The New York Times tried to make the case that third-party guarantees, or ‘irrevocable bids’ as they are styled at Sotheby’s, have the effect of suppressing bidding.

One of the problems with that conclusion is that it may simply reflect confirmation bias. In other words, the works that show strong interest from bidders may be the very lots that auction houses are unwilling to give the terms that come with these arrangements because they are confident with the risk.

However it plays out, Sotheby’s doesn’t believe one can come to any conclusion from the performance of the various lots. They provided us with a breakdown of each type of guarantee for each sale. As you can see from the charts above, the aggregate performance of each type of lot—house guaranteed, third-party guaranteed and un-guaranteed lots—is all over the map. (Sotheby’s estimation of what happened at the other houses is also a jumble.)

It would appear that the actual works of art had more to do with the prices achieved than which type of guarantee was used to sell the lot (or any guarantee at all.)

When you look at those numbers, you should also think about the sample size. It’s too small to come to any conclusions about guarantee types. Also, remember that these are aggregate numbers. The success of a few lots might offset the poor performance of others.

Either way, as Phillips CEO Ed Dolman says today in the New York Times, guarantees are not going away:

“Guarantees are here to stay — it’s something all our clients want to consider,” Mr. Dolman said. “Success is in making the right decisions around those guarantees — making sure the risks are laid off, if you can lay them off, and not expose the company to huge losses if you get it wrong.”

Third Place? In Auction World, Phillips Is Making Strides (NYTimes.com)