AUCTIONEERS and trade associations sharing information on undesirable clients have to be careful that they are not breaking the law.
So says leading industry lawyer Pierre Valentin of Withers LLP, who set out the potential pitfalls at the latest meeting of the Society of Fine Art Auctioneers and Valuers (SOFAA).
Auctioneers risk falling foul of several legal requirements, he told delegates, not least unintentionally creating a cartel.
“The issue is whether auctioneers may share amongst themselves information on buyers who do not pay or pay late, or sellers who consign dubious property, or agents who claim to represent others without authority,” said Mr Valentin.
“Competition law prohibits behaviour that has the object or effect of preventing, restricting or distorting competition… The first concern is that the sharing of information amongst auctioneers may distort competition.”
He further explained that if the information is shared within a trade association that holds a dominant position in the UK auction market, the trade association “may abuse its dominant position”.
“Occasional information sharing is unlikely to be a concern because the impact on competition will be negligible,” Mr Valentin explained. But he said that “the organised sharing of information (e.g. within a trade association) potentially violates competition laws”.
What’s more, the fact that there are good commercial reasons for sharing the information (e.g. protecting auction businesses from rogue clients) is not a good defence to anti-competitive behaviour.
“Sharing statistical data and market research is acceptable. Sharing generic information such as, for example, the fact that a string of fake sculptures were recently consigned from a particular region, is unlikely to be an issue. The more specific the information (e.g. named individuals) the greater the risk of violating competition laws.”
Delegates were further advised that the sharing of specific client information is not just a risk from a competition law perspective. It could also violate clients’ confidentiality.
There is also the risk that information being shared could be defamatory.
“If auctioneers occasionally share information amongst themselves on specific clients, statements on those clients should be verifiable,” said Mr Valentin. “If the client claimed defamation, the auctioneer will normally have a defence if he can justify his statement by reference to, for example the client’s payment records.”
Finally, if auctioneers share client information in writing, there is the further risk that they will violate data protection regulations.
Mr Valentin’s seminar will undoubtedly provide the industry with food for thought. It follows on from his equally useful SOFAA session last year, when delegates were astounded to discover that they risked unwittingly breaking the law against bribery by not following the correct administrative procedures.
To read ATG’s report on that issue, click here.
By Ivan Macquisten