Predicting More Guarantees in 2018 Misses Their History and Use

This look at the use of auction guarantees is available AMMpro subscribers. First time monthly subscribers get a 30-day grace period. Curious readers are welcome to subscribe to the monthly option and cancel before being billed.

New Year's predictions are a hoary journalistic tradition best honored in the breech. Nonetheless, at least two art market columnists have taken the opportunity to predict the increased use of guarantees by auction houses in 2018.

The logic presented betrays a fundamental misunderstanding about the use of guarantees in the auction market. There's no way to predict whether there will be more or fewer guarantees in 2018, or whether the value of the guarantees will go up or down. But it is worth noting that 2017 saw more evidence of a decline in the use of guarantees across the major sales.

Actually, with the presence of the massive Rockefeller estate—which carries a massive global guarantee that dwarves the aggregate guarantees offered in most previous years—on the market, the rise in the use of guarantees for 2018 is already baked in.

But that's not what the prognosticators mean when they say the use of guarantees will go up. Here's an example from Artnet:

Every time the world economy crashes, auction houses dust off their talking points about fiscal responsibility and the wrong-headedness of their older, freer-spending policies. Then, every time we experience a sustained recovery—at least, at the apex of the economic pyramid—they go right back to approving big guarantees, especially now that it’s become de rigeur to offload some of the risk to third parties.

Or take from The Art Newspaper that assumes the success of the Leonardo inevitably leads to more guarantees:

why would vendors not accept a guarantee, particularly in the light of the very public failure at Christie’s London in October, just a month before the Leonardo sale, of Francis Bacon’s Study of Red Pope 1962. 2nd Version 1971, (1971), which “went naked” sans guarantee and was estimated at an over-optimistic £60m-£80m?

So let's try to answer that question and then talk about what guarantees are, how they are used by the auction houses and how the use of guarantees has changed over the last decade.