Lemons

[Edited slightly for clarity]

I just have a few comments as an outsider.

Most of the problems are structural - auction houses are double dealers, conflicted in trying to satisfy both consignor and buyer. There are past instances of clear misrepresentation and intent to mislead, but generally, they do a good job and self-regulate well.

Unlike in housing or other industries, greater society is not impacted by a small number of well capitalized collectors/dealers potentially losing money, hence there will never be any meaningful regulation to separate and formalize fiduciary duties in the industry. The only major regulations are related to anti-money laundering.

That being said, in this recent case there was a lack of disclosure that was pointed out publicly. Whether there was intent to misrepresent is not possible for outsiders to prove, as we are not privy to the correspondence. However if you automatically consider lack of disclosure as trying to mislead the public, then it would mean that the overwhelming majority of auction houses are guilty.

Most of the outrage seems to come from the internet mob that never intended to bid on any of the lots, let alone even register for the auction. They are not customers of the auction house, and the auction house is not obliged to disclose anything to anyone whom they view as a crazed Jacobin. And practically speaking, in terms of the hammer price, it probably didn’t make much of a difference whether the details were publicly disclosed or not. The bidders were mostly professionals, and as customers (and loyalists) of the auction house, all probably did their due diligence and had their questions answered prior to bidding.

On the other hand if we believe in progress, inclusivity and decreasing the risk premium associated with investing in collectibles such as watches, auction houses should self-regulate to standardize and improve disclosure (and basic things like photo quality too). We saw this recently with a top house that provided excellent component level condition reports. But this is time consuming and entails risks of its own. In the future, as newer technologies emerge, full disclosure will become standard - this is inevitable. For now, the detective work of the gruff Vidocqs and Sailers of our world pointing out inconsistencies and discrepancies is valuable, as they add to collective knowledge, keep everyone on their toes and maintain standards. Whatever your opinion of their background, intentions or the method, accuracy, language, and tone of their accusations, it is partly thanks to them that standards are maintained. Insulting them as keyboard Clouseaus or belittling their ledger of complaints is counterproductive and arrogant, regardless of whether they viewed the lots in person or not. After all we are in 2024, and photo resolutions are not perfect but have improved significantly; it just entails more work on the part of the auction house to answer questions for those attempting to do due diligence remotely. And I would like to add that in my personal opinion, there were some lots that should not have been part of a top tier catalogue. For example, a piece of paper from the 90’s does not confirm authenticity.

On the other hand it’s also important to note that, as we learned from ATG’s annual report, obtaining consignments in this soft market is difficult. The number of very desirable, rare lots has declined across the board as collectors and dealers keep their stars in the safe for sunnier days. This is a major cause of stress for top tier auction houses, who are expected to unearth unicorns every season.

As mentioned above, I don’t know if there was an intention to misrepresent (that’s not the point of this post) but there are understandable reasons why an auctioneer would not publicly disclose all the intricate details of an obscure reference to the public, especially when the actual bidders are privately aware of the details, and accredited enough to take a loss.

Why? The primary function of top tier auction houses is not disclosure. Top tier auction houses are first and foremost event planners; they serve both consignors and buyers well by organizing an exciting, bubbly, almost dream-like show¹. This has a positive trickle down effect on the whole industry - collectors who denounce auction houses included - and hence is important. After all, we buy and sell dreams, not ratty old watches. Nobody wants to drink flat champagne. And nothing ruins a good show than a long, complicated, can of worms about serial/dial/case/movement congruence. According to the auction house and its loyalists, the relevant buyers were satisfied. Case closed, clap emojis.

As a bidder and consignor myself, my general view today is that if an auction house is open to the public, it should be as transparent as possible, at least after vetting and registering a potential bidder. It should have professional staff on hand to answer questions and send photos. In this case, given the higher-profile people involved, it would have been wiser for the auction house to have provided full disclosure by a hired specialist staff member not involved in the consigning or clerking. Ideally, to avoid conflicts of interest (or appearances thereof), consignment sourcing staff, clerking staff and cataloguer/specialist staff should be organized into 3 different teams, with different incentives and often opposing each other internally. In this case it was not. (Btw, its not for most houses). Maybe it’s just growing pains of a newer house, but a top tier auction house should optimize their organizational structure and operations to reduce conflicts of interest and manage disclosures. Auction houses are fee-earning service providers, not risk-taking principals. Otherwise, an accredited professionals-only private auction with say, a preview-only public catalogue might have been better suited.

Let’s not forget, they managed to gather some excellent lots in a tough environment, which deserves credit. However the current controversies could result in the auction house and its loyalists being stigmatized as an elitist and exclusive good old boys club, even if it was not their intention. It would also be best for the auction house to delegate communication on social media to specialists, in order not to exacerbate an already emotionally draining and inelegant situation.

In the future, I think newer technologies (not regulations) will naturally force a structural change in the industry, improving clarity of fiduciary duty and standardize disclosure. As with the controversies around dealer hyping, the auction house disclosure controversies will sound quaint. There will still be shenanigans (what’s an auction season without popcorn?) but hopefully only between the professionals and none of the vitriol that would alienate young collectors, dealers, journalists and scholars.

1. Compare the live auctions of a top tier auction houses to the lesser known auction houses in my weekly auction highlights - whereas in a live auction of a top tier auction house the air can feel electric, the ones I highlight usually consist of a bored administrator staring at her screen, reading the tape, hoping her coffee break will come soon.