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NEW YORK — Sotheby’s has announced a major shake-up of its customers’ fees, reducing its buyer’s premium for the first time since it was introduced in 1979 and setting sellers’ commission at a standard rate. The new charges will come into effect in May.
Among the headline changes, Sotheby’s is abandoning its current three-tiered buyer’s premium structure and switching to a simple two-tiered format. The new rates will be 20% on the hammer price up to $6 million and 10% of the hammer price thereafter.
It effectively means Sotheby’s premium will be significantly lower than that charged by its principal market rivals and many regional U.S. salerooms.
Previously, the fees at Sotheby’s were 26% up to $1 million, then 20% up to $4.5 million, and then 13.9% on the portion of the hammer price beyond those levels. Since 2020, the company also charged an additional 1% administrative fee applied to the hammer price of all individual lots (the so-called ‘overhead premium’) that has now been scrapped.
Sotheby’s key changes for sellers includes the introduction of a uniform seller’s commission rate of 10% on the first $500,000 of the hammer price per lot. There will be no seller’s commission on the portion of the hammer price above $500,000.
Sellers of higher value consignments will not have to pay any commission at all where the low estimate is $5 million or above. When the low estimate of a premium lot is between $20 million and $50 million, sellers will receive 40% of the buyer’s premium in addition to the hammer price. These new fees publicly reflect the sort of arrangement that was previously commonly agreed in private.
Sotheby’s is also officially implementing a new ‘success fee’ of the type that Christie’s introduced to its vendor’s terms a decade ago. Whenever the hammer price of the lot exceeds to the top estimate, Sotheby’s will receive an additional 2% commission.
The moves are remarkable on a number of counts.
Buyer’s premium ‘creep’ – that brought fees to 26% and more in the London and New York salerooms – has been a familiar if controversial feature of the fine art auction business for four decades.
This is the first time since 1982 (when Christie’s briefly dropped its premium from 10% to 8%) that one of the world’s leading auction houses has reduced its buyer’s premium.
There is clear water between Sotheby’s and Christie’s (with its multi-tiered structure beginning at 26%) and Bonhams (a similar structure opening with a 28% fee). The firms have broadly kept their buyers’ charges in line with each other ever since buyer’s fees were controversially introduced in the 1970s (previously, the salerooms only charged vendors’ commissions).
Sotheby’s said the changes follow “consistent feedback from buyers seeking lower premiums and sellers seeking clarity on selling fees”.
The auction house added: “For buyers, this new fee structure will not only make it simpler, it will also reduce the amount of buyer’s premium on the vast majority of lots. This in turn will benefit sellers by incentivising more bidding from clients which should drive up hammer prices.” Sotheby’s estimates that the average sold lot will incur 26% less buyer’s premium than before.
As a general rule, buyer’s premiums have risen so that vendor’s fees can fall. Vendors of high-value items rarely pay full commission.
Sotheby’s chief executive officer Charles Stewart said: “Since 1979, when Sotheby’s first introduced buyer’s premium in our salerooms, the market has largely shifted the transaction burden onto buyers. The result has been high costs for buyers and tiered commission structures that require a calculator to even understand, as well as an entirely opaque fee structure for sellers which distracts from what is most important to them”.
Part of the reason for the sellers’ changes is to move away from the private and often complex negotiations in securing works for sale. Sotheby’s said it was prioritizing “transparency and simplicity” in this regard.
The changes to seller’s fees do not apply to works offered with a guarantee or those priced above $50 million. Such works will carry a fixed fee of 4% of the guaranteed amount, chargeable to the seller.
The new fee structure comes into effect globally on May 20, 2024. It will apply to all auctions, excluding sales of cars, real estate, wine, and spirits. Consignments signed after April 15, 2024 for auctions on or after May 20, 2024 will reflect the new terms for sellers.
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