Is there Transparency in the Art Market?
In order for any kind of a market to successfully evolve and grow, a healthy relationship between the client and the seller needs to be in place. In a vast majority of examples, the key to achieving this bond is the presence of transparency and, in fact, a huge percentage of markets insists on a complete clarity of the buyer-seller relation as there must be no room left to any violations in terms of transactions and regulations. However, the art market is arguably the sole example of how a high volume market can function with, let’s say, compromised amount of transparency. Notorious for the amount of ill-defined situations plaguing it on a regular basis, the art market is known for its constant insisting on bending the transparency rules despite the fact so many laws are in charge of administering it.
Regardless of what historical stage of its development you are observing, the art market has always been a murky field in terms of transparency – laws and regulations governing this kind of a market were always in place, yet its functioning constantly remained extremely opaque. Of course, the shocking surprise comes into play when you realize some of the world’s most expansive items are regularly exchanged, as millions of dollars are moved on an everyday basis – yet, the art market is arguably the least regulated legal big-budget market in existence. And it’s precisely the aforementioned factor of art market transparency, or the lack of it, that is usually the main culprit why things tend to go wrong.
Why Transparency Is a Key Aspect of Any Market
Before we venture into the situation concerning the art market, let’s deconstruct things a little bit. Every transaction within any type of market really only has four key variables: the buyer, the seller, the goods and the funds. Each of these is essential and all of them bring certain risks into play. The presence of complete transparency is what’s expected to prevent these perils, or at least lower the odds of them happening to some extent. As far as the public, which is usually the main client base for most markets, is concerned, transparency largely means more clarity about the terms and conditions surrounding the process of purchasing items or services. Of course, the populace is also concerned with the issue of consumer rights, which also falls under the jurisdiction of transparency. Lesser common concerns imply issues with provenance, crime and manipulation, all of which transparency is capable of preventing to some extent. Judging by the number of concerns it’s supposed to prevent alone, it quickly becomes apparent just how important being transparent is to any kind of a successful market.
Art Market Transparency
So, what does transparency specifically mean in terms of governing the art market? Generally speaking, it is an idiom that covers an incredibly wide array of subjects such as clarity of pricing, terms of purchases, condition and its impact on the value of the artwork, consumer claims, provenance, market manipulation, history of the piece in question, certificates of authenticity, etc. Art market transparency and the hundreds of laws surrounding it should be in charge of preventing situations like money laundering, looting of antiquities, distribution of fakes and forgeries, all major issues of the art market that, unfortunately, tend to occur rather frequently despite the number of laws attempting to prevent them.
The next question comes rather naturally – if there are so many laws in place and people are already aware of transparency’s importance, why do problems of the aforementioned nature transpire? Well, although there are countless regulations, the truth is that transparency rules come with a lot of flaws, system holes and gray areas capable of causing severe scandals in the world of art. And, make no mistake, a huge majority of scandals that do happen in the art world usually can be attributed to some fault with transparency.
Why Are the Regulation Laws So Loose?
By estimating all the issues surrounding the loose rules of transparency in the art market, it would be logical that the community would toughen the regulations up a bit. However, there are surprisingly valid reasons why the current statutes are full of blemishes and loopholes perfect for exploitation. The main reason is the right to privacy that directly clashes with the fundamental idea of transparency compelling the seller to not withhold any information or give vague details. This is obviously not a beneficial situation for the person attempting to make a profit, as the rules of transparency would demand that they state the exact price for which the piece was initially bought, immediately limiting the price range of the current transaction.
Less strict transparency laws allow auction houses, dealers and collectors to skew the market in order to give themselves an unfair competitive advantage or create environments to sustain their holdings in artworks that might otherwise decline in value. On the other hand, full art market transparency would mean that potential buyers can find out precisely what a dealer paid for an item, making it much more difficult for sellers to cover their costs and sell at a decent profit. Costs of things like time, effort, expertise, restoration and transport would immediately become disregarded. It would appear that the perfect transparency would require an idyllic balance between toughness and fairness, but any market where the buyer and the seller end up in a tug of war in order to make an even playing field does tends to not function as good as expected.
Relying on the Government?
Prepare for the cold-hearted truth – the transparency issue is not going away, at least not any time soon. It would make no sense to get rid of it as the art market would decline into chaos. However, if the market is to sustain and regulate itself, some changes should be implemented to what we’ve got going on at the moment. Some counties, like the United Kingdom, believe that the solution lies in developing relationships with the government, which will ultimately allow the transparency laws to be better organized and more proactive. While the UK tries to realize this idea, the rest of the world is left questioning whether the art market transparency overlaps with debates about public interest and the right to privacy. If politics is to intervene here, then the lawmakers as a whole need a better understanding of how to balance public interest with the practical needs of the business.
The Future of Transparency Within the Art Market
There are two ultimate conclusions that can be scraped from this article – one is that the art market transparency is a necessity and the other is that it often severely cripples either those who acquire the pieces or the ones selling them. As the laws are intentionally compromised, gray areas thrive and they take their toll on the market as people continue to slightly break the rules in order to get an upper hand. What’s even more frightening is that the art market and its community are pleased with the current situation as they do not seem to be overly concerned with these problems, often going as far as denying that there’s anything wrong.
Yet, there is no reason to completely fall into despair. Although the problems do seem overwhelming and even a bit grim, the art world should be able to upgrade the state of transparency to a point it becomes a much lesser concern. In fact, this process is already well underway – there are countless services out there that made it their mission to improve art market transparency. They do so by providing price information databases, precise auction results with highly detailed analysis, regular reports that come from reliable and trustworthy sources, reviews of art events, predictions of what the future may have in store and providing both the newcomers and the regular members of the art business with guidance. After all, a huge amount of problems humanity faced over the centuries was effectively fixed by educating the public and this might be a key solution for this situation as well – by making sure the public is aware of why some aspects of the art market need to remain somewhat secretive and why others must be made unrestricted at all costs, we should make great strides towards a more successful art market.
- Kaye, L. M., Spiegler, H. N., 2016, The Art Market: Would More Regulation Spoil All the Fun?, Herrick [Oct 13, 2017]
- Sherwin, B., 2013, Art Market Transparency: Should artists be open about their past and present art pricing?, Fine Art Views – Art Marketing Inspiration [October 13, 2017]
- Winkleman, E., 2017, How Transparency Might Just Save the Art Market, Edward Winkleman blog [October 13, 2017]
- Ashley, P., 2015, New transparency in the art market, The Telegraph [October 13, 2017]
Featured images: Art HK 2012, via postism.com; An Art Fair Before Its Opening, via artmarketsf.com; Moving an Artwork With Security, via prod-upp-image-readft.com. All images used for illustrative purposes only.