It sounds almost too good to be true: Tim Goodman’s Fine Art Bourse (FAB) went live at the end of June a buyer’s commission of only 5%, compared to the 25% fee commanded by traditionalists Sotheby’s and Christie’s.
While this head-on challenge to the duopoly has been much publicised, one of the key factors that helps it achieve these savings has gone largely unexamined: by basing the business in Hong Kong, Goodman has been able to create a business that is VAT free, artist resale royalty (droit de suit) free and free from copyright fees.
Needless to say, Goodman’s decision to locate the business in Hong Kong is no happy accident, but the result of his hefty art world experience and careful research.
“What we are doing is taking advantage of the law – and complying with the law,” says Goodman. “We’ve had legal opinions from lawyers in the EU, the US, Australia and Hong Kong regarding the extraordinary jurisdiction advantages of having the online auctions take place in Hong Kong. Contracts between the buyer and FAB are in the jurisdiction of Hong Kong and comply with Hong Kong law – so we pay no VAT on the 5% service charge, no resale royalty and there is no need for the seller to pay a copyright fee to illustrate the painting on the website.”
Perhaps surprisingly considering the savings involved, FAB is the first company to do this. Will others follow – and will it bother Goodman if they do?
“I would expect others to follow – but it will take others at least a year to set this up; it’s taken me three years,” he says. “It’s a complex thing to do both legally and technologically. In 12 months time FAB will have critical mass so we have the advantage of being number one.”
Read more from our interview with Tim Goodman next week.