Reference no: EM131477005

Christie’s International and Sotheby’s, international auction houses for art and estate items, are known for their handling of the estates and property of the rich and famous, such as the estate of Jacqueline Kennedy Onassis; the gowns of Diana, Princess of Wales; and the effects of Marilyn Monroe. Together, the two firms con- trolled 95 percent of the international auction market. Sotheby’s CEO of more than 20 years, Diana (Dede) Brooks, and Christopher M. Davidge, the CEO of Christie’s, at the direction of their bosses, Sotheby’s chairman, Sir A. Alfred Taubman, and Christie’s chairman, Sir Anthony Tennant, met to discuss their companies’ charges for commissions. Sir Alfred and Sir Anthony had met and agreed that they were “killing” each other with their competition. Both then directed Brooks and Davidge to reach agreements that ensured their firms’ survivals. Ms. Brooks and Mr. Davidge then began a series of meetings, many of which were in the backseat of Ms. Brooks’s car as she picked Mr. Davidge up from the airport, in which they discussed the following: ?? Their commission rates ?? An agreement to publish nonnegotiable commis- sion rates ?? An agreement as to who would publish rates first ?? Exchange of customer information so that they could monitor each other ’s commission rates ?? Eliminating interest-free loans to their seller/ customers on consignment arrangements ?? Eliminating charitable deductions as part of their pricing to sellers The agreements reached in the town-car meetings worked. In March 1995, Christie’s announced that it was increasing sellers’ fees from a flat commission rate to a sliding scale that ranged from 2 to 20 percent. In April 1995, Sotheby’s announced the same change. Their rates changed in this pattern until Mr. Davidge was fired in December 1999. Upset about a “paltry” severance package, he turned documents over to the Justice Department. When Christie’s learned that the documents had been turned over, it announced that it was increasing its buyer’s commission from 15.5 to 18 percent and charging its sellers less. Seller commissions would drop to between 1 and 5 percent. Sotheby’s did not follow the change, the first time in the nearly five- year period that there was any difference in the two houses’ commission rates. The price-fixing charges against the two auction houses involved “conscious parallelism.” Mr. Taubman denied any involvement in the price fixing and offered a lie detector test conducted by a former FBI agent to establish that he did not know of the arrangements and communications between Ms. Brooks and Mr. Davidge. The two key questions in the polygraph exam, which Mr. Taubman passed, were the following: Did you tell Dede Brooks to try and reach an agreement with Davidge regarding amounts to be charged to buyers or sellers? Did Dede Brooks ever tell you that she had reached an agreement with Davidge about amounts to be charged to buyers and sellers? Mr. Taubman's answers of "no" to each of these questions were found to be truthful by the polygraph examiner. The test was conducted without any current law enforcement agents present. Evaluate whether the actions of "conscious parallelism" in pricing violates federal antitrust laws. Also evaluate whether the executives can be charged with criminal violations of federal antitrust laws. Which federal antitrust statute would apply?