#1261 1975 · Sotheby's and Christie's · Art and antiques auctions
Sotheby's and Christie's raised revenue by charging the side with no rival price
the problem
Inflation squeezed margins, but raising seller's commissions risked losing consignments to a cheaper rival
background
By the mid-1970s, Britain's oil-crisis-era inflation had driven up Sotheby's and Christie's operating costs — staff, premises, cataloguing, insurance — while their revenue still came entirely from a single commission charged to the seller of each lot. Raising that seller's commission to cover rising costs was the obvious lever, but sellers of major collections could and did shop the biggest consignments between the two houses, so whichever house raised its rate first risked simply losing the sale to the other.
The two houses needed more revenue per lot without making their headline fee to sellers look worse than a rival's, since the seller's commission was the one number consignors compared directly when deciding where to sell. The buyer, who competed to win the lot rather than to be chosen as a client, had never been charged a separate fee at all — an entire side of every transaction was untouched by the commission structure.
what everyone would do
The straightforward fix was to simply raise the seller's commission to cover rising costs, the fee both houses already charged and controlled directly — but sellers with valuable collections compared that exact number between Sotheby's and Christie's before consigning, so either house raising it alone risked losing major consignments to the other.
what they saw
Sellers compared commission rates between the two houses; bidders, competing for a one-of-a-kind lot, had no rival price to compare against, so a fee charged only to them went unpriced by competition.
the move
In September 1975, Sotheby's and Christie's both introduced a buyer's premium in London — an additional 10% fee charged to the winning bidder on top of the hammer price — while leaving their seller's commissions unchanged, extending the fee to their New York and American operations by 1977 and 1979 respectively.
why it works
Price comparison only disciplines the specific number customers are trained to compare; a seller evaluating where to consign compares commission rates between houses, but a bidder in the room is competing against other bidders for a unique lot, not comparing hammer-price-plus-fees against a rival house's price for the same item, because the same item isn't for sale anywhere else. The buyer's premium exploited that difference exactly: it added revenue at the one point in the transaction where competitive price comparison structurally couldn't happen.
the payoff
The premium doubled the take on every lot without raising sellers' rates, and dealers walked out of a Sotheby's sale in protest that month.
where it breaks
The mechanism depends on the second party genuinely lacking an easy point of comparison; once buyer's premiums became universal across the industry, that protection eroded, and bidders now factor the premium into every bid, comparing all-in costs across houses just as easily as sellers once compared commissions — which is why more recent fee experiments, like Sotheby's 2024 move to an all-in price, have had to find new asymmetries to exploit.
what came after
The buyer's premium is now standard practice at nearly every major auction house worldwide and has climbed from its original 10% to 25-30% on top lots, making it, alongside the seller's commission, one of two revenue streams — rather than one — that auction houses draw from a single sale; the fee structure it established still shapes how bidders calculate their real maximum bid at every major auction today.
references
- [1]A Short History of the Buyer's Premium in AuctionsExpert Appraisal Co., 2020expertappraisalco.com
- [2]Buyer's and seller's premiumsAntiques Trade Gazette, 2019antiquestradegazette.com