Sotheby’s chairman faces trial on price-fixing case

Former Sotheby’s Chairman A. Alfred Taubman is to go on trial on Thursday for allegedly scheming with his one-time counterpart at rival Christie’s to fix commission fees charged to customers of the world’s largest auction houses, Reuters reported.

Jury selection in the case is scheduled to begin in Manhattan federal court in the government’s criminal case against the Bloomfield Hills, Michigan, real estate magnate who is the controlling shareholder of Sotheby’s, Reuters reported.

Taubman, who maintains his innocence, was indicted in May along with Sir Anthony Tennant, Christie’s former chairman, for allegedly masterminding an international price-fixing conspiracy that operated between 1993 and 1999.

Tennant, 70, a British citizen, has previously told newspapers he does not plan to come to the United States.

However, the government does expect to introduce another Christie’s former chairman, Christopher Davidge, as a key witness. Last month a federal judge denied efforts by Taubman’s lawyers to block the testimony.

Another important government witness who is expected to take the stand is Diana Brooks, former Sotheby’s president and chief executive, who pleaded guilty last year to one count of conspiring to violate antitrust laws.

If Taubman is convicted, he could be sentenced to a maximum three-year prison term. The one antitrust charge against him also carries a possible $350,000 fine that can be increased based on the loss suffered by the victims.

The Justice Department said Sotheby’s and Christie’s control 90% of the world’s live auctions of art, jewelry and furniture. It alleged that the two former chairmen conspired to fix commissions, instead of undercutting each other’s rates. During the six-year period of the alleged scheme, the two houses charged sellers in the United States at least $400 million in commissions.

Auction houses generally accept goods on consignment from individuals and entities for sale at auctions. Sellers make payments, known as commissions, to the auction houses for their services. The commissions are a percentage of the sale price of the goods sold at auction.

Before the alleged scheme started, the two houses competed primarily on the basis of commission fees because they both provided substantially the same service to sellers, the Justice Department said. However sellers lost their main bargaining tool because of the conspiracy, the government claimed.

In addition to fixing commission rates, the indictment also alleged the defendants exchanged customer information in order to monitor and enforce the commission rate schedules.

The federal investigation into possible price fixing by the auction houses led both Taubman and Brooks, his protegee, to resign from their positions in February 2000.

In addition to Brooks’ deal with the government, Sotheby’s also pleaded guilty to an antitrust charge and agreed to pay a $45 million fine. Christie’s, which had been cooperating with the government, was not charged criminally.