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The Christie's surrender of information bought it conditional amnesty, but Sotheby's, slower off the mark, will get none. "The idea of the program is to get the first guy to break," notes Albert A. Foer, president of the American Antitrust Institute in Washington. Although Christie's may be off the hook, "Sotheby's could be required to pay a penalty. Some people could go to jail."
The feds' investigation did not, in fact, begin with the auctioneers. In the early 1990s, the Justice Department turned its scrutiny on private dealers in an effort to nail the ones who indulged in "ring" bidding--the technique of defrauding sellers by agreeing not to bid against one another in the auction room so that the low-balled object could then be sold by the ring at a second, informal auction of dealers only. About a dozen dealers and collectors were convicted. But Justice decided that the paper trail compiled in those cases might lead further--to Sotheby's and Christie's. It subpoenaed truckloads of letters, documents, phone books and sales catalogs from both houses, and started to dig.
Auction houses charge two commissions on sales--one from the buyer, the other from the seller. It's perfectly legal to drop or raise your prices after a rival does; gas stations facing off across an intersection do it all the time. What's illegal is for two or more rivals to form a "cartel" by agreeing in advance to fix a price. One of the signs that this may be happening is a close, copycat pattern of changes--and this, the Justice Department claims, is what has been happening for years between Sotheby's and Christie's. In 1992 Sotheby's raised its buyer's fee from 10% to 15% on the first $50,000 (on higher amounts the buyer paid 10%). After just seven weeks, Christie's announced an identical fee rate. Three years later, Christie's took the lead by changing its seller's fee from 10% to a sliding scale of 2% to 20%. After a few weeks, Sotheby's did the same thing.
Whether the feds' charges stick or not, the auctioneers' legal headaches have only just begun. The case has invited civil suits by disgruntled collectors alleging that the commission-fixing has defrauded them as sellers and buyers. And indeed, some 38 suits have already been launched, and last week they were consolidated into a class action. Under class-action rules, theoretically anybody who bought or sold art at Sotheby's or Christie's during the period of the alleged conspiracy could become a party to a suit. This could run into thousands of people and tens of millions of dollars in claimed damages.