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Abstract

Over the last twenty years, the art and auction market has been transformed from one where the prevalent bidders were experienced dealers and professional agents acting on the behalf of collectors and museums, into a market where many novice participants are engaged directly in bidding for themselves. These new entrants to the art and antique auction market bid against each other, as well as against the dominant long-term experienced participants, dealers and gallery owners. With the population of buyers greatly expanding, another observable element is the establishment of new regional auction houses. Moreover, there has been an increase in the number of auctions held by long-existing auction houses. There has also been an increase in the quantity of fine art objects, antiquities, and antiques that are regularly made available at auction as a result of estate sales and high prices inducing owners to offer their valued possessions for sale. The influx of a new class of participant bidders into the auction market has produced a group of individuals, sometimes naïve and very often inexperienced in the rules and conventions governing auction transactions. This group of new bidders has provided motivation for increased deception and manipulation in the auction environment. Thus, these changes in the auction market have produced a burgeoning population of potential victims of traditional fraudulent practices in the auction market. In addition, the opportunity for gain has provided an incentive for the creation of new schemes involving misrepresentation of goods and the development of manipulative market practices devised to raise the ultimate price paid for those goods. Because many in the new class of auction bidders are relatively ignorant about the goods on which they are bidding, and because they are unaware of both the potential means for distorting the bidding process and the need and opportunity to obtain expert third party evaluations of goods offered at auction, there is a need to develop legal protections that will impose responsibility on auction houses to stand by the claims and assertions about the goods that are offered at auction. It is clear that because these bidders often are willing to expend large dollar amounts at auctions, there is both the means and reasons for expanding deceptive practices in the auction markets that justify the development of a more stringent basis for liability on auction houses for deceptive and misrepresentative practices. Before this change in the auction environment, the established auction market in the United States was dominated by established firms whose reputation was a valued asset. These firms had a reason to police the bidding process and to exercise care in the characterization and presentation of goods for auction in ways that minimized deception. With the development of a new class of auction houses, a group of enterprises have entered the market, many with low capitalization and little hope of long-term operation, and which have no reputation to protect and little interest in competing with the national auction houses in the area of reputation for integrity. Consequently, these new firms have little interest in avoiding fraud and deception beyond the avoidance of litigation or criminal prosecution. Because states do not license auctioneers, or regulate auctions, entry into the auction business is open to anyone. There is no professional training or qualification established for the auctioneers in the area of appraisal; nevertheless, auctioneers regularly offer opinions as to the authenticity of items during the period that objects are available for inspection before bidding and at the time of bidding. Moreover, some of these auction house employees give estimations of value at the actual time of auction. The major established auction houses provide a warranty of authenticity of the works of art, antiques, and antiquities in the written catalogues or printed conditions of sale, although these warranties may vary by type of merchandise according to the classifications and limitations adopted by the auction house. A warranty of authenticity of authorship is often provided that guarantees the identity of the creator or maker of an object, and the “period, culture, and source of origin” of a property offered at auction. Such warranties are also limited in duration. There is, however, a tremendous lessening of the extent of the warranty of authenticity, if one is provided at all, by the regional or local auction houses that are unwilling to take on the liability created by contracting to guarantee the authenticity of objects they sell at auction.

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