Christie's and Sotheby's concluded a deal on September 22nd 2000 with U.S justice after both auction houses were accused of illicit agreement. They agreed to pay off US $ 512 million to settle the case with 120,000 buyers who had been penalised by their sharing of the art market during five years. Alfred Taubman, the head of Sotheby's, might thus be forced to sell his shares.
The managerial boards of Christie's and Sotheby's certainly heaved a sigh of relief after the conclusion of the deal.
Both auction houses had been accused of having concluded a secret agreement that penalised many buyers and sellers. Their heads were due to appear in court in February 2001 and faced a $ 1 billion fine, according to the counsels representing the injured party. Such a sanction would have seriously penalised Christie's and Sotheby's especially as some nasty disclosures were expected during the forthcoming trial.
The fine represents between four and five years of Christie's profits and its unique shareholder, the Artemis holding headed by François Pinault, will meet it. This represents a formidable financial sacrifice but Christie's, which had obtained immunity from U.S justice in exchange for its cooperation, will now feel quite relieved while facing its future challenges. All the more, the turmoil that resulted from that justice action did not rock the auction house on its bases since all members of its managerial team, excepted its Christopher Davidge, its general manager who resigned in 1999, have remained in command.
Already Christie's has reinforced its supremacy on the international art market gaining a 53% share in 2000 against 47% for Sotheby's.
Things may look different for Sotheby's, which has been much affected by this case. The American-owned auction house has incurred huge expenses for the creation of its Website and its profits for the first six months of the year 2000 do not exceed $ 1 million.
Many experts from Sotheby's have defected while the willingness to cooperate with U.S justice shown by Diana Brooks, its former general manager, has unsettled Alfred Taubman. The latter still has 23% of Sotheby's shares but 63% of voting rights. His wealth was estimated at $ 800 million last year but will dwindle as he has agreed to pay off $ 156 million out of $ 256 million claimed by U.S justice.
Much depressed by the illicit agreement scandal, Mr Taubman is now in a fragile position and might be tempted to accept an offer to give away his participation. Sotheby's might thus fall into the hands of the LVMH group headed by Bernard Arnault, François Pinault's arch rival.
Arnault already approached Taubman last year to try to acquire Sotheby's but postponed his decision as he preferred to wait for a settlement of the dispute with U.S justice. Now the way seems clear for a new offensive by LVMH, which has already taken control of the London-based Phillips and the Tajan group in Paris.
Arnault has recently reinforced the managerial board of Phillips and may well try to acquire Sotheby's soon before merging the two auction houses.
Alfred Taubman,75, took Sotheby's over in 1983 and is now described as disillusioned man. This property business tycoon from Michigan, who once said he was selling art like one was commercialising beer, however managed to save the auction house from bankruptcy seventeen years ago.
In 1988, Sotheby's was on top of the world sharing 59% of the art market and Taubman accumulated a series of spectacular successes but the Gulf War of 1990 brought his ascent to a halt. he then had to make cuts after hiring Diana Brooks as general manager and started to meet his fall after reaching with Christie's an illicit agreement that was detrimental to many buyers and sellers. From then on he did not manage to eschew the problems he was facing and was forced to resign from his post of head of Sotheby's board last February.
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