Specifies auction requirements

2 Co-sponsors

• Kemp Hannon
• Dale M. Volker

Title of bill

An act to amend the general business law, in relation to auction requirements

Purpose or general idea of bill

To provide clear and extensive disclosure requirements on auction houses to consumers.

Summary of specific provisions

Section one of the bill is Legislative findings.

Section two are the new provisions detailing the extensive disclosure requirements. The bill requires specific disclosure requirements as to auction catalogues, the auction house's interest in an article, reserve price, loans between the auction house and any purchaser, loans by the auction house to any consignor, prohibition on "chandelier" or auction house bids unless disclosed to the bidding audience, items offered as a result of a business liquidation.

The bill also establishes minimum requirements for contracts between auction houses and sellers as to fees, commissions and charges, reserve prices, assurance of title, and rebate commissions.

Lastly, the bill provides for minimum safeguards for purchasers; itemized invoices for lots purchased, estimated values of lots, disclosures on reserve prices, assurance of title, prohibitions on certain practices including combining lots, blind items and bartered sales.

Section three is the effective date.

Effects of present law which this bill would alter

Present law does not regulate the disclosure requirements put in place by this bill as to consignor sales and contracts between auction houses, bidders and sellers.

Justification

Certain auction houses have been criticized for practices that allow for If chandelier" or sham bids by in-house auction personnel in order to "goose" bidding or "raise enthusiasm" for lots offered for sale. A sham or "chandelier" bid is any bid for which there is no bonifide offer or bidder. Also known as a "phantom" bid, this is a bid announced by the bid caller even though there is no bid of this amount. It is a device sometimes used by bid callers to keep the bid alive and moving upward. At Legislative hearings, testimony was heard that sham or chandelier bids are used by auction houses as a means of obtaining bids that meet and/or exceed the reserve price. The Committees received testimony that raised serious concerns over this practice. Witnesses testified that sham bidding undermines confidence in the art market, and that such bids are deceptive and should be prohibited. Sham bids create a false atmosphere of interest in offered work that may not actually exist and deprives the public of any real knowledge of the true level of interest for the work. Under the provision of this bill, an auctioneer would be required to announce, at the end of a round of bidding, whether an item had been left unsold. Also required would be an announcement prior to the auction, when applicable, the practice of "bidding on behalf of the consignor" - sometimes called "taking bids off the chandelier." Ending this practice in combination with the other disclosure and contract requirements of this bill will go a long way to enhancing protections for the bidding public and consumers during an auction. The provisions of this bill have largely been in place in New York City since 1986 and have improved auction house practices and the value received by purchasers.

Prior legislative history

2000: S.7536: Consumer Protection. 2002: S.7324: Consumer Protection. 2003-04: S.2523-A Consumer Protection. 2005-06: Assembly Calendar. 2007: Passed Assembly/Senate Rules Cmte. 2007: S.6175A: Rules Committee/A2442A: Passed Assembly 2008: S.6175A: Consumer Protection Committee/A2442A: Passed Assembly

Fiscal implications for state and local governments

None.

Effective date

This bill will take effect on the sixtieth day after it becomes a law.