Sotheby's pay £170m to settle price-fixing case

Sotheby's in New York is to pay $256m (£170m) compensation to art dealers and buyers who claim they have been the victims of a price-fixing scam. Despite settling the class-action lawsuit, the 225-year-old auction house still faces a US Justice Department investigation into anti-trust offences dating back to 1992.

Sotheby's in New York is to pay $256m (£170m) compensation to art dealers and buyers who claim they have been the victims of a price-fixing scam. Despite settling the class-action lawsuit, the 225-year-old auction house still faces a US Justice Department investigation into anti-trust offences dating back to 1992.

If the civil settlement, announced yesterday, is endorsed by the judge in the case, it will go down as one of the biggest in legal history. It represents a considerable financial blow to Sotheby's, which made a profit last year of $32.8m.

Sotheby's stands accused of colluding with Christie's, its long-time rival, in setting buying and selling commissions on artworks and other precious goods. Christie's, which is based in London, will also pay $256m to the plaintiffs in the lawsuit, according to reports. The company made no comment yesterday.

The humbling of the two firms has been spectacular. For centuries they have dominated a business associated with elitism and wealth. As it has unfolded, the scandal has served to expose a shared culture of arrogance, however.By setting commission levels jointly, the two firms were in effect stifling competition between them. Such activity is illegal.

Christie's and Sotheby's still command about 90 per cent of the $5bn global auction market. American officials were already investigating possible collusion between them when, in January, the former chief executive of Christie's, Christopher Davidge, turned over documents to them in return for immunity.

The Justice Department is believed, meanwhile, to be close to resolving its investigation of the scandal. Because of its early decision to cooperate, Christie's is probably safe from prosecution. Sotheby's and its one-time chief executive, Diana Brooks, may also win leniency if theyagree to testify against the company's ousted chairman, Alfred Taubman.

Mr Taubman, who was forced to resign over the revelations, has agreed to pay $156m of the Sotheby's share of the civil settlement out of his own pocket. He will also pay $30m towards a separate settlement agreed between Sotheby's and its shareholders.

Michael Sovern, chairman of Sotheby's Holdings, said yesterday: "Our goal over the last several months has been to put behind us the litigation clouding Sotheby's future. The settlements we have approved today resolve the lawsuits in which the company had the greatest potential financial exposure. With a Justice Department resolution in prospect, the company can move forward with its business."

Mr Taubman, who made his fortune building shopping malls in the Midwest, also acknowledged the deal. "I endorse and am contributing to these settlements to facilitate the resolution of all matters and to minimise the impact on Sotheby's, a company I care about deeply."

By settling early, the two houses have stopped the civil lawsuit going to court, where an eventual judgment could have been pricier. Even so, there has been shock in the art world at the agreement's size. "The amount is huge, perhaps significantly more than anyone anticipated," said one New York dealer, Abigail Asher.

Sotheby's itself will pay only $50m in cash towards the settlement. The plaintiffs, who are from around the world, will also be offered certificates good for discounts on future commissions, which together will be worth another $50m.

The company has accelerated the process to prepare for a possible sale to a new owner. Nobody would consider buying while the price-fixing affair remained unresolved.