Phillips is rising. In late 1999 the LVMH luxury-goods empire of French magnate Bernard Arnault bought Phillips, making it a major player overnight. In the past, Phillips could boast of a swank Mayfair headquarters and a client list that once included the British royals, but its network of provincial salesrooms sold mainly B-list works culled from the British market. Backed by Arnault’s cash, Phillips jumped into competition with Sotheby’s and Christie’s for big-ticket items, including top-end jewelry, furniture and impressionist paintings. The art world will never be the same. “This business has been between two players since the end of World War II,” says Francois Curiel, chairman of Christie’s in Geneva. “We always knew who the competitor was and we learned to second-guess them. Now we won’t.”
Phillips doesn’t hope to match the big hitters for size. It plans to compete in a few lucrative specialties, and leave the Antiguan postage stamps and other niches to Sotheby’s and Christie’s. It has also launched headhunting raids on its rivals. Last month Phillips secured the services of a former Sotheby’s highflier, Simon de Pury, who will run its operations. The key battleground is New York, the world capital of the art market. This summer Phillips will move out of a tacky white-brick apartment house next to a palm reader near the East River and into a stately bank building on West 57th Street. Insiders insist the symbolic challenge is unintended, but the glitzy new location is halfway between Sotheby’s and Christie’s. Says Andrew Schoelkopf, a former Christie’s staffer who now heads the Internet art company onview.com, “The auction business is all about sizzle, and the type of space where you entertain has a substantial and material impact on the results at an auction.”
Phillips also plans to open new London offices, and to merge with Etude Tajan, a Paris auction house with a Europewide presence that LVMH bought last February. At the same time, LVMH began pouring money into marketing, with broad hints at the character issue. One ad read: “Phillips: the other way to run auctions.” The reference to the price-fixing charges, which Christie’s avoided by aiding the prosecution of Sotheby’s, was obvious. “When you have a duopoly it very often becomes incredibly corrupt,” says Robert Monk, director of the Gagosian Gallery in New York. “Christie’s and Sotheby’s really had a stranglehold on the collection world.”
It will be tough to break. Phillips sold only 40 percent of the works on offer at its first New York auction of impressionist and modern art last May–despite the presence of Sharon Stone. To win customers from Sotheby’s and Christie’s, Phillips is believed to have guaranteed unrealistically high sale prices–a move analysts believe resulted in hefty losses on $43.9 million in sales. But the record is improving. At its next auction in November, Phillips sold Andy Warhol’s “Flowers” for $1.8 million, well above expectations. New York gallery owner George Adams says, “They come across as more serious, more ambitious. It’s pretty clear from moves that they have made in the last few months that they need to be taken seriously.”
Arnault has his own reasons for risking losses in the fickle art market. One is his rivalry with fellow Frenchman Francois Pinault, who bought Christie’s in 1998. The two luxury-industry tycoons have a history of matching each other bid for bid, whether they’re buying vineyards or auction houses. More important, an auction house adds luster to the LVMH brand, which already embraces the likes of Louis Vuitton and Christian Dior.
What next? There are rumors that Arnault may try to buy Sotheby’s, too, which would make him king of the auction houses. Powell denies the rumors, and Sotheby’s now comes with expensive baggage, including customer demands for millions in refunds. In any case, many art aficionados now believe a shake-up is overdue. “The operational back end of the auctions business is still run in the way that it was 250 years ago,” says art industry analyst David Kusin. “What is needed are solid business people who are not afraid to redefine the way they do their business.” Arnault, he says, just might be the man.
