A Look at Artist Resale Rights

The Gallerist takes a look at artist resale royalty laws and the benefits and drawbacks. Some of the dire predictions on the royalty regulations and taxes have not impacted sales, although there are many groups who still oppose them.

It seems the law primarily benefits artists who are in demand and are whose works are sought after.  Those in the middle and lower markets, who probably need the royalties benefit less.

The Gallerist reports

It is worth looking at the nations (most recently, in 2006, the U.K.) where artist resale royalties is the law of the land to see if the benefits are indeed high and the drawbacks actually dire.

“Sales have been as healthy as before the law came into effect,” said Glenn Scott-Wright, the director of London’s Victoria Miro Gallery. “Clients haven’t indicated that they were unwilling to buy because of the royalty. In fact, there hasn’t really been much discussion of the law.” British auctioneers have reported similar results. Pilar Ordovas, the former head of Christie’s contemporary art department in London and now a gallery owner, claimed that the auction house conducted a “study of comparative taxes in the United States, such as the New York City sales tax, which is pretty comparable to the artist resale royalty, which suggested that the impact would be pretty minimal.” Her own experience is that the “the law hasn’t really changed things. At most, it is a cost absorbed by the dealer.”

The U.K.’s resale royalty law came into existence in two phases. The first, in 2006, provided royalties to living artists, and the second, in 2012, extended the law to the families and heirs of deceased artists. The British resale royalties law, which employs European standards of payment, sets a minimum sale price above which the resale royalty comes into play at 1,000 euros (820 pounds or $1,380), diminishing by a sliding scale to one quarter of one percent for profits exceeding 500,000.01 euros. The British law set the single maximum payment for any one sale is at 12,500 euros. According to the London-based Design and Copyright Society, an artists’ licensing organization that has acted as the primary collecting agency for these royalties and takes a 15 percent commission (covering the cost of collection), approximately 3,360 artists have been paid royalties amounting to 34 million euros since 2006. Approximately three quarters of the resales were at auction houses.

In 2011, Jussi Pylkkänen, president of Christie’s Europe, called the artists’ resale rights “a matter of real concern. It will affect the modern art market, which is a key aspect of Christie’s activities in London.” Four years earlier, Anthony Browne, the executive director of the British Art Market Federation, claimed that the law “is expensive and complicated to administer, and it will shift buyers and sellers from the U.K., 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.

And yet, Sarah Percy-Davis, the chief executive of the London-based Association of Art & Antiques Dealers, which has long protested the introduction of artist resale royalties as creating a burden on association members, stated that while “damage is difficult to measure, [c]ertainly, at the upper end of the market, damage has been negligible, and no one has been put off from buying or selling.”

Even at the lower end of the market, damage appears to be more theoretical than actual. John Robertson, who until he retired recently ran a commercial art gallery in London for 43 years, said that “sorting out the administration of the law” involved a great deal of time if not money. “Most of my contemporary art transactions were at the level of 1,000 to 3,000 pounds,” he said. “Paying 4 percent on that amount wasn’t as much the problem as the time it would take to do everything the law requires,” especially since he handled 400 to 500 sales at this price range per year. Still, almost all of his sales in contemporary art were at the primary, rather than the secondary, market, and almost none of those pieces were ever resold, to his knowledge.

Evidence that artist resale royalties have benefited artists who are in need has been scant. 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 to the collecting agencies and only 6 percent to living artists. Critics claim the practice has largely benefited the heirs of already successful artists like Pablo Picasso, Georges Braque and Henri Matisse. Another study, conducted by the Intellectual Property Institute of the University of Southern California School of Law, found that “there is no evidence that [artist resale royalties] has diverted business away from the U.K., where the size of the art market has grown as fast, if not faster, than the art market in jurisdictions where [artist resale royalties] is not currently payable.” However, the study also found that most payments to artists “are quite small and the median payment to artists based on auction house data is 256 pounds,” adding that 80 percent of all payments have been to a relatively small number of top artists.

When their work is no longer admired and after most artists die, interest and prices generally diminish rapidly, and auction houses like Christie’s and Sotheby’s won’t accept low rent consignments. Odds are, the principal beneficiaries of a U.S. artist resale royalties law will be established artists whose careers are thriving, more than those who have fallen on hard times. With a tax code that so already heavily favors the already well-to-do, are we ready to extend more largesse to a different class of wealthy, this time artists?

Source: The Gallerist