The Art World Worries About Guarantees

The auction guarantee issue is picked up by Colin Gleadell and it seems to unleash the most imaginative theories of unscrupulous behavior. Calling a guarantee price manipulation ignores the fact that guarantees are standard practice in other industries, particularly the entertainment industry where “prices” for actors, directors and screenwriters are “manipulated” by studio executives hoping to create a monster hit:

Aside from the dampening effect guarantees can have on bidding because estimates are set high, and the question mark over their profitability, there is some scepticism about whether the guarantees can be a form of price manipulation, and, because of their competitive nature, a driving force behind price inflation. In recent years there have been massive jumps in record prices for a painting by Giacometti and a sculpture by de Kooning, both apparently bought by the guarantor with no competitive bidding.

Rather than being a form of manipulation, they’re a form of risk transfer meant to enhance the position of the auction houses. Although, the practice can quickly work against an auction house:

The guarantee, in which sellers are guaranteed an undisclosed sum before auction is an increasingly popular form of doing business at the high end as it eliminates risk for the seller. It is also an area of competition between auctioneers where the highest guarantee offer wins the property for sale.

Art Sales: at what price guarantees?  (Telegraph)