7. Surveying the contemporary conversation
What to make of all the fuss?
• Relationship to industry growth and current
sociopolitical climate
• Focus on dealers and auction houses
• Concerns about market power and fair pricing
• Emphasis on ethics and business
• Popular conceptions of the art market
7
8. Surveying the contemporary conversation
―Apart from drugs, art is the biggest unregulated
market in the world.‖
— Robert Hughes, art critic, in Mona Lisa’s Curse (2008)
8
9. Surveying the contemporary conversation
….Really?
• Demands for and attempts at regulation are
actually nothing new
• Definitions of ―regulation‖—in terms of both form
and content—are manifold
• Any constructive dialogue, then, will require
greater context and specificity
• As well as attentiveness to where these
demands are coming from, towards whom
they are directed, and what forms of regulation
are expected
9
11. Conceptualizing regulation
―Regulation creates, limits, or constrains a
right, creates or limits a duty, or allocates a
responsibility.
Regulation can take many forms: legal restrictions
promulgated by a government authority, contractual
obligations that bind many parties… self-regulation
by an industry such as through a trade
association, social regulation (e.g. norms), coregulation, third-party
regulation, certification, accreditation or market
regulation...‖
— Wikipedia
11
12. Conceptualizing regulation
We have always been regulated
• Regulation in its most conventional sense
(i.e., government constraints) has arguably existed
in some form since the earliest civilizations
• E.g., standard weights and measures, permits
for productive activity
• Regulation through specialized agencies staffed
by experts emerged in the US through the 18th and
19th centuries
• Their forms and scopes have varied over time
in response to economic and political changes
• But, regulation in its broader sense (i.e., social
norms) is constitutive of society itself
12
13. Conceptualizing regulation
―Vibrant capitalism is dependent upon, and even
constituted by, sensible regulation. There is no
market without regulation that defines property
rights, sets standards for business practices and
creates a widespread confidence in the fairness of
the economic rules of the game. To imagine the
world in terms of preexisting markets and
intrusive government is to conjure up an
unhelpful fiction.‖
— Edward Balleisen (Duke Law) and David Moss
(Harvard Business School), Government and
Markets: Toward a New Theory of Regulation (2009)
13
14. Conceptualizing regulation
Commercial regulation is based on an ideal model of
economic activity (itself a reflection of collective
belief and social norms)
• Predominantly (neo)classical economic models of
efficient markets
• Thus, primarily concerned with market failures:
• Constrain market power in cases (e.g., monopoly)
• Prevent asymmetric information (e.g., insider
trading)
• Provide public goods
• Address externalities, both positive and negative
• Other concerns involve professional standards and
conduct (often addressed through self-regulation)
14
15. Conceptualizing regulation
But regulatory failure is also a problem:
―The primary reason for the government failure
[leading to the financial crisis] was the belief that
markets do not fail, that unfettered markets would
lead to efficient outcomes, and that government
intervention would simply gum up the works…
Too often, the regulatory system gets captured by
those who are supposed to be regulated… The risk
is especially severe in a political system such as
ours, which is highly dependent on campaign
contributions.
— Joseph Stiglitz, ―Regulation and Failure‖ in
Government and Markets: Toward a New Theory of
Regulation (2009)
15
16. Conceptualizing regulation
Potential sources of art market regulation
• Financial Industry Regulatory Authority (FINRA)
• Securities and Exchange Commission
• Department of Justice
• Federal Bureau of Investigation
• Internal Revenue Service
• and many, many more…
16
17. Conceptualizing regulation
Uniform Commercial Code (UCC)
• ―A general and inclusive group of laws adopted, at
least partially, by all the states to further uniformity
and fair dealing in business and commercial
transactions.‖ (Legal Dictionary)
• Origins date back to the 1892 National Conference
of Commissioners on Uniform State Law
• First full version published in 1952 and adapted in
whole or in part by all states (except LA) by 1967
• Of primary importance for the art market are
Articles 1 (General Provisions), which sets general
terms and principles, and 2 (Sales), which covers
the sale of goods.
17
18. Conceptualizing regulation
New York regulatory framework
• New York General Business Law
• Includes some consideration of art market
activities, e.g., auction and auctioneers (Article
3), appraisers of fine art (Article 13-B)
• New York Arts and Cultural Affairs Law (Chapter
11-C of the Consolidated Laws)
• Specifically addresses the following:
definitions (e.g., ―artist,‖ ―art merchant‖); artistart merchant relationships; express warranties;
works of fine art; sculpture and multiples
generally; and sale of visual art objects and
sculptures produced in multiples
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20. Historicizing art market regulation
Historical precedents
• Early modern Europe provided a transition from
patronage to market
• First open art market in 15th century Antwerp
• Institutional regulation (of a sort) through guilds and
academies until late 19th century
• Refuted by artists, especially the Impressionists
• Roles of dealers, galleries, and museums evolved
throughout the 20th century
• Growing disjuncture between commercial and art
historical value due to further market evolution?
20
21. Historicizing art market regulation
1966 reforms to New York General Business Law
• Novel attempt to regulate the art market directly
through state legislature
• Distinguishes art from other forms of personal
property
• Primarily concerned with protecting (1) artists
in relationships with dealers (trust vs. agency),
museums, and purchases and (2) consumers
from forgery and other deceptive practices
• Published legal assessment in 1978 argues that
the artist protections are unproductively stringent
(and conflict with the UCC) while the consumer
protections are an effective complement to general
UCC provisions
21
22. Historicizing art market regulation
The legal perspective from 1988:
―The preceding analysis concluded that because an agency
and fiduciary relationship exists between the auctioneer
and the original owner or consignor of a work of art, the
interests of the owner receives adequate legal
protection. The purchaser of a work of art through such
an intermediary, however, does not receive equivalent
protection…
According to [the prevailing legal view], any individual who
undertakes to enter into the arcane world of the art
market—where prices are high and information scant—
must assume the risks inherent in such a transaction.‖
— Patty Gerstenblith, ―Picture Imperfect: Attempted
Regulation of the Art Market‖ (1988)
22
23. Historicizing art market regulation
The legal perspective from 2011:
―Yet their disparate legal holdings raise the question of how
to structure art merchant liability in the absence of fraud
given the unique nature of the artwork…
There are three leading scholarly theories for imposing
additional regulations upon the art market to protect
unsophisticated purchasers…
[S]cholars [also] propose the application of securities
regulations by requiring auction houses to owe duties of due
diligence and disclosure to consignors of artworks… [and] to
impose these requirements on sellers and consignees to
protect art purchasers.‖
– Brian D. Tobin, ―The Virtues of Common Law Theories and
Disclosure Requirements in the Market for Fine Art‖ (2011)
23
24. Historicizing art market regulation
Lessons from history?
• Perennial concerns
• Disclosure and transparency
• Authenticity and liability
• Exceptionalism
• Based on size of market and status of art
• Enforcement
• Generally takes place through litigation
24
26. Looking ahead
Regulation through litigation
• In the absence of any consolidated
oversight, whether external or internal, litigation
will increasingly be an regulatory force the art
market
• Effects are already palpable (e.g., press
coverage in The Spectator and The
Economist, closure of authentication
boards, rise in insurance policies)
• Long-term effects are uncertain, both on the art
market and the art world
26
27. Looking ahead
The problem(s) of museums
• Despite their decreased purchasing
power, museums still occupy a critical position as
arbiters of value and promoters of self-regulation
• Restrictions on asset-use of collections is of
particular significance
• Museum deaccessioning policies index cultural
attitudes towards the ontological status of fine art
• Recent controversies, such as the Detroit
Institute of Arts, are good bellwethers as to how
art (and its markets) are perceived
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