A Crisis of Confidence?

By Michael McCullough

The Economics of Authenticating Art

In April of last year, I attended a gathering where Michael Straus of the Andy Warhol Foundation spoke about the foundation’s then recent decision to stop authenticating works by Andy Warhol. It was interesting to hear him say that part of the reason for the decision was the foundation’s confidence that the market for Warhol’s works “can take care of itself.” What this means in practical terms is that galleries, auctioneers and collectors can make their own determinations about the authenticity of a Warhol work when they decide to sell or purchase. Having worked in the art market for a decade and a half now, I’m sure the art market can take care of itself but the problem is that it really doesn’t want to.

Galleries and auctioneers rely on art experts’ opinions because it gives them cover to offer guarantees of authenticity to buyers. Only the criminally insane- though there are some out there buying- would spend millions of dollars on an artwork without some form of an authenticity guarantee. Therefore, if I own an artwork and want to sell it, I must have “the” expert on the artist bless the work; if they don’t then my artwork is practically worthless. To make this more complicated, sometimes the expert doesn’t say “no,” but determines that there is not enough information to form an opinion, which amounts to a vote of no confidence. And if I want to dispute the expert’s “no” or “no confidence” determination then I have to find not one, but two recognized experts who are willing to state that the work is authentic. The net result is that it’s difficult- if not impossible- to contest “the” expert’s authenticity determination. Moreover, sometimes it is the case that there is only one recognized expert for a certain artist’s works. The response of lately by collectors has been to bring lawsuits against “the” experts under various legal notions such as negligence, fraud, antitrust violations, and any other theory their lawyers can conceive. In consequence of this, many of the authentication boards for major artists will no longer authenticate works because too many of them have been sued by unhappy collectors.

What do we say when we want to cast doubt on a long-standing tradition that has ceased to produce useful results? We begin by saying tentatively, “Well, it’s not exactly written in stone.” Authenticity opinions were never meant to be written in stone in the first place, so it was quite predictable that the art market would be faced with this problem. Prices for highly coveted artworks have increased exponentially while the ability of collectors to authenticate those works has remained stagnant. What has changed is that collectors are no longer satisfied with their options.

Several years ago, I saw a cartoon of two art experts looking at a painting by the artist Peter Doig. One expert said to the other, “I’m certain it’s a Doig.” The other expert responds, “I think it might be a cat.” While a great deal of experience and thought might go into an expert’s decision about authenticity, in the end it’s only an opinion along the lines of “Doig” or “cat” at that particular moment in time. That is to say, the experts are offering galleries and auctioneers the ability to avow authenticity subject to future reconsideration while the economic demands placed upon collectors call for assurances on a longer continuum.

As a general tenet of life, people are created equal but opinions are not. When you receive an opinion from a doctor about your health you expect you can rely on it; we know that not every aspect of human body is if fully understood, but we at least expect to be given the variables and a prognosis of the disease. On the other hand, when a stockbroker tells you that a certain stock is a “must buy,” then you should run for the hills because you know something else is coming your way. Experience in life teaches us whom we should trust.

It shouldn’t be a surprise to anyone that art experts’ opinions are rarely meant to be final decisions. Scholarship, they will tell you, changes based upon new information discovered from time to time about artists’ techniques and materials, and new works are found that add to their knowledge of the artist’s oeuvre. An opinion about an artwork is more akin to who will win the World Series this year- it will be a choice of one of two, but no more can be said for certain at this time.

Unavoidably, this is exactly how the courts have treated art experts’ opinions; without exception, all of the lawsuits against art experts over the past several years have failed miserably. Judges and juries are in no position to gauge the authenticity of artwork, so they rely on the trusted experts. The Warhol Foundation was sued twice in the last few years and won both cases, though that smile on the courthouse steps probably cost them several million dollars. This means, practically speaking, that the authenticity quandary is more of an economic problem than a crisis of confidence. A much better reading of the situation would gather that art experts are not being compensated at an appropriate level. Think about other trades where people offer their opinions as a paid service: the credit rating agencies in the financial industry have been subject to vicious lawsuits- and probably justifiably- over the past few years and we don’t see any of those companies getting out of the credit rating business. Why? Because credit rating agencies make barge-loads of money every day- paid for by the very financial institutions that rely on their opinions to sell their wares. Does this sound familiar? If art experts were compensated in the same manner as credit rating agencies then the art market would not be having this debate. The Warhol Foundation should charge five percent of the fair market value of a work in order to authenticate it, and I suspect they would willingly withstand the judicial activism directed at them by any disgruntled patrons.

Just today, I came across another cartoon of two art experts standing in a gallery looking at a taxidermy wolf covered in a sheepskin pelt and enclosed in a glass case. One expert said to the other, “I’m afraid it’s a fake.” How very appropriate.

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About mcculloughllc

Michael McCullough has extensive experience in art, cultural heritage, and international trade matters. He is a former associate counsel to Sotheby's worldwide where he advised the company on the sale and financing of fine art, the decorative arts, cultural property, antiques, jewelry and special collections. Mr. McCullough is credited with the development and implementation of global policies and procedures related to the acquisition for consignment and sale of some of the greatest artworks in the world. Mr. McCullough is also experienced in U.S. Customs regulations, international trade agreements, export controls, economic sanctions constraints, anti-corruption rules, U.S. Fish and Wildlife regulations, and other government agency requirements. Mr. McCullough has represented clients before U.S. Customs and Border Protection, the Department of State, Immigration and Customs Enforcement, the U.S. Fish and Wildlife Service, the Food and Drug Administration, the United States district courts and the Court of Appeals for the Second and Fourth Circuits.
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