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Session 1 art-market-regulation


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Session 1 art-market-regulation

  1. 1. Transparency for the Global Market Since 2004 – Art market regulation (or the lack thereof?) 1
  2. 2. Agenda Surveying the current conversation Conceptualizing regulation Historicizing art market regulation Looking ahead 2
  3. 3. Surveying the current conversation 3
  4. 4. Surveying the current conversation 4
  5. 5. Surveying the current conversation 5
  6. 6. Surveying the current conversation 6
  7. 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. 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. 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
  10. 10. Conceptualizing regulation 10
  11. 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. 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. 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. 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. 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. 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. 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. 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 18
  19. 19. Historicizing art market regulation 19
  20. 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. 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. 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. 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. 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
  25. 25. Looking ahead 25
  26. 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. 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 27
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