You are incorrect - it was not Sotheby's who decided "not to sell", it was the consigner who set their reserve at $70 million, and would not lower it, even though Sothebys actively suggested that they do so a day or two before the sale took place, knowing that they very well might not have somebody who would be willing to bid at the hammer that high. This was entirely the seller's call, and not the auction house's. The seller simply wasn't willing to part with their artwork for less than they felt it was worth, and they were perfectly fine taking it back if it didn't achieve the desired hammer price. It was their artwork, and their decision.
Just for clarity - this was not an "enhanced hammer" deal. It was a simple fact that the consigner set their reserve at $70 million, and the consigner would not lower their reserve, even knowing the risk that the work would publicly fail at that level. An enhanced hammer deal is an entirely different situation, and it applies to third-party guarantees and/or irrevocable bids (know as IBs) – and neither apply in the specific situation...
This is Todd Levin, who is quoted in the New York Times article above. People seem to be very confused about how public auctions legally work. Here is a short lesson, being that I worked at Sotheby's for five years in the 1990s. An auction lot has a pre-auction low estimate and a high estimate that is printed in the catalogue. This is simply a guide that the experts provide - a conservative estimate as to what the experts think the auction lot might sell for based on comps of recent public sales of similar works. When an item comes to auction, the consigner and the auction house work together privately to set a reserve price (not to be confused with the pre-auction estimate which is public). The reserve price is the price at which the lot will sell, and if it fails to achieve the reserve price, it will pass and go unsold. The reserve price can be no higher than the low estimate. Traditionally most reserves are set between 80% and 100% of the low estimate, though this is not always the case for reasons I will not go into here. The auctioneer may open the bidding at any number below the reserve, and may bid up in any increments whatsoever until they hit the reserve. Once they hit the reserve, however the lot is going to be sold, and then the auction house cannot provide any more bids. Any bids called out after an item hits its reserve, must be actual bids placed in the room, on the phone, on the internet, or left in the book by verified bidders. I hope that clarifies precisely the legalities and mechanics of how things work...
There's nothing remotely deceptive. Everybody understands there is a publicly available printed pre-auction estimate, and everybody understands that there is a reserve existing, only known to the consigner and the auction house, which can be no higher than the low pre-auction estimate. This is all clearly laid out in the auction house's publicly available terms and conditions, which also lay out every single one of these terms (and everything else applicable), what all the different terms mean, and how the auctioneer may and/or may not operate under those specific and crystal clear rules when running the auction. Everything is completely transparent. Now - if you go to an auction, and you don't read the publicly available terms and conditions, then perhaps yes, something might seem deceptive to you – but the reality is you're an idiot for not informing yourself of the readily-available rules and easy-to-understand laws and regulations under which the auction operates. At that point, it's not on the auction house at all, it's on you – caveat emptor.
It's fine if we don't agree, but the only reason to play the stupid game you describe is that it ends up working to the advantage of the house.
"We disclosed our nonsense in the terms and conditions, it's your fault if you don't catch on" is a fine way to do business if that is how you want to be seen doing business.
This is Todd Levin, who is quoted in the NYT article you have referenced. No one was willing to pay $64.25 million. That was just a chandelier bid by the auctioneer Ollie who was trying to get somebody up to open with a minimum bid of $70 million. The owner had established their reserve price at the low estimate, meaning that the low reserve of $70 million was also the lowest bid that the consigner was willing to accept as an opening bid. And if somebody bid $70 million at the hammer, they would still be responsible for the additional Sotheby's buyer's premium, and that buyers premium would've been a bit over $10 million, bringing the total paid for the Giacometti to $80 million at a minimum (had it sold). Since the previous sales that took place in 2013 in 2010 were $50 million and $53 million respectively, had this lot sold for $80 million all in, it would've sold for over 50% more than it had when it was successfully sold previously. I hope that math maths better for you with a complete explanation...
Thank you for taking the time to visit here and share insight. Yes, that explains it. The missing pieces for me were 1) no knowledge of "chandelier bids" (I thought bids were bids) 2) the article says "without a minimum price guarantee" which I read to be describing the absence of a reserve. With knowledge of chandelier bids, and an understanding that there was a reserve, it all makes sense :)
No worries, always glad to be of service if I can! I've worked in the art world (I have a private art advisory) for about 45 years now, and worked at Sotheby's for five years in the 1990s as well, so I know this territory extraordinarily up-close-and-personal from the inside out... :-)
