Editor’s Note: This story originally appeared in On Balance, the ARTnews newsletter about the art market and beyond. Sign up here to receive it every Wednesday.
For those who watch auctions for sport, guarantees tend to take the fun out of things: There’s nothing less exciting than knowing an artwork has sold before the gavel comes down. But those with skin in the game bask in the security of irrevocable bids. Like them or loathe them—and despite the recent decline in guaranteed lots—they remain widespread at the top end of the market.
In a report last October, ArtTactic found that guaranteed lots were down 22 percent year-on-year for evening sales of postwar and contemporary art in the first half of 2023. However, they accounted for over 54 percent of evening sales of the same segment in the first half of last year (by hammer value).
Given their elite nature, it should be no surprise that auction guarantees are the latest part of the art world that a tech startup is trying to “democratize” and make more transparent. Last week, the White Glove, which advertises itself as “the first online marketplace connecting sellers with guarantors,” launched a pilot project at London’s Forum Auctions, which was acquired by global art advisory Gurr Johns in 2021.
For that project, the UK-based company partnered with Artclear, a blockchain company for recording indelible digital certificates of authenticity for physical artworks, to put a Bridget Riley print, titled Leap (edition of 75), under the hammer. Artclear scanned the work using its portable scanner to create a digital certificate of authenticity stored on the blockchain. The White Glove described the artwork as having “dual backing,” referring to both a guarantee and a blockchain certificate. Estimated at $6,500 to $9,000, the print was then sold during a live-streamed auction last Wednesday, where it went for $9,500.
“Guarantees have long been associated with exclusively seven-figure artworks, yet the market liquidity benefits of the product are equally relevant at lower price points,” Stefan Ludwig, the CEO of Forum, told ARTnews.
For the uninitiated, there are, broadly speaking, two ways in which auction houses can offer guarantees. One is direct: the house itself is on the hook to buy the piece, having negotiated a minimum price with the consignor. The other type is a third-party guarantee, where the house brings in another potential buyer to share the guarantee or take it over entirely. There are collectors and dealers who are known to be frequent third-party guarantors, whether they actually want the artwork or are using the arrangement as a financial vehicle. Recently, even a museum got in on the action.
Either way, the seller is guaranteed a certain price, whatever the outcome of the auction. Depending on the arrangement, if the lot sells for more, the third-party guarantor might receive a percentage of the final price.
The White Glove says its “financial product” can be adopted by any physical or online auction house and “gives the power back to sellers” by allowing them to negotiate a minimum guaranteed sale price ahead of the auction. “If bids exceed that price, the seller and guarantor share the upside profits, meaning less risk and more benefit for everyone,” the company explains on its website.
The company’s business model has two sources of income. The former works as a commission fee, where the auction house pays the White Glove in return for placing an irrevocable bid. “This is typically a mid-to-high single digit percentage of the final hammer price,” Charles Bent, the company’s cofounder and COO, told ARTnews. That form of income is certain. The other, which is less certain, is “an upside share split between the guaranteed price and the final hammer price. The percentage that the White Glove receives is subject to negotiation.”
Bent explained that the company’s goal was to demonstrate the potential for innovation in the guarantee space while also making guarantees more transparent and accessible across the board. The company does that, he said, by offering guarantees at a more affordable price point, which expands which assets can be provided guarantees beyond high-end artworks. The company thinks its system can be applied to low-priced artworks, like the Riley print, but also luxury items. The hope, he added, is that the model could be adopted not just by small houses, but also by big ones, like Sotheby’s and Christie’s, and “set a new standard in the art market.”
Artclear, meanwhile, said it sees its partnership with the White Glove as being about boosting art’s liquidity, making for easier trading in the process. There’s also the hope that it will make it easier to secure asset ownership and provenance information. “We’re enhancing the value of the service that the auction house can provide [because auction houses] can intrinsically trust the data we provide, and it becomes much easier to resell artworks,” Angus Scott, Artclear’s CEO, told ARTnews.
For the White Glove, the way into the top auction houses is to simplify the “lower end of the market” for them. “At this end, it doesn’t make sense for the auction houses to put in the time and effort to find guarantors, so that’s where the maximum value add is for the White Glove,” he added.
Christie’s has experimented with blockchain technology before. Back in 2018, the auction house was the first to record a sale on the blockchain, in this case during the Barney A. Ebsworth Collection auction in New York. The house partnered up with Artory, a blockchain title registry start-up specific to the art market, to create a digitally encrypted certificate for each work in the 90-lot sale, which totaled $323.1 million. Blockchain technology hasn’t been used much in auctions since then, but both Christie’s and Sotheby’s are very gung-ho about guarantees. Why wouldn’t they be, when they ultimately result in fewer unsold lots?
“Used prudently, guarantees are good for consignors, collectors, and the market overall,” Mari-Claudia Jiménez, Sotheby’s head of global business development, told ARTnews. “A potential consignor may feel more inclined to sell if they have the security of a guarantee.” A Christie’s spokesperson similarly told ARTnews that guarantees can “provide a level of assurance” in a tough market and encourage “more sellers to sell their works” at auction. When asked about transparency, Jiménez and the Christie’s spokesperson both mentioned that all guarantees are noted before the sale in online auction catalogs.
And as for the idea that guarantees take the excitement out of the sales? Jiménez pointed to the recent record-breaking sale of Leonora Carrington’s Les Distractions de Dagobert (1945) in May. That work carried both an irrevocable bid and a guarantee and still had a ten-minute bidding war, eventually hitting $28.5 million on a $12 million–$18 million pre-sale estimate.
“It is the market’s recognition of the value of a work of art that establishes its ultimate value, not guarantees,” the Christie’s spokesperson said.