Regulating Creativity: The Impact of Regulations on the Art Market
The art market, often characterised by its luxury and exclusivity, operates within a complex web of regulations that shape its dynamics. These regulations range from provenance research and due diligence to customs regulations such as import and export. The recent departure of the United Kingdom, a global hub for the art trade, from the European Union has brought the impact of these regulations into sharper focus. This article delves into the multifaceted effects of regulations on the art market, examining their influence on pricing, transparency, and the broader art ecosystem.
Jan Brueghel the Elder, The Sense of Sight, 1617. Oil on panel. Photo Courtesy: Museo del Prado.
The Art Market: A self-regulated ecosystem?
The art market often carries the reputation of being a self-regulated realm, thanks to its opaque and distinct nature. However, while this perception is valid, it only offers a partial understanding of the intricacies underlying its functioning. Even though many aspects of the art market are not regulated by the government, there are significant aspects that are regulated, the most notable of which are the Import and Export regulations.
With an ever more globalised world, no auction house, gallery, or museum can function without import and export regulations. Whilst this paperwork often makes trade harder, it also protects the art market and its functions. With strict custom rules implemented, one can avoid illicit trafficking of cultural goods as well as, consequently, possible illegal trade with such objects. On the one hand, this enhances the allure of the art market by offering the assurance of acquiring untainted artworks. On the other hand, it complicates and increases the cost of international trade.
The relationship between cost-effectiveness and guaranteed safety can be interpreted as the outcome of the majority of regulations enforced within the art world. If one, for instance, takes a look at Money Laundering Regulations, the same principle applies. On the one hand, Money Laundering Regulations ensure that the Art world stays clean and is not corrupt; on the other hand, Art Market Participants find themselves in situations where they have to pay a lot of money to comply with such regulations, consequently making their services more expensive.
An exploration of the French and UK art markets provides valuable insight into how regulatory measures influence the broader artistic landscape.
Dulwich Picture Gallery. Photo Courtesy: Adam Scott, GalleriesNow.
France v UK
Historically, France had been the leading art market before the UK took over. Whilst it is clear that the political unrest in France during the 18th century did not benefit the art market and contributed to its demise, one should not disregard that the regulated nature of the French art market did not help its standing and its growth either.
The French art market has been heavily regulated since the 18th century. Stringent rules were instituted for auctions, encompassing bidding constraints and guidelines for marketing objectives. Moreover there was only restricted access to auction houses, auctioneers had to be vetted by the state and have a specific education. The Dealer's System operated within a highly exclusive network primarily comprising existing dealers and heavily relying on artist monopolisation. In the meantime, the UK art market was very easily accessible. Auction Houses were open to everyone, and an auctioneer's job was mainly restricted to getting a license. The Dealer's system was very open, and they tried to reach international areas and markets through strategic advertising.
The accessibility and openness of the UK art market during this period can be attributed to several factors. Firstly, there was likely a cultural emphasis on democratizing access to art, promoting a more inclusive environment within the art community. Additionally, the competitive nature of the art market may have driven Auction Houses and Dealers to adopt more open policies in order to attract a wider range of buyers and sellers. Moreover, the strategic advertising efforts aimed at international markets may have been driven by a desire to expand business opportunities and increase profits in a globalized economy.
However, important to mention here is that France initially benefitted from its regulated market due to the nature of the customers. During the 18th century, a new customer base arose that was unsure about art and did not have any connoisseurship yet. This change can be attributed to the fact that the growing middle class during this period had increased disposable income and leisure time, allowing more individuals to engage with art as consumers. The regulations of the French art market imposed safety on the artworks and consequently encouraged buying. This was not the case in the UK. However, with knowledge about art growing, art collectors were seeking cheaper and easier options to buy art, which is where the UK showed itself to be a good option and took over the lead in the art market.
Nowadays, the UK remains the leading art market compared to the French one. However, with France lifting regulations and the UK leaving the EU, and thus being subject to more regulations, one is starting to notice an increase in the French art market share, suggesting that the Art market is seeking cheaper options rather than safer options. Only time will tell if France will be able to reach the same market share as the UK in the future.
Illustration by Katherine Hardy. Photo Courtesy: Katherine Hardy, The Art Newspaper
Digitalisation and the Future
Another aspect deserving attention in the discourse on regulations' impact on the Art Market is the global trend toward digitalisation. As our world embraces digital transformation, the art industry must adapt and innovate to safeguard artworks and foster accessibility. Embracing digitalisation presents both opportunities and challenges in regulating the art market. On the one hand, technological advancements like Blockchain offer innovative and cost-effective solutions for protecting artworks and enhancing regulatory oversight. For instance, Blockchain technology enables the transparent tracking of artwork provenance, bolstering authenticity and combating fraud in a cost-effective way. However, the rapid evolution of technology introduces novel regulatory complexities previously unencountered. These emerging issues, such as data privacy concerns and the rise of digital art, pose new challenges for regulators, rendering the market more difficult to govern effectively. As the art world navigates this digital frontier, striking a balance between harnessing technological benefits and addressing regulatory hurdles becomes imperative for ensuring the integrity and vitality of the market.
Image of Phone Display, Photo Courtesy: Beauty Words
Conclusion
In conclusion, it can be observed that while the art market may appear self-regulated, it is, in fact, subject to numerous imposed regulations. Whilst these regulations make the market safer, they also make it more expensive. Whether an art market benefits or does not depends on the current demand of the art market and the nature of the customers. Lack of knowledge, as well as political unrest, favour a regulated market; the opposite favours an unregulated market. Furthermore, the digitalisation of the art world offers an opportunity to regulate the art market cost-effectively. However, one should not disregard that the digitalisation of the art world also poses new difficulties and dangers, which will have to be addressed in the future. In total, one can say that the complex interplay between regulations, market demand, and consumer preferences continuously evolves, shaping its own dynamics and outcomes.
Sandra Nikusev
Art Markets Co- Editor, MADE IN BED