Keller Introduces Bill to Regulate Auction Houses

Senate bill would regulate art auction houses

By Patrick Malone
The New Mexican

Art and politics are inescapable fixtures at the state Capitol, and now they’re on a collision course at the Roundhouse.

A proposal introduced last week in the Legislature would impose government oversight of art auction houses for the first time and change the way some of them do business.

Reports of questionable auction practices involving expensive pieces that distort prices and set off a chain reaction that negatively affects artists, galleries and ultimately private purchasers of artwork inspired the proposed legislation, according to its sponsor, Sen. Tim Keller, D-Albuquerque.

“Usually $10,000 and over — fine art — those are the concerns I’m hearing about,” Keller said.

The bill is likely to encounter opposition from auction houses that could find it onerous and contradictory to accepted practices in the art business, according to David Clemmer, curator at Zaplin Lampert Gallery in Santa Fe. He is former director of Santa Fe Art Auctions, which along with Manitou Auctions and Altermann Galleries and Auctioneers, constitute the art auction houses in Santa Fe.

Auction house representatives did not return messages seeking comments.

Senate Bill 78 would require auction houses to disclose the reserve (or minimum acceptable price) for a piece of artwork up for auction, make public any financial interest that the auction house has in a particular piece of artwork and allow potential buyers to inspect items before bidding on them.

Clemmer expects auction houses will balk at the prospects of divulging reserve prices and disclosing any financial interests in artwork they are selling because neither is a standard practice.

“That’s something I’ve not seen,” he said. “Locally, auction houses are likely to object. There’s a certain amount of theatricality involved in auctions, no doubt about it. But that’s part of why people go to auctions.”

Keller said the disclosure elements of his bill get to the heart of the specific complaints that have come to his attention.

“Two pieces of art were being sold, similar, up for auction with different reserve prices that were not disclosed, therefore, the buyers were under misconceptions about the reserve prices,” he said. “Pieces of art in auctions, as well, where some were owned by the auction house and some were not and that not being disclosed — basically the process is biased toward the art that’s owned by the auction house and that’s not being disclosed.”

Keller’s bill also would give the Attorney General’s Office authority to regulate art auctions and act on consumer complaints. Currently, no statutory oversight of art auctions exists in New Mexico.

“This is essentially an unregulated area in our economy that is very high-dollar in places like New York and Santa Fe,” he said. “Because there’s no statute there’s no basis for a complaint. Unless these transactions constitute egregious fraud that would be covered under federal contract law, there’s nowhere for people to complain to.”

Keller would not identify the sources of the complaints that inspired him to introduce the legislation, except to say that they were gallery owners and art investors.

“The fact that they feel they need to stay anonymous to me is another reason that we need the regulation,” he said. “Things are clearly bad enough and tense enough that they’re not even comfortable going public with it. Some of them are worried about retribution for the works that they need auction-house services to sell.”

Artists and galleries rely on auction houses to get their consigned artwork in front of potential buyers — including galleries, which rely on the wholesale savings realized at auction to make their profit margin on sales to collectors.

“The prices that are set on the retail side of things in the galleries are determined by what happens in the wholesale market,” Keller said. “So this actually does affect every tourist and every art owner and dealer in Santa Fe and in the state, even though it’s sort of upstream from what they would do on a daily basis.”

Keller also refused to identify the auction houses accused of questionable practices.

“The complaints I got were about multiple auctions that took place in Santa Fe,” he said. “It’s not even necessarily an auction-house-by-auction-house issue; it’s actually an auction-by-auction issue. So in other words, one auction by a house might go very smoothly and not have all of these issues, but then the next one, there isn’t as much transparency and these things aren’t covered.”

Clemmer said Keller’s attention on the established art auction houses is misplaced.

“The auction houses based here in Santa Fe, I’ve dealt with them extensively, and those operations are very much on the up-and-up,” Clemmer said. “I would be very surprised if people were taking issue with them. It doesn’t serve anybody’s purposes well to try and do dirt by the people who are in your own backyard.”

Regulatory scrutiny should instead target less reputable art auctions that pass through town for a few days then move on, Clemmer said.

“I think there should be a greater concern over these fly-by-night operations that come through with truckloads of stuff, set up shop and sell some art that I think is of questionable authenticity,” he said. “They basically travel from town to town with their own stuff. As to where it comes from, I couldn’t really say.”

The legislation Keller proposed instead targets permanent auction houses. It takes a cue from a New York law that as originally proposed contained many of the same provisions and more, but was ultimately tempered down. Keller said his bill is a starting point that he hopes all segments of the art economy will help mold — including auction houses.

In a state where $6.5 million worth of art adorns the walls of the Capitol building, and a city where $200 million in art changes hands each year according to the last formal study a decade ago, Keller says he recognizes what’s at stake for Santa Fe and New Mexico.

“This is a white-hot Santa Fe issue, and it’s a reflection of the uniqueness of New Mexico,” he said. “There are not a lot of states that care a lot about this. New York and New Mexico are two that do.”