Standardizing Warhol: Antitrust Liability for Denying the Authenticity of Artwork

• Citation: Vol. 6 No. 3
• Publication year: 2011

Washington Journal of Law, Technology and Arts Volume 6, Issue 3 Winter 2011

Standardizing Warhol: Antitrust Liability FOR Denying THE Authenticity OF Artwork

Gareth S. Lacy(fn*)

© Gareth S. Lacy

Abstract

Art authentication boards are powerful; their determinations of authenticity can render artwork worthless or add millions of dollars to market value. In the past, boards that denied authenticity of artwork typically risked tort liability for disparagement, defamation, or fraud. In Simon-Whelan v. Andy Warhol Foundation for the Visual Arts, Inc., however, an art collector alleged monopolization and market restraint after an authentication board denied the authenticity of his Andy Warhol painting by stamping "DENIED" on the back of it. The case is the first antitrust lawsuit against an authentication board to survive the defendant's motion to dismiss. The decision therefore suggests potential liability exposure under the Sherman Antitrust Act for art professionals who render opinions on the authenticity of artwork. This Article discusses how Simon-Whelan provides a framework for pleading antitrust claims against authentication boards and considers what standard could be appropriate for analyzing similar claims at trial. This Article also describes how antitrust law governing standards setting and product certification outside the art world could apply to art authentication and organizations setting authenticity standards.

Table of Contents

Introduction .................................................................................. 186

I. Art Market and Authentication Principles ............................. 189

II. How Simon-Whelan's Lawsuit Survived the Board's Motion to Dismiss ................................................................. 191

A.Plausibility ....................................................................... 192

B.Relevant Market ............................................................... 194

C.Antitrust Injury ................................................................. 196

III. Two Litigation Paths: Per Se Illegal or Rule of Reason Analysis ............................................................................... 197

A.Categorizing Market Restraints ....................................... 197

B.Per Se Antitrust Violations .............................................. 200

C.Rule of Reason Analysis .................................................. 201

IV. Future Frameworks: Applying Antitrust Aspects of Certification and Standards Setting to Art Authentication ...205

A.Does Per Se or Rule of Reason Apply to Standards Setting and Authentication? .......................................... 207

B.Status of the Essential Facilities Doctrine ........................ 209

C.Liability Theories Challenging the Substantive Standard Itself ................................................................ 210

D.Liability Based on Procedural Defects in the Authentication Process .................................................. 211

Conclusion ................................................................................... 214

Practice Pointers ........................................................................... 215

Introduction

In 1962, Andy Warhol began mass-producing silkscreened prints of Coke bottles, soup cans, and movie stars.(fn1) Warhol produced this art in his studio, known as The Factory, in much the same way corporations mass-produced consumer goods.(fn2) The line between business and art soon blurred for Warhol: "Business art is the step that comes after Art. I started as a commercial artist, and I want to finish as a business artist."(fn3) Warhol reached his goal: In 2007, the art collection of the Andy Warhol Foundation for the Visual Arts, Inc. approached $500 million.(fn4) But with business-style success came business-style litigation.

In 2007, art collector Joe Simon-Whelan filed the first antitrust lawsuit against the Andy Warhol Art Authentication Board, Inc. ("Board"), a non-profit organization that renders opinions about whether Warhol paintings are authentic or not.(fn5) Simon-Whelan had submitted his $195,000 painting for authentication, but the Board stamped "DENIED" on the back of the painting, rendering the work of art worthless.(fn6) Simon-Whelan documented the painting's provenance and resubmitted it for authentication, but the Board again stamped "DENIED" on his painting.

In response, Simon-Whelan sued the Board and the Andy Warhol Foundation for the Visual Arts, Inc. ("Foundation") in the United States District Court for the Southern District of New York.(fn7) He claimed the Foundation and the Board violated section 1 of the Sherman Antitrust Act ("Sherman Act"),(fn8) which prohibits conspiracies in restraint of trade; and section 2, prohibiting monopolization.(fn9 )In particular, he alleged the Board restricted the market for authentic Warhols to drive up the value of the Foundation's own art collection.(fn10) Defendants moved to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.(fn11) But the court denied this motion and allowed plaintiff's monopolization and market restraint claims to proceed based on the Board's rejection of the painting as an authentic Warhol.(fn12) Although the lawsuit was eventually dismissed with prejudice,(fn13) the court's decision provides useful analysis of what elements need to be alleged under the pleading standard articulated by the United States Supreme Court in Bell Atlantic Corp. v. Twombly(fn14) to survive a motion to dismiss and proceed to discovery.

This Article will explain how Simon-Whelan alleged sufficient facts to survive the Board's motion to dismiss, will describe the analysis courts use to evaluate antitrust allegations, and will discuss how antitrust cases involving certification and standards setting outside the art world could contribute to an emerging antitrust theory and also suggest best practices to reduce exposure to liability.

I. Art Market and Authentication Principles

Contemporary art is bought and sold on two basic markets: the primary market for newly-created work of living artists; and the secondary market for work that has already been sold on the primary market.(fn15) Secondary art market sales generally occur through auctions and private-dealer sales where prices are often much higher than in primary markets.(fn16) The primary market involves curated gallery exhibitions of work obtained directly from artists' studios. The supply side of both markets includes individual collectors, private owners, museums, foundations, and dealers holding inventories, while the demand side includes collectors, museums, and dealers seeking inventory. Intermediary dealers, galleries, and auction houses bring these buyers and sellers together on the primary and secondary art markets.

Authentication supports the secondary art market by stamping out forgery and misrepresentation and providing a measure of certainty in the secondary market.(fn17) "[Stylistic] authentication is the process by which art experts-academic or independent art historians, museum or collection curators, art dealers, auction house experts-attribute a work of visual art ... to a particular artist."(fn18) Opinions about authenticity can change and various experts may have competing views on the authenticity of a particular work of art.

Stylistic authentication methods vary, but often include: connoi-sseurship, in which the expert expresses observations in words; reviewing the catalogue raisonné, an annotated book of the artist's works; documenting provenance; and gathering eyewitness testi-mony.(fn19) Authentication based solely on stylistic inquiry is inherently subjective and therefore exposes the expert to potential liability.(fn20 )Another approach is scientific authentication in which the expert conducts objective investigation based on tests including radiocarbon dating, chemical analysis, or x-ray diffraction.(fn21)

Authentication of certain artwork, such as Warhol or Rembrandt, can be particularly challenging when the artist was prolific and employed assistants. Auction houses face considerable liability regarding the authenticity of artwork sold on secondary markets and will often refuse to sell work excluded from an artist's catalogue raisonné. In other words, authentication is as much a product of market consensus as expert or scholarly inquiry.

If a work of art is not listed in a catalogue raisonné, secondary market actors may, however, turn to authentication boards.(fn22) Authentication boards are often created by artists' foundations and comprised of individuals who have scholarly interest in an artist's work or first-hand experience working with the artist. Unlike a catalogue raisonné, an authentication board only reviews artwork as it is submitted by owners. In addition, the catalogue raisonné is often attributed to a single author, while an authentication board is a committee.

Some authentication boards have been short-lived, which can make secondary market actors cautious about their opinions. For example, the Comite Picasso, a group of experts and members of Pablo Picasso's family, formed to make definitive assessments of Picasso artwork, but broke up after Picasso's daughter refused to participate. The Andy Warhol Art Authentication Board, Inc...