Auctionata Accused of Major Trade Violation after an Audit Report
One of the largest online trading companies Berlin-based Auctionata has underwent an audit review that revealed numerous violations, including shill bidding and breaching trade regulations. Audit accountancy company KPMG reviewed Auctionata’s documents and found numerous irregularities in the company’s €80 million euros business. Due to the irregularities found the auction company could face fines and revocation of its trade license. Of course, the scandal can cause irreparable damage to Auctionata’s reputation.
Buying Art Under a Fake Name ?
KPMG audit report states that the company’s CEO Alexander Zacke and his wife Susanne Zacke both used their real names and numerous aliases in order to participate in auctions on the site. Employees and management members have bid in auctions as well. Both Alexander and Susanne Zacke denied press accusations of using aliases to inflate auction values and claimed that they only bought several pieces in 2013 and 2014 in order to decorate their apartment in Berlin.
Additional Auctionata Violations
Additionally, the report states that management consigned and later sold works with questionable valuations in exchange for substantial advances. Alexander Zacke and his wife were accused of consigning almost 600 items worth around €500,000 which values were many times questionable and based on incomplete or even missing consignment contracts. According to the report, many employees, including numerous board members bought artworks using the site, thus violating trade regulations. The official statement on the company’s website claims that “the report refers to the early stage of the company” and that “all issues pointed out by the report have already been addressed in 2015”. “Naturally we made mistakes in the beginning, but we have worked hard to fix them.”, Alexander Zacke stated about the report.
Auctionata – the First Livestream Auction house
Auctionata is one of the biggest auction houses in Germany. According to their website, the auction house owes its success and most of its revenue to the lengthy string of livestream auctions that make about 80 percent of the company’s profit. The rest of the revenue is generated through the online shop and private sales. The company has reported net sales of €81 million in 2015 alone, which is almost a 200 percent rise compared to last year.
Source: Wirschafts Woche
Since the release of this article we’ve received an official comment from Alice Hinrichs, Auctionata’s PR Manager which we now (on April 11th,2016) include into the original article. You can read the official Auctionata’s statement about the KPMG report below.
The KPMG Governance and Compliance report was actually commissioned by Auctionata’s management on its own accord mid 2014, in close consultation with the supervisory board. The report refers to the early stage of the company, i.e. early 2013 and 2014. All the material for the basis of the evaluation by the KPMG auditors was submitted by the Auctionata AG management on their own accord and entirely voluntarily. The report merely noted that the management could face investigations, had they not taken the necessary steps towards full compliance upon reviewing its findings.
The goal was to improve internal company standards on the basis of this report and to prepare for a potential IPO. “The rapid growth of Auctionata made us soon realize that we could not continue on as a young startup could. For that reason, the management ordered a full-scale compliance audit. Wherever our standards were found to be lacking, we rigorously changed them,” says Alexander Zacke, Founder and CEO of Auctionata. The compliance team at the time, the employees, the management and the supervisory board members of Auctionata AG have since then worked closely together in order to systematize and professionalize the internal structures on the basis of the resulting audit report.
Bids made by the auctioneer up to the limit are absolutely common business practice. They serve to protect the limits that are determined by the seller on whose account Auctionata acts. This is explained in Auctionata’s terms & conditions, like most of the other auction houses. (See clause 7.9 in our terms and conditions). At no point have bids made by the auctioneer gone above what the consignor determined as reserve. Today Auctionata sets industry standards in providing transparency in the cases where a reserve price is set and where lots are sold on a conditional basis by indicating this in the catalog and the results page. All consignments of the Auctionata employees were retrospectively approved by the supervisory board and found to be proper. Consignments by employees were always treated with the same diligence as external consignments. In the early stage of the company, employees and management members have bid in auctions, to buy objects for themselves. This was a mistake and was stopped immediately after the release of the report.
Since the submission of the KPMG report in January 2015, Auctionata has carried out regular internal audits on the basis of its findings and all the issues raised by the report were addressed between 2014 and 2015.
Auctionata’s Official Statement
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Featured image : Auctionata studio and Auctionata website screenshot ; Images for illustrative purposes only