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Home > IPLJ > Vol. XXX > No. 3 (2020)

 

Keywords

consumer protection, art sales, art auctions

Abstract

As sales of art at auction become increasingly popular and accessible, an overlooked consumer right may cause sellers of art to get “burned.” At its core, the auction process is intended to establish the price of a difficult-to-value object of art, therefore, the underlying philosophy of an auction is that sales are final. However, cooling-off rules in U.S. off-premises contracts are broad enough that auction house contracts can potentially fall within the ambit of these rules, giving rise to the consumer’s right to cancel the contract.

Arguably, permitting consumers to cancel in remorse undermines the premise of an auction and may be detrimental to the market value of the artwork, the auctioneer’s business, and by extension the consumer. Cooling-off rules are ineffective in the context of art auctions because these rules were not drafted with an understanding of the mechanics of the auction process or the characteristics of the art market, including the subjective value of art. In fact, applying these rules to art transactions would be consumer protection overreach. These rules were designed to redress high pressure sales techniques used by door-to-door salesmen who cornered vulnerable consumers at home. By contrast, the relationship between an auction house and a consignor or winning bidder is very different: the balance of bargaining power favors the consumer. Further, for the auction process to be effective, the consumer cannot be permitted to walk away from the sale out of remorse.

Despite some ambiguity in the U.S. legal framework, it is important to not assume that these cooling-off rules do not apply to auction house contracts. Such a mistake could extend the prescribed cooling-off period indefinitely, thus aggravating the costs of administering returns. Ultimately, the art world will be handicapped by the uncertainty of the application of these rules, therefore, the time for reform is now. It is upon stakeholders in the artworld, who have industry expertise that regulators and legislators are unlikely to have, to proactively petition the Federal Trade Commission to develop new approaches to the right to withdraw as it relates to art transactions.

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