Buyera��s remorse

It is doubtful that Russian billionaire and Chelsea Football club owner Roman Abramovich felt that sensation of buyersa�� regret after his A?60 million 24-hour spending spree at Christiea��s and Sothebya��s in New York in 2008. He paid A?17 million for Lucian Freuda��s Benefits Supervisor Sleeping, and then proceeded to acquire Francis Bacona��s Triptych (1976) for A?43 million the next day.
Currently at #132 on Forbesa�� Rich List, on paper Abramovich is a zealous purchaser with a reliable history of payment; the ultimate star player. No need for jibes about sitting on your hands or inviting your wife to tag along to obstruct excessive purchases in the saleroom. Yet the threat of non payment is an ongoing and costly dilemma for auction houses of all sizes and it begs to differ whether auction houses should have more authority when obliging client payment.

Chinese billionaireA�Liu Yiqian, who just this week boughtA�Modigliani’s Nu couchA� A�for $ 170.4A�million, generally uses his American Express Centurion at auctionsa�� but not all his compatriots have the same habits a��

Yves Saint Laurent & Pierre BergA�a��s a�?Sale of the Centurya��

Chinese clients take note. For unfortunately, Chinese buyers have a notoriously bad reputation in the press. A�Recollections of the Yves Saint Laurent and Pierre BergA�a��s a�?Sale of the Centurya�� held at the Grand Palais spring to mind. In 2009, the news ricocheted through Paris, auction houses and dealers as it was revealed the Chinese buyer, later discovered to be Cai Mingchao and advisor to Chinaa��s National Treasures Fund, refused to pay for two Chinese 18th century bronze heads looted from the Old Summer Palace. Cai had the winning bids at A?13 million apiece and refused payment on the grounds that it was a a�?patriotica�� act.

The story not only challenged regulations set in place to protect the auction house, but also began meandering into the moral grounds of the sale of looted items. A�Dealers in China were torn between upholding the professionalism the industry had come to expect, whilst harboring this desire, even if untoward, to root for the patriotic claim this sale had come to represent.

A spark seemed to have been ignited, where buyers actively bid, but failed to cough up. A�It seems this is not only an issue in the West. The famous Chinese billionaire and art investor Liu Yiqian has had his own indiscretions, telling The New York Times in 2013, a�?Once the item is sold but doesna��t get paid for, what happens next?a�? Continuing, a�?Of course, I do believe that Western integrity is a bit stronger than that of the Chinese people. But it is only natural that we would encounter this problem.a�?

Bainbridgea��s famous sale of the Qianlong a�?fisha�� vase

For smaller auction houses, the risk is far greater. The famous a�?fisha�� vase from the reign of the Qianlong Emperor (1735-1796) sold at Bainbridgea��s auctioneers in Ruislip, a 45-minute drive from London, received lengthy coverage since its auction in 2010. A�With only one other known example of the molded vase existing in the world, conserved at the National Palace Museum in Taiwan, and after much debate regarding its authenticity, it sold for a miraculous price to a packed saleroom. Although an exorbitant price of A?43 million was realized, the hype around the sale was unfortunately not going to counteract the fact that the Chinese buyer refused to pay. This time, the buyer is said to have debated the 20% buyers premium equating to A?8.6 million. For Bainbridgea��s, the risk began before the sale started. When the original estimate of A?800,000 to A?1.2 million quickly lost control, the unsuspecting auctioneer would realize that no credit checks were in place to guarantee the culminating A?43 million. The auctioneer Peter Bainbridge did not wish to comment on the sale of the vase.

Problems of delayed payment

Christiea��s and Sothebya��s for example, ask for proof of identification, proof of address, bank statements, and often a hefty deposit from new (and existing) bidders. With awaiting vendors expecting payment within 35 days, auction houses frequently have their hands tied when payments are delayed. But how long should auction houses have to wait? Evidently, auction houses do have a requirement to fulfill the description stipulated in the sales catalogue, but an error on the part of the buyer such as bidding on the wrong lot or raising your hand to wave at an acquaintance, are not relevant excuses to cancel a sale.

A delayed payment is a ticking time bomb and can lead to a domino-effect amongst clients. But when there is this much hype surrounding such a transaction, it is impossible for the auction house to re-offer the item without losing sale credibility. Following Yves Saint Laurent and Pierre BergA�a��s sale of the bronze heads, Christiea��s owner FranA�ois Pinault publicly donated them to the Chinese government in 2013 in Beijing. For Bainbridgea��s, the sale was public knowledge and far more agonizing. Not until January 2013 did Bonhams intervene to present a new buyer, who is believed to have settled a reduced amount in the region of A?20 to A?25 million for the Chinese Imperial vase. Yet whereas Bainbridgea��s name may have benefitted temporarily from the furor of the sale, many other smaller auction houses still face the hazardous gamble of clienta��s refusal to pay, whilst ignoring legal requests.