As the spread of COVID-19 continues to impact global business, auction houses are trying all means possible to cope with financial difficulties. Besides cost-cutting measures such as furloughs, pay freeze, layoffs and shifting more live sales online, they are also finding ways to increase revenue.
Starting 1 August 2020, Sotheby’s will be implementing a new fee – an Overhead Premium – payable by all auction buyers in Sotheby’s global salesrooms and online sales. The fee will be 1% of the hammer price. It’s the fifth time that the auction house has increased the buyer’s fees between 2015 and 2020.
For your easy reference, The Value has created two tables illustrating updates on Sotheby’s fees.
The auction house said on its website that the fee ‘is an allocation of the overhead costs relating to our facilities, property handling and other administrative expenses, and reflects the increasing costs associated with delivering great service and experiences in a highly competitive marketplace.’ The Overhead Premium will be applicable to all live auctions that take place on or after 1 August and any online auction that close after that date.
There are three noteworthy points regarding the implementation of the new fee.
1. The Overhead Premium is a separate fee from Buyer’s Premium, which will both be included in the final price realised. Simply put, generally speaking, the newly-added Overhead Premium is similar to a 1% increase in Buyer’s Premium.
2. Both Overhead Premium and Buyer’s Premium rates exclude local taxes and any applicable artist’s resale right. For salesroom like Hong Kong where no local taxes are imposed, there will be no additional charges. In some other salesrooms, buyers need to take local taxes into consideration, depending on the art categories and local government policies.
3. The new arrangement will be applicable to all live auctions and online auctions. The calculation of Buyer's Premium and Overhead Premium for online sales will be based on the pricing structure of respective salesrooms, same as how they handle live sales, except for selected online sales where no Buyer’s Premium is charged.
We’ll need to keep an eye on how others react to Sotheby’s new Overhead Premium, especially the reception of rival auction houses. Will it cause a ripple effect and bring in a wave of overhead premium or higher buyer's premium imposed by other auction houses? Please stay tuned!