Christie’s Gets a Slap on the Wrist from the Advertising Standards Authority

A recent ruling by the Advertising Standards Authority (ASA) reminds auctioneers that estimates in auction catalogues must make clear that charges apply in addition to the hammer price, and if VAT applies to those charges, they must be shown inclusive of VAT.

The Advertising Standards Authority (ASA), the UK’s independent advertising regulator, investigated a complaint about Christie’s London Interior Sale online auction catalogue of 11 January 2018.  In a ruling published on 10 October 2018, they concluded that Christie’s advertising of lots in the online auction catalogue was misleading.

By way of background, in December 2016, the Committee of Advertising Practice (CAP) published a guidance note on ‘auction guide prices and no-optional charges’.  CAP is the sister organisation of ASA and is responsible for writing the Advertising Codes.   In their guidance note, CAP took the view that whilst it was not practical to include auction charges (e.g. the buyer’s premium) in the auction estimates because these charges were subject to change,  the ASA was likely to consider that ‘ads featuring guide prices [aka auction estimates] would need to provide a clear reference to the existence of those fees and provide an explanation of how they are calculated. The ASA is likely to expect the existence of relevant fees to be indicated immediately next to the guide price’.

CAP’s 2016 guidance also stated that ‘if VAT applies to fees [e.g. the buyer’s premium], unless all or most of those to whom the claim is addressed pay no VAT or can recover it, it should be included in the fee. If a premium is £100 + VAT, it should be referred to as £120. Where fees are expressed in percentages, these should incorporate VAT so a fee of 25% + VAT should be stated as 30%. If all those to whom the price claim is clearly addressed pay no VAT or can recover VAT then it can be separated from the fee base price, but the existence and rate of VAT should be prominently stated. In this case, £100 + 20% VAT.’

The guidance note went on to describe how fees should be advertised when the fee is calculable in advance, when the fee is not calculable in advance, and when some fees are calculable in advance but other are not.

CAP concluded that whilst it was ‘unlikely to expect specific information about how fees are calculated to accompany every guide price, because in complex areas this would not be practical. However, such information (and how to access it) should be clear to consumers. It is unlikely to be acceptable to only include the information in the terms and conditions’. CAP made a few common-sense suggestions as to how fees might be presented next to auction estimates printed in the catalogue.

The Complaint against Christie’s

Christie’s seems to have ignored CAP’s 2016 guidance despite its feeble attempt to persuade the ASA to the contrary.  The auction estimates in Christie’s London catalogues carry no reference to relevant fees ‘immediately next to the guide price’ as required by the guidance note.  Instead, at the bottom of every page of Christie’s London online catalogues, the reader is advised in small letters that ‘other fees apply in addition to the hammer price – see Section D of our Conditions of Sale at the back of this Catalogue’.  If you turn to Section D, you find information on the buyer’s premium and the Artist’s Resale Right.  As far as taxes are concerned, you are referred to yet another section headed ‘VAT Symbols and Explanation’.  That section, in turn, sends you back to the ‘glossary’ at the end of the Conditions of Sale.  A consumer unfamiliar with buying at auction may be forgiven for scratching his/her head in disbelief at the complexity of it all.

The ASA criticised Christie’s on two grounds.  First, the auction estimates of each lot advertised for sale did not give an indication that non-optional fees such as the buyer’s premium would be payable in addition to the hammer price. The reference at the bottom of each catalogue page to ‘other fees apply in addition to the hammer price – see Section D of our Conditions of Sale at the back of this Catalogue’ was insufficient and could be overlooked by consumers.  Secondly, the rates of buyer’s premium in Section D of Christie’s Conditions of Sale excluded VAT.  Whilst Section D referred to the fact that VAT might apply, that reference alone was insufficient.  The rates of buyer’s premium should have been inclusive of the rate of VAT payable.

The ASA concluded that ‘the ad must not appear in its current form again’.  The ASA told Christie’s ‘to ensure that quoted guide prices in future advertising for auction items or lots made clear that non-optional charges, such as buyer’s premium, any other applicable fees, and the likely rate charged, and applicable taxes such as VAT, were payable on top of the hammer price’.  We also told Christie’s to ensure that any further detailed information about how those charges and taxes are calculated were adequately signposted, and that quoted prices, such as buyer’s premium, must be inclusive of VAT, if not all of the buyers could recover VAT or pay no VAT’.

Christie’s London does not seem to have implemented the ASA’s recommendations yet.  Their January 2019 online auction catalogue available at the date of this blog displays auction estimates in the same way as the online auction catalogue complained of last year.

Other auction houses

The other main London auction houses do not seem more compliant with the CAP 2016 guidance than Christie’s. Sotheby’s London online auction catalogues are arguably more impenetrable than Christie’s because the font of the line of text at the bottom of each page is so small that unless you manage to enlarge it on your screen, you will miss it.  It reads: ‘Buyers of all lots are liable to pay hammer price plus buyer’s premium, applicable taxes and Artist’s Resale Right.  Refer to sale catalogue or sothebys.com for further information.’  Phillips’ London online auction catalogues do not even include a line on each page referring the reader to a buyer’s premium and VAT.  None of the main London auction house appears to quote rates of buyer’s premium inclusive of VAT.

Irina Minervino and Pierre Valentin