New Bid On The Block

What do you get by combining Louis Vuitton, a rented museum, a famous abstract painting of two rectangles, the Justice Department and Sharon Stone? Answer: a toehold in the snobby world of New York art auctions. But barely.

Last week Phillips--an English auction house with only a small, old salesroom in New York, but recently acquired by the French luxury-goods billionaire Bernard Arnault--held its first modern-art sale at the American Craft Museum in Manhattan. The place was packed and crackling with expectation. Could the upstart firm make itself a player in a business long dominated by the venerable duopoly of Sotheby's and Christie's?

The timing certainly seemed right for a fresh alternative. Until now, the august No. 1 and 2 houses had evenly split 95 percent of the $5 billion art-auction business worldwide. But last Christmas, the CEO of Christie's (acquired in 1998 by Arnault's longtime rival, Francois Pinault, owner of Gucci) was forced to resign. Embittered, he told U.S. government officials that Christie's and Sotheby's had secretly agreed to keep the rates of commission each charged to sellers exactly the same. In February, Sotheby's top two officers, shopping-mall magnate Alfred Taub-man and socially connected ex-banker Diana Brooks, stepped down. They could face possible criminal charges.

Even with all the scandal besetting the big two, only a few folks thought Phillips could actually pull off its coup. Art dealer Richard Gray speculated that Phillips--a distant No. 3--"would have difficulty getting stuff at the blockbuster end of the market." Phillips did have one star attraction--Kazimir Malevich's 1920 "Suprematist Composition," which had hung for 60 years across the street at the Museum of Modern Art before Malevich's heirs got it back. Phillips had reportedly guaranteed the owners $15 million, and was hoping a $20 million sale would create the momentum it needs to be a contender. But the rest of the night's offerings (including a Monet, a Cezanne and a few Picassos) were middling examples and likewise burdened with high guarantees. Moreover, Phillips was essentially putting up a tent for a week while Christie's was ensconced in new $50 million quarters in Rockefeller Center and Sotheby's was in the midst of a $130 million expansion of its Upper East Side building.

Phillips CEO Chris Thomson, a trim, confident Scot, was realistic. "If this sale flies," he said shortly before the doors opened, "our mountain to climb is still steep." Leaning close, he added, "Sharon Stone is here tonight--an attribute the other houses don't have." Stone attended on behalf of AIDS research, to which Phillips donat-ed a small slice of the night's profits. She pitched in by smiling to the balcony to hype bidding, and doing a Vanna White shtik with a sweet little Julio Gonzalez sculpture standing in for a vowel.

Overall, however, the sale landed in a gully somewhere between a fizzle and a disaster. Only 19 of 31 works sold--just over 60 percent, compared with the 80 percent hit by Sotheby's and Christie's in their opening spring auctions. The Malevich fetched only $15.5 million, excluding commissions--hardly the sensation Phillips sought. The new contender may not have crashed, but it wasn't exactly flying, either.