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Thursday, 19 January 2012 03:17

Resale Royalties: Roiling the Contemporary Art World

Resale Royalties Roiling the Contemporary Art World BY DANIEL GRANT
Roiling the Contemporary Art World


In 1973, Robert Scull, the owner of a New York City taxi fleet, sold off the bulk of his noted Pop Art collection at Sotheby’s, in the process earning $85,000 for a painting by Robert Rauschenberg entitled Thaw that he had bought fifteen years earlier for $900 from the artist’s dealer. Rauschenberg, who had attended the sale, came up to the collector at the end, shoved him and said scornfully, “I’ve been working my ass off for you to make that profit?” Scull replied to the artist, “You’re going to sell now, too. We’ve been working for each other.” In other words, higher prices on the secondary market result in greater demand and higher prices on the primary market. However, Rauschenberg’s anger did not abate, and he became an advocate for “resale royalties,” whereby collectors pay artists (or their heirs if it’s within seventy years of the artist’s death) a percentage of the profits they earn when they sell an artwork.

Mark Grotjahn, Los Angeles, California, 2011. Photography by Ramona Trent. Courtesy Mark Grotjahn Studio. Copyright: Mark Grotjahn.
Mark Grotjahn, Los Angeles, California, 2011. Photography by Ramona Trent. Courtesy Mark Grotjahn Studio. Copyright: Mark Grotjahn.

Rauschenberg’s support helped a five percent resale royalties act become law in the state of California in 1977. If a collector is unable to locate the artist to make a royalty payment, the California Arts Council will hold the money and attempt to find the artist. Until recently, however, the law has been widely ignored by galleries, auction houses, and artists themselves. (Since 1977, the Arts Council has only collected approximately $350,000 for the payment of more than four hundred artists, according to a spokeswoman.) But in the past fifteen months, several lawsuits by artists have been filed against collectors, art galleries, Christie’s, Sotheby’s, and even eBay, for failing to pay owed royalties for artworks sold in California on the secondary market.

“The law has simply not been obeyed,” said Lonnie Blanchard, lawyer for Los Angeles artist Mark Grotjahn, who filed a lawsuit in late 2010 against Dean Valentine, a longtime collector of his work, for failing to pay him royalties following sales. “Artists generally are reluctant to push their collectors to pay the royalty because they don’t want to damage their relationship, but enough is enough.” Grotjahn’s lawsuit alleges he is owed as much as $150,000 in royalties.

For their part, the auctioneers have responded by challenging the constitutionality of California’s resale royalties act, claiming that it conflicts with the Commerce Clause whereby the federal government, not individual states, regulate interstate commerce.

The idea behind the law, which only California chose to enact, is that artists often sell their work very cheaply at the outset of their careers, which doesn’t so much reflect the importance or quality of the art itself as the power imbalance between the artist and the collector. When that work rises in value, it is usually a result of the artist’s growing reputation. According to resale royalties advocates, the artist has increased the value of his or her work for the benefit of the buyer, who has become enriched at the artist’s expense. Resale royalties return some of that value to the artist when the artwork hits the secondary market. These royalties also act as a type of pension for older artists.

“In general, I think resale royalties is a pretty good idea,” said painter Chuck Close, who with a number of other artists this past October filed a class-action lawsuit against the auction houses. “I know some artists who were successful in the 1960s and 70s and have since fallen on hard times and could really use the money.”

The wrangling over resale royalties isn’t limited to the state of California. England, which adopted a resale royalty law in 2006, is expanding that law in 2012, much to the chagrin of art dealers and auctioneers. The implementation of the law was staggered, first to involve only living British artists, in order to allow the art market to adjust to the new requirement, but the expansion brings into the mix sales of work by deceased artists, which are greater in number and generally higher in value.

Sir Anthony Caro. Photography by Barford Sculptures, Ltd. Courtesy, Barford Sculptures, London.
Sir Anthony Caro. Photography
by Barford Sculptures, Ltd. Courtesy,
Barford Sculptures, London.

The British law sets a minimum sale price of £3,000, above which the resale royalty comes into play, with subsequent royalties set at a diminishing rate; starting with 4 percent for profits up to €50,000, and going down to one-quarter of 1 percent for profits exceeding €500,000.01. The single maximum royalty payment for any one sale is set at €12,000. The London-based Design and Artists Copyright Society, one of the two most significant nonprofit agencies collecting and distributing resale royalties, estimates that artists have been paid €15.5 million since 2006. When sales of work by famous deceased artists are added to the mix, the value and volume of royalties are expected to increase four-fold, perhaps more.

Like the United States, artists in the UK are divided on the issue of resale royalties. Damien Hirst has expressed his support for the law, while Anthony Caro and David Hockney are among a group of artists who signed a petition against it. (Tania Spriggens, a spokeswoman for the Design and Artists Copyright Society, said, “no artists have returned their royalties to us. The checks have all been cashed.”) Caro claimed in a recent e-mail that the law generally “will mainly benefit artists who are already successful.”

Most of continental Europe has had artist resale royalty laws for decades. A 2010 report on artists’ resale royalties commissioned by the European Art Market Coalition found that in continental Europe, 74 percent of all the royalties collected went to artists’ heirs, 20 percent went to the collecting agencies, and only six percent went to living artists. Helping older artists may be the theory, but the practice has largely been to support the heirs of Picasso, Braque, Matisse, and a handful of successful painters and sculptors.

During a U.S. Congressional hearing on the subject in 1989, the late Elaine de Kooning called artists’ resale royalties “a ‘Fat Cat’ provision which would benefit very few artists, those least in need of help…The majority of artists who barely eke out a living (if they’re lucky) from the sale of their work would not be helped by this law in any way. It would most certainly discourage collectors from buying art.” Gilbert Edelson of The Art Dealers Association of America has spoken out against enacting a law in the United States, but that did not stop Wisconsin Democratic Senator Herb Kohl and New York Democratic Representative Jerrold Nadler from introducing, this past December, the Equity for Visual Artists Act of 2011, which would be an artists’ resale royalties law on the federal level; the act, however, was dropped.

Opposition to artists’ resale royalties stems from the fact that contemporary art is the riskiest area of the entire art market — with works by many living artists never achieving a secondary market — and therefore collectors should not be penalized but allowed to enjoy the rewards of their discernment.

If artists are divided on the subject, dealers and auctioneers are not. Speaking about the UK, Anthony Browne, executive director of the British Art Market Federation, said, “The problems with the law are already evident, and they’re just going to get worse.” The artists’ resale royalty “is expensive and complicated to administer, and it will shift buyers and sellers from the UK, which has lost a considerable amount of global art market share in the past five years, to countries where there is no royalty to be paid” — such as the United States (he meant New York).

Daniel Grant is a freelance writer specializing in art and antiques.