entry barriers, including geographical, financial, social (including nationality), and competence ones. The underlying rationale was that a French auctioneer had to be an arbitrator between the seller and the buyer, his regulated function being to bring all the required information (appraisals) to the market before transactions took place. (7) To Anglo-Saxon public authorities, instead, auctioneers have merely represented a profitable economic sector to be expanded, to significantly contribute to the national economy. Therefore, no particular entry barriers have been imposed here, if not endogenously, such as the social ones. Registration and, in some cases, certification have been the rule.

    In France, during twentieth century, entry barriers for commissaire-priseurs have been twofold, socio-economic and education...

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