The discussion of the art market’s relative maturity raised the question of regulation: with the market currently estimated in the tens of billions of dollars, is it time for governments to step in and put their stamp on the industry? Velthuis was quick to point out that even at the high end of estimates, the entire art market is a drop in the bucket compared to a company like Walmart, which had over $480 billion in sales last year. Rather, he said, the question is: “Is the art market worth regulating?”
Valentin, the London-based lawyer, said the idea that the art market isn’t regulated is “nonsense.” A few years ago his firm counted up the existing regulations that apply to the United Kingdom’s art market, finding at least 167 rules and regulations, most of which applied broadly to all businesses, although there were some that were specific to cultural objects or antiquities. Some were national, others came from the European Union, and others stemmed from international bodies, such as UNESCO. But he stressed the challenge of regulating a market that is so international.
Rennie, a real estate developer, pointed out that discussions of art market regulation often tend to confuse regulatory action with “good morals.” In the real estate business, for example, brokers’ fees are typically standardized and clearly spelled out, which is frequently not the case in art deals. The relationship-based art industry generates information asymmetries that can be larger than in other spheres where more information is publicly available, creating more opportunities for bad actors. But is that something regulation can solve?
“It’s very hard to regulate morality,” Rennie said.
Sheffer noted that the industry group he chairs, the Art Dealers Association of America, requires its members to pledge to abide by a code of ethics, a form of self-regulation. He said any further steps towards regulation should be made carefully and thoughtfully, and most serious issues (such as fraud, perhaps, or forgeries) should be left to the courts.
“Do you want to regulate whether somebody is buying for investment value, for personal enjoyment, or for speculation?” he asked, noting these evaluations are already in the purview of the Internal Revenue Service and sometimes the legal system.
“Do you want to regulate if someone buys a horizontal painting and decides they prefer to hang it vertically?” he asked again, to some laughter. “We need to decide what we want to regulate.”
Sheffer noted this debate is more salient in places where the art market is still reaching puberty, than, say in more mature markets such as New York or London. He described visiting an organization of Korean art dealers in Seoul last winter as a board member of the international organization Talking Galleries. There, he advocated for how trade associations could work to improve and upgrade industry practices, in addition to promoting the market by organizing gallery weekends and other events. He said a trade group’s responsibilities included creating a code of ethics, ensuring members adhere to it, and disseminating news and legal developments that impact the trade.
“It was all new information to them,” he said.
Sheffer suggested art fairs could take a more robust role in promoting best practices and codes of ethics, given the outsized role they now play in the market.