This article first published in July 2014.
Wasn’t government invented by early man to provide fair settlements of disagreements, protection from enemies, and planning for the storage and maintenance of the collective food supply? Now we have teams of Orange Cone People working for our governments who spend their time trying to think of more ways they can help us but manage to interfere with what we are trying to do. Orange cone people like to have control over situations that don’t merit their meddling, and they are hard at work now trying to help struggling artists earn more money. But resale royalty for visual artists is not working in many of the countries where it has been the law for a while, so why would we want to jump into legislation in the US before we study those situations thoroughly?
The Orange Cone people want to fix the art market so it is more fair to the many talented artists whose work grows dramatically in value, but the profit is made by the collector, not the artist. Admittedly, this is a problem, but living artists have the ability to charge higher prices for newly created art, thereby gaining monetarily from their growing popularity demonstrated at auction. Instead, the Orange Cone people want to put their little orange cone barriers in the way of the flow of the art market by passing legislation that makes the situation more complex without solving the problem.
Droit de Suite is a French term referring to a royalty paid to the original artist when his or her work is resold. In France, a law requiring such a payment was passed the first time in 1920. The latest iteration requires that a royalty of whichever is less: between .25% and 4% (depending upon the situation) or E 12,500, must be paid to artists or their heirs for 70 years after their deaths. In France, the royalty must be paid even if the seller had not made a profit. ACK.
Since 1920, almost 60 countries have passed similar legislation, but not in Asia or America. In 2001, the European Union decided that resale royalties should be paid throughout the EU, also capped at E 12,500. The UK enacted a droit de suite called ARR in 2006, but required payment only to living artists. This was changed in 2012 to comply with the EU directive. According to an article by Maura Cahill Pettengill in the Art Newspaper 6.23.10, Christopher Battiscombe, the Director of the Society of London Art Dealers, said that the ARR only helped the artists who were already doing well, the top 10%. An American art advisor complained because the auction house passed the seller’s obligation to pay the artist’s royalty to the buyer. He had to pay a 10,000 pound royalty to Damien Hirst on top of the hammer price and the buyer’s premium. Damien Hirst is not a struggling artist. So whom does the ARR really help? Whom does it hurt? ACK.
Australia passed a droit de suite on 6.23.2010. Theirs is a flat, uncapped royalty of 5% with the first sale exempted. An artist there, John R. Walker, is an author on this AAD website. He writes about how the resale royalty law is not working out as the artists had imagined. Instead, he described in June 2014, their law as, “A make-work scheme for arts administrators, a restraint of trade and what is essentially an anti-progressive tax: the more you have, the more you receive” and had cost taxpayers over 2.2 Million Australian dollars in its first three and half years. Originally thought to be of help to indigenous artists, the law has ruined the market for their unique art. Walker writes in August of 2013, “the old free market indigenous art sector has largely been replaced by a state backed official Indigenous cultural academy.”
So the Australian version of droit de suite is having a deleterious effect on the art market there and hurting the very people the government sought to help. ACK.
In the US, the state of California passed a droit de suite law in 1976, which applied to artists and sales in that state only for resales where prices are greater than $1000, during the artist’s lifetime or within 20 years of the artists death. Currently, the law has been challenged for its constitutionality with its fate to be decided by the Ninth Circuit Court of Appeals. What is interesting about the California droit de suite law is the way royalties are paid. Royalty payments are made directly from the seller to the artist with no overseeing reporting required or through the California Arts Council if the seller can’t find the artist. If the CAC can’t find the artist, the money is spent on Art in Public Places. In California, they have no idea how many delinquent sellers exist because the sales and royalties are not reported. The burden falls on the artist to keep track of all of the transactions of his or her art in order to apply for the royalty, and many artists are unaware of the law. The CAC advises artists to follow auction house sales and Google themselves regularly, and to sell their work with a contract stipulating their rights in the event of a resale. Section 536 of their law states that artists have the right to ask for the contact information of the buyer in any transaction so that they can track their work. Legal help is offered to artists ONLY IF their lawsuit is successful. Can you imagine this on a national level? ACK.
In 1992, the US Copyright Office did a study, according to Wikipedia, which determined that “there were not adequate economic or copyright policy justifications to warrant adopting droit de suite at the federal level,” but added that it should be reconsidered if the EU passed a unified droit de suite law, which happened, as mentioned above, in 2001.
In 2011, droit de suite bills were introduced in both houses of the US Congress, but they weren’t passed because of a lack of support. Last February 26, droit de suite bills were introduced again (HR4103 and S2045). The Senate version, supported by only 2 senators, was read twice and referred to the Committee on the Judiciary on the day of its introduction. The House version has 15 supporters as of 6.24.14: 3 from California, 3 from New York and the rest from nine other states. On 3.20.14, it was referred to the House subcommittee on Courts, Intellectual Property and the Internet, where it remains as of today. In favor of this legislation is Karyn Temple Claggett of the Copyright Office and Ted Feder, President of the Artists Rights Society.
The US version, called ART, would apply to the resale of work by artists who are US citizens or citizens of any country that has its own resale royalty law, on sales at auction over $5,000, including only unique work or works from editions of 200 or less, if signed and numbered by the artist. The royalty is to be whichever is less: 5% of the resale price or $35,000 (which is 5% of $700,000). Should the law be enacted, after 2015, the $35,000 figure will increase yearly by a multiple of the cost of living adjustment. Artists whose work already sells for hundreds of thousands are included in this legislation, as are artists whose work has sold for over $5,000. Is this law designed to help the right people? ACK.
Distributions of the US royalties, minus a reasonable amount to cover the expenses of the distribution, would be made four times a year by a “visual artists’ copyright collecting society,” which, to the best of my knowledge and Google’s, does not exist in the US under that description. Yet this proposed legislation which will affect the lives of millions of people lists qualifications for such an agency: prior experience and a good record of complying with the law or the authorization of 10,000 “authors of works of visual art.” So it appears that this proposed legislation would create new jobs for the people who would locate the artists and distribute royalties to them and reimburse themselves for their work out of the artists’ 5%. Would these distribution organizations report all sales data to the Federal Government? After all, these sales of art at auction are subject to a tax on capital gains for the seller. Is all this really helping the artists? What existing organizations would become the distributors? The Archives of American Art? The Artists Rights Society mentioned above? ACK.
Enforcement of the US law would be that the delinquent seller would be guilty of copyright infringement where the penalty would be paying a fine as well as full royalty to the person who owns the copyright, whether the creator of the art or his or her successor. Think of the record keeping to enforce this. Currently, most sales are not public. Would all art sales have to be published, not on sites that require membership as we have today, but publicly? Since the artist is the one who stands to gain monetarily here, would this be similar to the California situation where the artist would have to keep track of every work of art they ever created? ACK.
But it gets worse. There is a section to the proposed ART law that requires that a study be done within 5 years of its enactment to determine if the law as had a deleterious effect on the US art market and to decide if the law should be expanded to include dealers, galleries or other art professionals. Why would you wait to do such a study until after the damage had been done to the US art market? Why not do the study before the law is enacted? ACK.
The Orange Cone People need to study before they meddle in a free market that is thriving like the US art market, especially since living artists have the freedom to charge as much as the market price for their newly created art, a much simpler alternative for monetary gain than the record keeping that would be required to collect royalties under the proposed legislation, to be called ART in the US.
Editor's Note: To read Theodore Feder's response published on AAD in August 2014, click here.