Competition Law: The Last Pioneer for Eradicating Institutional Dominance?

February 21, 2025

By Renée Ramona Robinson

If the adage “apart from drugs, art is the biggest unregulated market in the world” is true, then what better way to fix it than with the regulatory force of competition law?^[1]

The art market has been critiqued as one of the most unregulated, obscure areas of the global economic market—rife with instances of fraud, forgeries, and money laundering.^[2] Many of these issues are compounded by the issue of authenticity when only a handful of experts or institutions have the ability to assess the value of an artwork. Authenticity allows for an inequality of power within the art market as it helps certain institutions—like the authentication boards that manage the catalogues raisonnés of artists, to auction houses, that only rely on authentication certificates from these boards—to gain an unimaginable influence within the art market.

While some experts have argued that the process of authentication should remain in its own sphere, unimpeded by threats of litigation, and only handled by prominent practitioners, many believe the value of a work of art, depending not on its own aesthetics, but human interference to be a scam.^[3] With the influence of large institutions from auction houses, galleries, and authentication boards, the law can be an important tool to temper this institutional dominance. Competition law is a field of law dedicated to regulating markets and ensuring fairness.^[4] Therefore, it is argued that it is prudent to leverage the potential ways in which competition can serve as a mode of regulation. There are two prime examples for how competition law is already being floated as a probable source: authentication boards and resale restrictions.

Authentication Boards

Large entities like the Pollock-Krasner Foundation and the Andy Warhol Foundation retain a level of dominance by being the only institutions with authentication boards that can authenticate the artists’ works. Competition law proved useful in litigation against them as a strategy to push back against their dominance within the field.

The Simon-Whelan case presents the only opportunity that we can see antitrust allegations being used to effectively capture the dominance and inequality that these large institutions wield. Joe Simon-Whelan filed a class-action suit on behalf of art buyers who he claims purchased Andy Warhol pieces at artificially inflated prices.^[5] He argued that the Andy Warhol Foundation and its authentication board “have complete control over the authentication of Warhol artwork by virtue of the Board’s status as sole recognized authentication authority for Warhol works and the Foundation’s publication of an official catalogue of Warhol works.”^[6] He claimed that this authentication system works by the Board individually rating Warhol’s works, and the informal mechanism which is the consideration of whether or not the work belongs in the catalogue raisonné of Andy Warhol works.^[7]

Simon-Whelan had submitted a painting to the Board that he claimed was previously authenticated by the Foundation and Estate.^[8] Prompted by interested buyers, the Foundation denied the painting into Warhol’s catalogue raisonné.^[9] His painting was ultimately denied twice, even with the presentation of additional documentation to the Foundation, which meant that he “was unable to sell any of the Warhols that he owned without first submitting them to the Board and that he was ultimately forced to sell his Warhols through third-parties at a fraction of the price.”^[10] This is another example of how powerful these boards are: “The Board was the most important market arbiter of Warhol authenticity. It operated in secrecy and initially gave no reasons for its decisions . . . Prior to the Simon [sic] lawsuit, the Board had been thought to have airtight insulation from legal liability. Anyone who submitted a work to the Board signed a legal waiver contracting away the right to sue in the event of a disappointing verdict.”^[11]

Bringing this antitrust lawsuit exposed the perfect weak spot. In order to circumvent this power wielded by the Board, Simon-Whelan alleged a conspiracy to monopolize and restrain trade.^[12] On the plausibility of the antitrust allegations, the court agreed with Simon-Whelan’s claims. They acknowledged that the illegal restraint on trade and monopolization claims were sufficiently argued by acknowledging evidence of inconsistent application of their authentication policies.^[13] While the case was eventually dismissed because Simon-Whelan settled,^[14] it had immense strategic potential as a mechanism in which to make large institutions more culpable and threaten their legitimacy. After the lawsuit, the Andy Warhol Foundation eventually discontinued its authentication process.^[15] Other large authentication boards eventually followed suit.^[16]

Resale Restrictions

Art authentication is not only one of the most pressing issues of the art industry that stifles competition in the art market, but contractual agreements also further inequality in bargaining power.^[17] Contracts for sale, consignment agreements, and resale agreements are all widespread documents that are commonly employed within the art market, so those on the other side of them feel compelled to accept the terms as-is or walk away.^[18] Forced into a zero-sum situation, most of these contracts give the institution that is setting the terms a large latitude of power.

The resale restriction arguments in the case Huang v. Debernardi present another consideration of how competition law can fight against institutional dominance and critique the ‘unregulated’ nature of the art market. The case involved Michael Xufu Huang who bought a Cecily Brown painting from the Paula Cooper gallery.^[19] The complaint alleged that Huang entered into a resale restriction agreement with the gallery when he bought the painting, but afterward, he sold it to defendant Federico Debernardi.^[20] Debernardi then later resold it, unknowingly contravening Huang’s agreement with Paula Cooper.^[21] In the brief supporting their motion to dismiss, they argued that these no-sale contracts are inherently anticompetitive.^[22] They contended that the terms in these agreements are particularly onerous, secretive, and prevent the reputable purchase and selling of art in a transparent manner.^[23] Additionally, they constitute a “horizontal restraint between art dealers. The no-shop, non-resale, and right-of-first-refusal clauses at issue here exist to ‘maintain control over the market in the artist’s work.’”^[24] The restriction on the way artworks were offered for sale are antithetical to the free-market competition dynamics in which there is equality because “they are designed to ensure that there is only one monopolistic point of control for the resale of the work, and that no buyer can purchase the work without agreeing to enable and maintain this control. They are a pure restraint on trade.”^[25]

Sure enough, other art commentators are witnessing the same issue.^[26] With no clear guidance on the legality of these contracts (other than their being universally accepted), this points to one instance in which antitrust concerns are being used to challenge a dominant practice in the art market. These resale restrictions may have an anticompetitive effect in the secondary market, as they may work to “unjustifiably exclude the resale of the art to control pricing.”^[27] Additionally, they heavily infringe on the “equality of bargaining power” because the purchaser finds themselves subject to certain conditions that they may or may not have been privy to because “the restrictions are not usually negotiable and there is a clear distortive impact on the purchaser’s freedom of ownership of the art that has been acquired. The effect is that art cannot be freely circulated on the market and resale is restricted.”^[28] Competition law could be an effective means of control of not only challenging the legitimacy that these large galleries may impose, but a way for buyers and artists themselves to maintain some sense of equality in controlling their access to art.

Competition as a Cure-All?

Before assuming that competition law will fully solve the ills of the art market, there are still some instances in which plausible antitrust conspiracies will fail.

In the case Kramer v. Pollock-Krasner Foundation, art dealer David Kramer bought a painting that he alleged could be worth over $100,000 dollars if the main authority, the Pollock-Krasner Foundation, agreed to authenticate it.^[29] When he contacted several auction houses, in the hopes of auctioning his work, they all returned to him and said that proper authentication verification needed to be obtained from the Board of the Pollock-Krasner Foundation for the painting to be considered.^[30] When the Board refused to authenticate the painting, Kramer brought an antitrust suit against the authentication board and two prominent auction houses, Christie’s and Sotheby’s.^[31] Kramer alleged that a monopolization and antitrust scheme began after Jackson Pollock’s death to refuse to authenticate certain pieces, driving up the price of Pollock paintings, “Kramer alleged that to achieve the goal of this conspiracy, the defendants unreasonably restrained and dominated the ‘Pollock’ submarket of the ‘modern and contemporary artists’ market.”^[32] Kramer argued that Christie’s and Sotheby’s dominate the auction house market, and the Board unreasonably restrained competition in the light of authentication.^[33]

While the court eventually considered the potential market of both auction houses, they reframed the potential market by analyzing all of Kramer’s potential avenues for selling the painting. They concluded that Kramer’s framing of the market and geographical scope was flawed.^[34] On the basis of conspiracy, the court sided with the defendants, stating that the auction houses acted in their own self-interest because they abhor the idea of potentially selling a fake work.^[35] As far as the authentication board, the court reasoned that while they are the voice of authentication, they could not be the only art experts that can provide guidance on the authenticity of a Pollock.^[36] On its face, this ruling seems reasonable, but this is not the reality of the art world. Notwithstanding the fact that many art experts can give opinions on the authenticity of a work and be wrong,^[37] and that auction houses fear liability over authenticity issues,^[38] the court should reasonably have known that without the imprimatur from these main institutions, the Pollock piece that Kramer had is essentially worthless. The value that it retained significantly diminishes if it is not for these institutions’ approval, and this idea that Kramer can seek outside approval or be able to sell his work at the same level if these institutions are not involved is misguided.

Moreover, anticompetitive claims have also been levied by artists. In the Cenedella v. Metropolitan Museum of Art case, artist Robert Cenedella filed a claim claiming a corporate museum cartel, where the major museums in New York favored artists who had ties to large galleries that the museums were financially attached to.^[39] Cenedella alleged that in contravention of the Sherman Act and New York’s Donnelly Act, these museums and other “co-conspirators” conspired to keep his works out of exhibition, though his work presented a caliber similar to other works shown.^[40] He contended that the lack of transparency around certain acquisition policies coupled with the rise in valuation of a work after being displayed points to anticompetitive effects, “in sum, Cenedella alleged that the museums agreed to use their power in the art world to make certain artists’ works increasingly valuable, and then continued to draw upon those same artists to their collective benefit.”^[41] In the end, the court decided that these claims had no antitrust standing because the valuation and determination of whether or not his art would be displayed was tenuous and highly speculative.^[42]

Conclusion

Overall, competition law remains a feasible potential solution in the art world to fix some of the concerns around inequality and lack of transparency when it comes to dealing with giants such as authentication boards, auction houses, galleries, and museums. It has made some advances under the Simon-Whelan case, and it is a hot topic among lawyers who advocate around non-resale restrictions. Now, even artists are turning to the power of competition law. While it is uncertain that competition law will be a perfect panacea, it definitely seems like a viable art market antidote.

About the Author

Renée Ramona Robinson is an LL.M candidate at Harvard Law School, and a third-year PhD researcher at Paris I Panthéon-Sorbonne and Institut Français de la Mode. A cum laude graduate from both Sciences Po Paris and Queen Mary Law School, her research focuses on a socio-legal approach in the intersection of law and the creative industries, particularly in art, cultural heritage and fashion, to which she constructed, and teaches the first-ever Fashion Law Course at Sciences Po Paris collège. At HLS, she is President of the Harvard Art Law Organization, Founder and President of the Harvard Fashion Law Association, and Founder and Editor-in-Chief of the inaugural Harvard Art Law Review.

Suggested Readings:

· Amy Adler, Artificial Authenticity, 98 N.Y.U. L. Rev. 706 (2023).

· Enforceability and Effectiveness of Art Market Resale Restrictions, Art Law Podcast (Oct. 8, 2024)

· Gareth S. Lacy, Standardizing Warhol: Antitrust Liability for Denying the Authenticity of Artwork, 6 Wash. J. L. Tech. & Arts 185 (2011).

· Anna Brady, Resale Rules Have Become the Art World Norm: What Are They and Are They Enforceable?, Art Newspaper (June 13, 2023).

· Samuel Milucky, Tom Christopherson, Emelyne Peticca & Mona Yapova, Should You Care About Competition Law?, art@law (Apr. 2, 2021).

· Tim Schneider, The Gray Market: Why Contemporary Dealers and Collectors Are Monitoring an Antitrust Lawsuit over Birkin Bags, Art Newspaper (Apr. 1, 2024).

Bibliography:

1. Jon Sharples, “Unregulated” Auction Price Manipulation May Still Be Illegal, The Art Newspaper (Dec. 15, 2023), available at https://www.theartnewspaper.com/2023/12/15/jon-sharples-unregulated-auction-price-manipulation-illegal. ↑
2. Adam Geczy, Art: The Last Unregulated Market, It(s)tartswithdam, https://www.itstartswithadam.com/blog/art-the-last-unregulated-market (last visited Feb. 3, 2025). ↑
3. Derek Fincham, Authenticating Art by Valuing Art Experts, 86 Miss. L.J. 567 (2017). ↑
4. Transparency and Procedural Fairness in Competition Law Enforcement, OECD, https://www.oecd.org/en/topics/sub-issues/competition-enforcement/transparency-and-procedural-fairness-in-competition-law-enforcement.html (last visited Feb. 3, 2025). ↑
5. Simon-Whelan v. Andy Warhol Found. for the Visual Arts, Inc., No. 07 Civ. 6423(LTS), WL 1457177, at *2 (S.D.N.Y. May 26, 2009). ↑
6. Id.. ↑
7. Id. ↑
8. Id. ↑
9. Id. ↑
10. Id. ↑
11. Amy Adler, Artificial Authenticity, 98 N.Y.U. L. Rev. 706, 738 (2023). ↑
12. Simon-Whelan, WL 1457177, at *2. ↑
13. Id. ↑
14. Hanna Hesemans, Warhol’s Woe—Whelan v. The Warhol Art Foundation: Legal Authentication and the Dynamics of the Art World, (Maastricht Univ., Working Paper), available at https://www.academia.edu/33662319/WARHOLS_WOE_Whelan_v_The_Warhol_Art_Foundation_Legal_authentication_and_the_dynamics_of_the_art_world. ↑
15. Fincham, supra note 3. ↑
16. Id. ↑
17. Paolo Palmigiano, Natalia Faekova, Louisa Penny, Oz Watson, Andi Terziu & Danielle Owusu, Artistic Control or Market Manipulation?, Taylor Wessing (June 17, 2024), available athttps://www.taylorwessing.com/en/insights-and-events/insights/2024/06/artistic-control-or-market-manipulation. ↑
18. Anna Brady, Resale Rules Have Become the Art World Norm: What Are They and Are They Enforceable?, Art Newspaper (June 13, 2023), https://www.theartnewspaper.com/2023/06/13/resale-rules-have-become-the-art-world-norm-what-are-they-and-are-they-enforceable. ↑
19. Complaint, Huang v. Debernardi, No. 2021-005156-CA-01 (Fla. Miami-Date Cnty. Ct. Mar. 3, 2021). ↑
20. Id. ↑
21. Id. ↑
22. Defendant Federico Castro Debernardi’s Motion to Dismiss Complaint No. 2021-005156-CA-01 (Fla. Miami-Dade Cnty. Ct. June 18, 2021) ↑
23. Id. at 9–11. ↑
24. Id. at 10. ↑
25. Id. at 10–11. ↑
26. Palmigiano et al., supra note 16. ↑
27. Id. ↑
28. Id. ↑
29. Kramer v. Pollock-Krasner Found., 890 F. Supp. 250 (S.D.N.Y. 1995). ↑
30. Id. ↑
31. Id. ↑
32. Id. ↑
33. Id. ↑
34. Id. ↑
35. Id. ↑
36. Id. ↑
37. See De Sole v. Knoedler Gallery, LLC, 139 F. Supp. 3d 618 (S.D.N.Y. 2015). ↑
38. See Greenwood v. Koven, 880 F. Supp. 186 (S.D.N.Y. 1995). ↑
39. Cenedella v. Metropolitan Museum of Art, No. 17-cv-8781, 2018 WL 6629408 (S.D.N.Y. Dec. 19, 2018). ↑
40. Id. ↑
41. Id. ↑
42. Id. ↑