Introducing…our (new) column where each month we take a deep dive into the ever evolving art market.
In a time of frenzied mergers and acquisitions across industries and countries, the art market needs to look at the adverse implications of increasing consolidation. The answers lie in the anti-trust legislative movement and the US candy market.
TEXT: Reena Devi
IMAGES: Courtesy of various
To say that we are living in an age of concentrated monopoly is putting it mildly but there have been repeated waves throughout history, cutting across manifold industries. Most famously, at the turn of the century, during the birth of corporate America, J.P. Morgan orchestrated a series of mergers culminating in megalith companies such as General Electric and U.S. Steel.
Fast forward to present day and we are looking at a full-fledged global consolidation landscape led by the likes of tech giants such as Facebook, Amazon and Grab. Forbes reported “an all-time record” of US$1.77 trillion in Merger & Acquisition transactions worldwide through the first four months of 2021, a 124% increase from last year and 10% higher than the first four months of any other year on record.
The rapid rise began in the second half of last year, thanks to record low interest rates, investors and private equity firms “sitting on mountains of dry powder and looking for places to spend it”, plus stimulus funding streaming into economies and a surging stock market.
It also seems easier for the strong to take over the weak as compared to pre-COVID-19 days. For example, in January this year, luxury goods giant LVMH completed a US$15.8 billion mega-deal to buy Tiffany & Co., a noticeable drop from the originally agreed payout of US$16.2 billion in 2019. Reportedly, due to market shifts since the pandemic, LVMH “was able to talk down the premium”.
The art market has also taken a fancy to mergers and acquisitions. Art storage and logistics services, adversely impacted by the slowdown of blockbuster events and exhibitions since the pandemic, witnessed the start of its own major consolidation phase in April. New York-based Crozier acquired London’s Martinspeed, while UOVO, Crozier’s outer-borough rival, bought over Museo Vault in Miami, allowing both US companies to expand geographically.
To be fair, the consolidation trend was prevalent in the art industry even before the pandemic. Mid to small-size galleries have been struggling from the inherently challenging, shifting art market, increasingly in favor of a handful of mega galleries. As such, gallery mergers seemed favourable—Johnen Galerie with Esther Schipper, Brett Gorvy with Dominque Lévy to create Lévy Gorvy, to name a few.
After the pandemic hit, it seemed even less surprising when veteran art dealer Gavin Brown closed his eponymous New York gallery after more than 25 years to merge with Gladstone Gallery.
Similarly, Leslie Hindman Auctioneers in Chicago merged in January 2019 with Cincinnati-based Cowan’s Auctions, to stay competitive in the wake of traditionally dominant auction houses such as Christie’s and Sotheby’s “expanding their digital reach and investment in the middle market”.
Even with the art market’s digital awakening, online platforms are not unaffected.
LiveAuctioneers, an American online platform for fine and decorative arts, antiques and luxury goods, looks set to be acquired by Auction Technology Group as part of its curated online marketplaces and auction-technology solutions.
To fully understand the implications of increasing consolidation across the art industry, we need to look at two areas beyond the art world—the US candy market and the growing anti-monopoly movement.
In 1963, The Hershey Company (commonly known as Hershey’s) bought over Reese’s, the first step in a wave of consolidation moves that led to Mars and Hershey’s controlling around 75% of the US chocolate market, and 60% of the country’s candy market overall, as of 2013.
The companies that resisted being bought up were compelled to compete with these giants but to no avail, because the mega companies were able to pay large “slotting fees” for shelf space, ensuring the buyer sees the same set of brands visibly displayed at most retail outlets. This is not so dissimilar from the experience economy of international art fairs with their pricey expansive booths which only big-name galleries can afford.
Moreover, in the case of the candy market, retail stores, which have also consolidated to a large extent, could “demand discounts and deals from candy makers”, which independent producers could not afford. This in turn made introducing a new candy bar by an independent producer to a mainstream market “virtually impossible”.
The lack of diversity and innovation also meant that dominant players in the market had little reason to create new and original offerings—Hershey’s pushed out its first new and original candy in 30 years that was not acquired or spun-off an existing brand in 2014. In view of such adverse impact, it is worth considering the implications of consolidation on originality and innovation when it comes to the mega galleries, art fairs, auction houses and related businesses that dominate our art market. Also, how will this affect taste, if it has not already done so?
Interestingly, the journalist who highlighted the effects of monopolisation in the US candy market, Lina Khan, was most recently appointed Chair of the Federal Trade Commission, one of the two US agencies that enforces antitrust law. She is at the helm of a growing bipartisan anti-monopoly movement on a legislative level, putting the spotlight on deals such as Amazon’s planned purchase of MGM Studios and Facebook buying out its competitors WhatsApp and Instagram. Even New York is making a comeback as an “anti-monopoly powerhouse.”
To be clear, this is not just an issue specific to the US. According to Matt Stoller, author of Goliath: The Hundred Year War Between Monopoly Power and Democracy, antitrust policy is run by a small yet international community of lawyers and economists and there is consensus in the group that what is happening now in America matters because “as goes the US on antitrust, so goes Europe.”
While tech and pharmaceutical industries are under the spotlight presently, the art market might not be able to steer clear of the current antitrust reckoning either. After all, the industry is already under scrutiny. Since last year, the UK and US governments have proposed tightened regulations on the art and antiquities market. With the art market marked as “an environment ripe for laundering money and evading sanctions” by authorities, questions will surely arise in the face of increasing mergers and acquisitions.
Nonetheless, it does seem concerns regarding originality, innovation and regulations pale in comparison to the art world’s entrenched money-always-wins mindset. At least for now.