The Gentlemen's cartel - price fixing as anti-trust violation (and jail time for executives involved)
STG CORPORATE AND COMMERCIAL LAW • CLIENT INSIGHT
How Christie's and Sotheby's fixed their prices for a decade — and what it teaches every business about competition law, fiduciary duty, and the power of going first
By Kat Strandberg | STG Corporate and Commercial Law AB
For almost a decade, the two most prestigious auction houses in the world ran an old-fashioned price-fixing cartel. Christie's was founded in 1766. Sotheby's in 1744. Together they controlled approximately 90% of the global fine art auction market. And from 1993 to 2000, their chairmen secretly agreed not to compete on seller commissions.
The case is remarkable for two reasons. First, the level of sophistication of the institutions involved — and the bluntness of the conduct. Second, the outcome: Christie's paid nothing. Sotheby's paid tens of millions. The difference was not who was actually initiating or driving the price fixing deal - it was only which house called the regulator first.
"Two of the world's most prestigious institutions committed one of the clearest anti-trust violations in history - for decades.”
What they did
Auction houses make money by charging sellers a commission on the hammer price and then they, as a rule, also charge the buyers a premium on top. For decades, Christie's and Sotheby's competed aggressively for the most valuable consignments — discounting fees, offering guarantees, doing whatever it took to win. By the early 1990s that competition was expensive for both institutions. Their margins were under pressure.
The chairmen — Sir Anthony Tennant at Christie's and Alfred Taubman at Sotheby's — resolved the problem privately. They agreed that both houses would publish identical, non-negotiable commission schedules and stick to them. No written cartel agreement was drafted and no formal board approvals where procured. Instead the structure was developed and agreed over secrete meetings in private homes and hotel suites. The conspiracy was then maintained through their respective CEOs, Christopher Davidge and Diana Brooks who both were in on it.
The effect was immediate and precise: sellers who had previously been able to negotiate for a better deal found that both houses quoted identical terms and neither would move. The competition they had relied on had been quietly eliminated. Nobody understood why for years.
How it collapsed — and why Christie's paid nothing
The conspiracy unravelled in late 1999 when Davidge, the CEO, left Christie's and, as part of his departure, retained the handwritten notes he had kept from his meetings with Brooks over the years of the conspiracy. Christie's new owner, François Pinault, authorised the company's lawyers to approach the US Department of Justice with those documents — and to offer full cooperation in exchange for immunity.
This meant that Christie's went first. Under the DOJ's Corporate Leniency Program — which offers complete immunity to the first company in a conspiracy to come forward and cooperate — that action determined everything.
Christie's — went first
→ Criminal liability: full immunity
→ Criminal fine: USD 0
→ Civil settlement: smaller share
→ Continued trading: uninterrupted
Sotheby's — went second
→ Criminal liability: prosecuted
→ Criminal fine: USD 45 million
→ Civil settlement: larger share of USD 512M
→ CEO conviction, chairman sentenced to prison
The total civil class action settlement — compensating sellers who had been overcharged during the conspiracy period — was USD 512 million. Sotheby's bore the larger share. Christie's, having secured immunity, contributed significantly less.
The individual consequences were also different at their core. Sotheby's CEO Diana Brooks pleaded guilty to price-fixing in 2000 and received probation and home detention after cooperating against Taubman. Alfred Taubman — Sotheby's chairman and the architect of the conspiracy at the highest level — went to trial, was convicted, and served one year and one day in federal prison. He was 77 years old.
Anthony Tennant, Christie's chairman, was indicted by a US grand jury but refused to travel to the United States. English prosecutors declined to act. He died in 2021 having never faced charges in any jurisdiction.
"Taubman went to prison. Tennant stayed home."
Three legal principles
This case is not primarily about auction houses. It is about principles that apply to any business operating in any concentrated market.
Price-fixing between competitors is per se illegal. Under competition law — in the US under the Sherman Act, in the EU under Article 101 TFEU, and in Sweden under the Competition Act — horizontal agreements between competitors to fix prices require no balancing test and no business justification. The harm to competition is assumed by the agreements mear existence. The fact that Tennant and Taubman believed they were solving a legitimate business problem — margin pressure in a competitive market — was irrelevant. The law does not distinguish between the players being high-end and dominant or not.
The leniency programme in the US rewards speed, not virtue. Christie's did not come forward because it had a change of heart. It came forward because Davidge's documents gave it an opportunity, and its lawyers understood what cooperation with the DOJ could mean. Both the EU and Swedish competition authorities operate leniency programmes - however often not as black-or-white in relation to the consequences of whistleblowing.
The basic structure is that the first to tell gets immunity, second in gets prosecuted. In any situation where a company discovers it may be party to an arrangement that could attract antitrust scrutiny, the question to ask is not "are we in trouble?" but "should we be making a leniency application right now?"
By fixing the commission schedule, both houses converted what appeared to be a competitive pitch process into a coordinated extraction of higher fees from the very clients who trusted them. That breach of fiduciary duty underpinned the civil liability that produced the USD 512 million settlement.
STG — Lawyer's take: Four things every business must know
The conversation with a competitor about pricing is already the problem. In competition law, the agreement does not need to be written or explicit. A shared understanding reached in a private meeting — even without documents — can constitute an illegal arrangement. If a conversation with a competitor moves toward fees, pricing, or market terms, leave the room. Document that you left.
First mover advantage in a cartel investigation is critical. Leniency programmes may immunity to the first company to cooperate with full disclosure. The second company gets prosecuted on the evidence provided by the first. If your company discovers it may be involved in conduct that raises competition law concerns, speed of response is the single most important variable.
Individual executives face personal criminal exposure. The corporate fine is one consequence. The personal consequence — criminal conviction and imprisonment — is separate and applies to the individuals who made and maintained the arrangement. Senior executives who participate in price-fixing face prosecution in their personal capacity. That liability does not disappear when they leave the company.
Agents who coordinate against their principals face both civil and criminal consequences. Any business using an agent, broker, or intermediary is entitled to expect that agent to act in its interests. An intermediary who secretly coordinates with the only alternative provider to remove the benefit of genuine competition has breached the foundational obligation of the agency relationship — and faces civil liability for every client who was overcharged as a result.
Competition law violations are easier to commit than most businesses realise — and harder to escape once they have been committed. The legal exposure attaches to conversations between competitors, not just to a written signed agreement. And in a market with a small number of dominant players, the scrutiny from regulators is correspondingly higher. Getting competition law compliance right, before a question arises, is the only reliable approach.
Questions about competition law, agency obligations, or commercial compliance?
Contact Kat Strandberg
STG Corporate and Commercial Law AB
Case references: United States v. Sotheby's Holdings Inc. (S.D.N.Y. 2001); United States v. Taubman (S.D.N.Y. 2002). Civil settlement: In re Auction Houses Antitrust Litigation. This article is written for general informational purposes and does not constitute legal advice. For advice on your specific situation, please contact STG Corporate and Commercial Law AB directly.