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The online art market – legal perspectives

July 2021 - Karolina Miłkowska & Laurens Kasteleijn for Art Law Services

Buying art online became a significant trend in recent years. According to the ’Art Collecting 2021’ Artsy Report[1], due to the COVID-19 pandemic, most in-person art world events transitioned to digital-only affairs, and purchasing artworks online turned out to be the only way for many collectors to support artists and their galleries, participate in auctions, or attend fairs.


Online art sales more than doubled in value year over year, to make up a quarter of the art market in 2020.[2] Despite the contraction of sales overall, aggregate online sales reached a record high of US$12.4 billion, doubling in value from 2019.[3] This upward trend, strengthened by the pandemic, illustrates that the online market carries the potential of getting more popular in the upcoming years.


The World Wide Web gives us many opportunities to purchase art online, however, these can be unreliable or even a proven to be a deception. It is therefore beneficial to be aware of the legal aspects related to acquiring art online.


We shall briefly discuss the legal aspects you should know about the online art market from a consumer standpoint.


The Consumer Rights Directive

For consumers purchasing art online, the EU Consumer Rights Directive[4] is providing consumers with a 14 days withdrawal period from the day on which the consumer or a third party other than the carrier and indicated by the consumer, acquires physical possession of the goods. In addition, a consumer should be able to exercise the right to withdraw before acquiring physical possession of the goods.


Invoice

The consumer should be also careful about the documents provided by the seller. Despite slight variations in local requirements, a typical invoice should include the following information:

Date of sale and invoice number;

Contact information for both artist and buyer with both a physical address as well as a phone number or email;

An itemized list that includes artwork sold with a description of the artwork, including the title, medium, and dimensions, as well as any extra costs such as framing, delivery, and installation. If you are selling multiple works at once, itemize each artwork individually;

Billing should be divided in a subtotal, which is the cost of work and services before taxes, in accordance with state requirements and the total sale; and

Copyright and reproduction rights information.[5]


EU General Data Protection Regulation (GDPR)

Another important issue for consumers is the data protection: EU data protection rules guarantee the protection of your personal data whenever they are collected. These rules apply to both companies and organizations (public and private) in the EU and those based outside the EU who offer goods or services in the EU, whenever these companies request or re-use the personal data of individuals in the EU.[6]


According to the GDPR, collecting and reusing personal information is allowed for companies or organization only in certain situations. One of them is when the company has a contract with a natural person – for example, a contract to supply goods or services (i.e. when buying something online).[7]


Getting the artwork

According to a worldwide consumer survey, in 2019 the average consumer was willing to wait five days between placing an order and receiving their purchase. Since the pandemic began, this has increased and the new expected delivery timeframe is 8 days. EU consumer protection rules ensure that when you buy goods and services in the EU you will have clear information on the product or service you're buying, its price, shipping and delivery costs as well as on your rights when things go wrong.[8]


Lack of conformity

According to Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees the seller must deliver goods to the consumer that are in conformity with the contract of sale.[9] Article 3 of the Directive informs that the seller shall be liable to the consumer for any lack of conformity, which exists at the time the goods were delivered. In the case of a lack of conformity, the consumer shall be entitled to have the goods brought into conformity free of charge by repair or replacement, or to have an appropriate reduction made in the price or the contract rescinded with regard to those goods.[10]


The seller shall be held liable where the lack of conformity becomes apparent within two years as from delivery of the goods. If, under national legislation, the rights are subject to a limitation period, that period shall not expire within a period of two years from the time of delivery.[11]


If the purchase was not collected straight away or have ordered it for delivery at home the seller should deliver it to the consumer within 30 days – unless specifically agreed on a different delivery time. If the goods are not received within 30 days, or within the agreed time, one should remind the seller by giving the seller an additional, reasonable time limit to deliver. If the seller still doesn't deliver within the extended deadline then the purchaser is entitled to terminate the sales agreement and be reimbursed as soon as possible.[12]


Copyright clauses

When it comes to intellectual property law, each work of art posted online must comply with a copyright - in particular when it comes to images posted on social media. [13] The buyer should be also aware of copyright clauses. Copyright is automatic and provides the copyright holder with the exclusive right to:

Reproduce (i.e., make copies of) the work;

Create derivative works based on the work (i.e., to alter, remix, or build upon the work);

Distribute copies of the work; and

Display the work publicly.[14]


Certificate of authenticity

Moreover, works of art should have a certificate of authenticity. A certificate of authenticity is particularly important for professional art collectors as these collectors are likely to purchase works of art for two reasons: the buyers have a personal connection to works, and they believe in its potential as a financial investment.[15]


Anti-money laundering regulations

Art market participants should also take into consideration the anti-money laundering regulations. Depending on the country, sellers are obliged to conduct customer due diligence when they establish business relations with buyers. In the Netherlands, the new Money Laundering and Terrorism Financing (Prevention) Act came into effect July 8th, 2020. It caused several changes in the professional and commercial trade – please see one of our previous articles on this subject.[16]


Digital art

The 69-milion-dollar sale of digital collage by American artist Beeple earlier this year was a significant moment for the art market and NFTs.[17] NFT stands for non-fungible token, a digital asset that represents real-world objects like art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.[18]


Will NFTs take over the art market? One can say that NFTs are solving some of the problems commonly associated with artworks, notably: NFTs introduce a dimension of authenticity with certified ownership. Furthermore, they create scarcity, as each digital artwork will only have 1 or at most a limited number of owners”.[19]


Would you like to know more about legal aspects of buying art online? Do you need to conduct due diligence scan of your possible client? Are you willing to know more about NFTs?

Please contact us at: info@artlawservices.com



Notes: [1]Artsy Report ’Art Collecting 2021’, https://partners.artsy.net/resource/art-collecting-2021-an-artsy-report/ (accessed 20.07.2021). [2] Ibidem. [3] The Art Market, An Art Basel & UBS Report, https://www.artbasel.com/about/initiatives/the-art-market?gclid=Cj0KCQjw6NmHBhD2ARIsAI3hrM2LOkzl8tewWkZHXXzK3rN7C_4kLNtdIRk_kH3mIntZ-zp2fuuF9mQaAqOiEALw_wcB (accessed 20.07.2021). [4] Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32011L0083&from=EN (accessed 22.07.2021). [5] https://abj.artrepreneur.com/the-documents-you-need-to-sell-your-artwork/ (accessed 23.07.2021). [6] https://europa.eu/youreurope/citizens/consumers/internet-telecoms/data-protection-online-privacy/index_en.htm (accessed 22.07.2021). [7] Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation),https://eur-lex.europa.eu/eli/reg/2016/679/oj (accessed 23.07.2021). [8] https://europa.eu/youreurope/citizens/consumers/shopping/shopping-consumer-rights/index_en.htm (accessed 23.07.2021). [9] Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31999L0044&from=EN (accessed 25.07.2021). [10] Ibidem. [11] Ibidem. [12] https://europa.eu/youreurope/citizens/consumers/shopping/shopping-consumer-rights/index_en.htm#order-not-arrived-distance-1 (accessed 23.07.2021). [13] https://www.theartnewspaper.com/comment/avoiding-legal-pitfalls-when-taking-the-art-trade-online (accessed 23.07.2021). [14] https://abj.artrepreneur.com/the-documents-you-need-to-sell-your-artwork/ (accessed 23.07.2021). [15] Ibidem. [16] See also: https://www.artlawservices.com/post/the-new-aml-rules-in-the-netherlands (accessed 23.07.2021). [17] https://www.hec.edu/en/knowledge/instants/will-nfts-disrupt-art-market (accessed 25.07.2021). [18] https://www.forbes.com/advisor/investing/nft-non-fungible-token/ (accessed 25.07.2021). [19] Ibidem.

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