Buyers' Premium (Abolition) (Hansard, 8 March 1983)

§ Mr. Andrew Faulds (Warley, East)
I beg to move, That leave be given to bring in a Bill to abolish the buyers' premium at auctions. The traditional role of auctioneers has long been that of disposing of other people's property and charging the seller a commission for acting as agent in such disposals. But in 1975, the two leading fine art auctioneers, Sothebys and Christies, got together somewhat surreptitiously and decided to pull a fast one on their customers by simultaneously introducing a so-called buyer's premium of 10 per cent. in addition to the seller's 10 per cent. commission.
One of the difficulties that arises when one discusses the auctioneers' buyer's premium is that there is widespread misunderstanding as to what precisely it is. First, it is not, despite what auctioneers would have us believe, a commission payable by buyers at auction. It is simply a spurious device whereby an auctioneer effectively doubles the commission that is payable by the seller who, more often than not, is unaware of that double dealing as the real selling price is the hammer price plus the premium. Thus, when the vendor is told that his article has fetched, say, £100, the auctioneer is deceiving him as, with a premium of 10 per cent., the buyer actually pays the auctioneer £110, the auctioneer furtively pocketing the extra £10.
The truth is that the seller reads on his statement that his property has been sold for f£100 from which the auctioneer merely deducts his selling commission. This is reminiscent of the three-card trick where the quickness of the deal deceives the eye. Mr. Charles Lee, president of the British Antique Dealers' Association, has circulated a letter to the members of that organisation in which he neatly summarises the effects of this impropriety. He says: It is not the expense of auction sales, which when taking vendor's commission and buyers' premium together adds up to some 18–20 per cent. of sale value, to which the dealers object. It is the fact that the imposition of the buyers' premium disguises the true cost. Apart from the incidence of taxes such as VAT and Stamp Duty, there is no other type of sale transaction in this country in which an extra charge of 10 per cent. is imposed on the buyer over and above the sale price. In effect the extra cost falls on the seller, as the buyer must allow for the premium in assessing his maximum offer. The 'hammer price' at auctions therefore tends to be lower than it would be if the true cost of sale was properly charged as vendor's commission. To the extent that sellers are misled into believing that the cost of sale is no more than the vendor's commission, and bearing in mind that buyers get no benefit whatever in return for paying the premium, market conditions in the art world are distorted by … 'this … practice', A stamp auctioneer and dealer from the west country has made the point in these terms: This premium is just a device to increase commission charges without the vendor realising it. Most vendors are told we have 'reduced' our commission and now charge a reduced rate. The fact that there is a double commission is not pointed out to him. The vendor thinks the auctioneer is being competitive whilst in fact he is charging much more than the straight vendor and buyer auctioneer ֵ The buyer in many instances does not know that there is VAT to be paid on the premium. Also in an auction room it is practically impossible for him to work out the final price he has to pay. When bidding commences he has to have a computer of a brain to work out the bidding plus premium plus VAT. Leading figures in the arts world were vociferous in their condemnation of this new practice. Leading dealers such as I have quoted in fine arts and antiques were much 709 opposed to the new charge. Boycotts of auctions were mooted and some dealers actually absented themselves from auctions for a while. But, of course, business has to go on. Unfortunately, such gestures were not supported widely enough to have any effect. To their everlasting credit, other auctioneers who disapproved of Sotheby's and Christie's misleading ploy of the buyer's premium decided not to introduce such a charge. Foremost among them were Messrs. Phillips. Due credit should be paid to them. They held out until economic and commercial necessity to compete forced them to do so. But, to underline their dislike of the premium, they decided never to charge it for acquisitions by public museums and galleries in Britain. That stance has the unqualified support of the National Art Collections Fund. But the same consideration for national interests is not shown by that conniving twosome, Sothebys and Christies.
The art trade referred the collusion between Sothebys and Christies to the Office of Fair Trading on two separate occasions, but Sir Gordon Borrie eventually claimed that he did not have sufficient evidence or proof. The dealers tried to stop the buyer's premium by bringing a High Court action against Sothebys and Christies in 1981, alleging collusion. As such, it was a registrable charge under restrictive trade practices legislation and thus the two auctioneers had broken the law by failing to register it.
There is an interesting story here. The case was about to be tried when, quite suddenly, and without warning, after some sort of involvement by that eminent panjandrum Lord Goodman, who has played the role of official intervener on a number of occasions, the two trade organisations—the British Antique Dealers' Association and the Society of London Art Dealers—were persuaded, I know not by what means, to join Sothebys and Christies for a champagne get-together at Claridge's at 3.30 one morning. They caved in to the auctioneers by withdrawing their case.
To be fair to the dealers, they were frightened by the appalling legal costs that were involved in pursuing their action. And, they had been led to believe that the auction houses would review and possibly withdraw their buyer's premiums and that a new era of trust and collaboration between Britain's auctioneers and dealers had dawned. That was some sad hope. From that day onwards, the auctioneers have held the whip hand over buyers and sellers alike.
The Department of Trade considered the matter to be of little importance. The Department's mistake is that, whereas perhaps this arrangement is not of crucial 710 importance if it affects only the richest in the land, it becomes very serious when almost every small auctioneer has been forced to follow the example of Christies and Sotheby's. Thus, everyone now who buys and sells at auction through a premium charging house in Britain is subject to what The Times, in an excellent leading article, described accurately as a "shoddy little deception." That leading article was a good deal more knowledgeable and exact in its analysis of this matter than The Times has been recently on several other issues. It concluded by saying that the legislature should end this ploy, referring to the buyer's premium. I trust that we shall do that, and I hope that no party political controversy will be allowed to inhibit any necessary legislation.
I have been informed by letter that the chairman of the Museums and Galleries Commission—that excellent gentleman Sir Arthur Drew—has written personally in support of my Bill to the Secretary of State for Trade. The museum commissioners are appointed by the Prime Minister to advise government on important matters affecting our public institutions and the private sector that helps them. As the chairman has given that advice, surely it is now the Government's duty to act upon it It would be infinitely preferable if the Government, knowing that they had the blessing of the entire art world and of the House, were to introduce an appropriate Bill that would receive the support of the House to enable it to be processed with some expedition. I hope that the Government will show that due concern and responsibility and pick up my excellent effort to change this matter in legislation.

§ Mr. Speaker
Who will prepare and bring in the Bill?

§ Mr. Faulds
Mr. Jim Callaghan—perhaps I should point out that that is my hon. Friend the Member for Middleton and Prestwich, although I am sure that I have the support of my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan)—Mr. Patrick Cormack, Mr. David Crouch, Mr. Tam Dalyell, Mr. John Garrett, Sir John Langford-Holt, Mr. George Morton, Mr. Stephen Ross, Mr. Neville Sandelson, Mr. A. W. Stallard, and Sir Derek Walker-Smith—a goodly band—and myself.