Online Sales

Banksy has become the target of a print fraud, it was exclusively revealed by The Art Newspaper (October 2007): ‘unauthorised works by the anonymous graffiti artist have been sold on the internet; prices for these have been illegally inflated with fake bids’. Banksy’s dealer, Steve Lazarides, and his authorised print publishers, Pictures on Walls (PoW), have been working together to investigate and stop this criminal activity. It recently came to light when successful bidders received their purchases of signed, limited edition, Bansky prints offered for sale on eBay, suspected their inauthenticity, and checked with PoW and/or Lazarides: some prints were endorsed with a forged signature and an unauthorised PoW blind stamp.

It appears that the fraud began around Autumn 2006 (at the time when resales of Banksy’s works were rapidly rising), and that it was an ‘inside job’. The Art Newspaper’s informant is a whistleblower who was involved in making the forgeries with other junior employees of PoW, these were then given to other people to sell on eBay: Lazarides and PoW estimate around 25 forged copies.

The fraudsters also engaged in the further criminal activity of ‘shill’ bidding on eBay – entering false bids to push up others’ bids. According to the whistleblower,  ‘They told us to do that .we’d start up other accounts and just . type in £1,000 higher than what someone else had put on it . we did that on everything we sold’. Although Banksy, Lazarides and PoW can do nothing about the shill bidding, they have invited ‘concerned collectors’ to contact them to authenticate and/or re-authenticate their works. Banksy himself issued a statement through his solicitor, Mark Stephens: ‘They say it’s better to be a fake somebody than a real nobody, but I don’t think that applies to art prints. If it turns out that limited editions have not been limited in edition then I sincerely apologise. This is particularly unfortunate for the people who buy my work to flip it for a quick profit on eBay, as I wouldn’t want to affect their mark up’.

There are two key artlaw issues to consider for online sales: shill bidding; fakes and forgeries. Shill bidding has been outlawed in the UK (and in most developed countries) for a long time, currently by the Fraud Act 2006. The use of the word ‘shill’ is thought to have originated through the practice in medieval England of producers of plays paying a member of the audience a fee – customarily  a shilling coin, one twentieth of a sterling pound – to applaud loudly at the close of the play. False bidding is an occupational hazard for everyone involved in auction sales, be they online or live, and is very hard to prove in the absence of a whistleblower who has been involved in the conspiracy. It is understandable that a seller at auction might be tempted to procure shill bids, to encourage higher bidding for their lot, which is why it has been common auction practice since ancient Roman times for auctions to be conducted with a seller’s reserve – a minimum selling price below which the auctioneer will not sell the lot; but only so long as the sale is publicly advertised as being with a seller’s reserve. In Banksy’s case, eBay appears to have succeeded in rooting out four sellers involved in the shill bidding, and has closed their accounts. It remains to be seen if there will be others, and whether criminal prosecutions will result.

Fakes and forgeries being sold at auction is a perennial risk, which is why it is customary for consigned lots to be offered for viewing at a preview: caveat emptor being the guiding principle, which is enshrined in the terms and conditions of sale in auctioneers’ catalogues and public notices that warn potential bidders to check the nature and quality of the lots to be sold. This risk is magnified when auctions are conducted wholly online (and without the opportunity of prior physical inspection, as with eBay), for the obvious reason that potential bidders cannot inspect the consigned lots. In the case of eBay, their online written terms and conditions for their ‘users’, make it explicit that eBay is not a conventional auction house in that they do not take possession of the lots, and therefore have no legal liability for their condition or the accuracy of their descriptions.

In some countries, conventional auction houses also successfully conduct wholly online auctions – usually with a term and condition of sale stating that the successful purchase price will be automatically and fully refunded if the successful bidder does not wish to retain their purchase, and returns it in its sold condition within a specified timescale. Countries where such online auctions appear successfully to operate include Canada, Australia, and India, probably because of the vast distances that would be involved in travelling to the auction house to pre-view the consigned lots. Often, a written report on the condition of the work is made available before bidding begins.

With all auction sales, online or otherwise, it is normal practice for auctioneers to include in their terms and conditions of sale a named country whose legal jurisdiction will be used to resolve any disputes that may arise. This is particularly important in the case of online sales, where it would otherwise be legally difficult to determine in which country the sale was completed (where the highest bid was accepted).

After the dot.com/Nasdaq business failures in 2000 online auction sales, having mushroomed in the dot.com boom in previous recent years,  reduced substantially. In 2002, for example, artnet.com (an online art auction service) stopped selling paintings to concentrate on prints and photographs, and Sothebys.amazon.com (a similar venture to artnet.com) ceased trading alone and merged with Sothebys.com. Accurate figures for the value of the online art market are elusive, but respected internet market researchers estimated it to be around £200 millions in 2002.

Improvements in digital technology in recent years have undoubtedly introduced risks for online auctioneers and successful bidders, especially the advent of the worldwide web and broadband, and their increasingly widespread access and relatively inexpensive availability. But in the case of dealers in the secondary art market, vast improvements in the quality of digital images in recent years appear to have introduced significant potential benefits. A traditional dealer’s main financial overheads included street-level gallery premises in locations attractive to ‘high net worth’ potential buyers, significant capital investment in buying ‘stock’, and paying rent and business taxes/rates on sufficient space to hold in stock works taken on consignment. Growing numbers of such dealers are now using high quality digital images of works for sale, sending them to targeted known collectors and, in some cases, conducting closed online auctions with favoured clients. In other words, there is in train a palpable shift in professional art market practice – towards online sales of works, based not upon sight and inspection of the physical object, but of its digital image;  and on the strict legal undertaking that if the purchaser is not satisfied and wishes to return their purchase then, as with reputable online auctioneers discussed above, they will automatically receive a full refund.

In these ways, online selling of works of art may be picking up aspects of the multiples movement, which – like dot.com businesses – came into being somewhat ahead of its time. Many people are interested in the development of the true potential of digital media.

© Henry Lydiate 2007

 

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.