(2 of 2)
What went wrong? Confidence. The sales revealed a buyers' backlash against controversial practices by the auctioneers, notably that of giving guarantees to owners in order to acquire works to sell. This technique -- which Sotheby's invented and Christie's denounced with high sanctimony in 1989, before quietly adopting it themselves in 1990 -- has produced a string of "pre-auction auctions" among the houses competing for merchandise. It means that the winning house, in order to fulfill its guarantee, has to pump its estimate higher and higher to hype expectation.
Were sales in which top bids were running 20% to 30% under the low estimates , to be called failures? Not really, sniffs Sotheby's U.S. chairman John Marion. As for charges that hype by the auction houses has undermined not only prices but the houses' own credibility as well, Marion says, "Anyone can say anything they like." But art dealers, who have lost much of their business to auctions in recent years, are not immune to schadenfreude. Lawrence Rubin, for instance, head of New York's M. Knoedler & Co. gallery, sees "a slump self- induced by the auction houses. Over the past three years, they have simply doubled their price estimates regardless of what the thing might really be worth. You can't go on jerking up prices relentlessly like that without real clients ready to pay them, and clearly they're not. You run out of rope."
The slide in the contemporary market -- the junk bonds, as distinct from the Impressionist blue chips -- is not helped by the fact that some of the biggest buyers of former years, like advertising mogul Charles Saatchi, are now strapped for cash and have turned into sellers.
But the larger problem will not go away. As the auction analyst Souren Melikian recently wrote in the International Herald Tribune, "Market manipulation has now reached such proportions . . . that even the greenest newcomers are becoming aware that they are being taken for a ride." Since the main form of this manipulation has been the systematic inflation of estimates, it leaves the auctioneers with a problem not even Dr. Gachet could cure.