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Thursday, November 10, 2005

Dirty Dealing?

Last Sunday afternoon, a group of museum administrators and curators assembled in the Dahesh Museum’s auditorium for a panel discussion on collecting contemporary art in this overheated market.

The panel, part of a larger conference on museum acquisitions and deaccessioning organized by the American Federation of Arts, featured Raymond Learsy (collector and Whitney Museum trustee), the artist Jeff Koons, Paul Schimmel (chief curator at the Museum of Contemporary Art, Los Angeles), and gallerist Marianne Boesky.

Insights by panel members ranged from the obvious (Learsy: the art market isn’t the insular little world it used to be) to the sound (Schimmel: explore more affordable work by underappreciated, mid-career artists) to the surreal (Koons: “This machine, this market, is showing how people love each other.”)

What intrigued me most, though, was a statement that Marianne Boesky let slip.

Boesky has made no secret about the process she uses for determining who gets to buy work by her very in-demand artists: identify a museum where she wants to place a work, find a collector affiliated with the organization, sell the collector a piece with the requirement that it be given as a partial gift to the institution.

Reiterating these well documented points for the museum staffers last weekend, Boesky added, “I work for the artist. We pick and choose who gets access [to work] for strategic reasons, for careers to grow,” adding generously that Whitney trustee Learsy could walk into her gallery and buy anything he wanted.

Not everyone is so fortunate. Boesky clearly has scorn for the new hedge fund collectors who think they can buy access to work by desirable artists. “Waiting lists are not linear things,” she said. “It’s not who gets there first.” Or who arrives with the most money.

None of this is news—surprising as it might be to those who think markets do, or should, operate efficiently. A Google search on Boesky’s name turns up several articles that quote her describing this strategy. What was new, though, was a piece of information that Boesky dropped almost in passing.

She mentioned that a few years ago Takashi Murakami paintings were selling at galleries that represent him for $60,000 while they were fetching $600,000 at auction. Murakami’s dealers from around the world, Boesky told the audience, got together to “do something” in response to this large price differential. (I assumed she was implying that they decided to either raise Murakami’s primary market prices or influence secondary market pricing, but she did not say this directly.)

That’s a fairly innocuous comment taken in the context of the whole of what Boesky does to manage the market for her artists’ works. But it’s one that may indicate that her market practices have crossed a line.

The U.S. Department of Justice’s Antitrust Division makes available on its website a pamphlet entitled “Antitrust Enforcement and the Consumer.” The purpose of the document is to help the general public identify antitrust activities. It contains the following advice:

How Can You Know if the Antitrust Laws Are Being Violated?

If any person knows or suspects that competitors, suppliers or even an employer are violating the antitrust laws, that person should alert the antitrust authorities so that they can determine whether to investigate.

Price-fixing, bid-rigging and customer-allocation conspiracies are most likely to occur where there are relatively few sellers who have to get together to agree. The larger the group of sellers, the more difficult it is to come to an agreement and enforce it.

Keep an eye out for telltale signs, including, for example:

  • any evidence that two or more competing sellers of similar products have agreed to price their products a certain way, to sell only a certain amount of their product or to sell only in certain areas or to certain customers
That bullet point (the first of several which I haven’t quoted) summarizes many aspects of Boesky’s market practices—especially the practice of meeting with competing sellers of the same product to “do something” about how that product is priced (if that is indeed what the discussion was about).

I’m not an attorney, and I don’t claim detailed knowledge of U.S. antitrust law. But as a consumer of products offered for sale on the art market, it seems to me that antitrust authorities would be justified in investigating whether Boesky has violated the law.

Boesky is a very bright woman and, I believe, an attorney herself. She has also had ample, first-hand exposure to the penalties faced by individuals who do not play by the market’s rules. (Her father, Ivan Boesky, famously plead guilty to involvement in a massive insider trading scandal in the mid-1980s. He eventually served jail time and paid a whopping $100M fine.)

All this would lead me to believe that Marianne Boesky would want to stay on the right side of the law as she makes markets in the work of the artists she represents. But listening to her talk about her activities makes me wonder if she is doing otherwise.

Related: Felix Salmon from last March on the irrationality of the art market.

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