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Wall Street Journal 10-8 features Antquorum Patek and Omega Auctions "Click" to Login or Register 
12-Size Expert
Picture of Robert Schussel
One of the featured articles on the front page of the October 10th 2007 Wall Street journal is about Antiquorium auctions and its co founder Osvaldo Patrizzi.

Key Points
1)Omega and Patek use auctions focused on just their watches as a marketing device and to rebuild interest in hi end watches.

2) Many of the record winning bids at both the Patek and Omega auctions came from the respective companies who said they paid the recording breaking bids to win the watches for their museums.

3) The Board Of Directors removed Mr. Patrizzi as CEO Chairman due to auditing issues.

Bob Schussel
Posts: 621 | Location: Vallejo, California U.S.A. | Registered: July 10, 2004
12-Size Expert
Picture of Robert Schussel
From Oct 10 Wall Street Journal

How Top Watchmakers
Intervene in Auctions
Luxury Timepieces Get
Pumped Up in Bidding;
'It's a Bit Dangerous'
October 8, 2007; Page A1

GENEVA -- In the rarefied world of watch collecting, where Wall Street investment bankers and Asian millionaires buy and sell at auctions, a timepiece can command a higher price than a luxury car. At an April event here, a 1950s Omega platinum watch sold for $351,000, a price that conferred a new peak of prestige on a brand known for mass-produced timepieces.

Watch magazines and retailers hailed the sale, at an auction in the lush Mandarin Oriental Hotel on the River Rhone. Omega trumpeted it, announcing that a "Swiss bidder" had offered "the highest price ever paid for an Omega watch at auction."

What Omega did not say: The buyer was Omega itself.

Auctioneer Osvaldo Patrizzi, president and co-founder of Antiquorum, left, and Stephen Urquhart, president of Omega, at the Omegamania auction in Geneva on April 15.

Demand and prices for expensive watches have been surging, fed by global economic growth. But there's another factor behind the prices: an alliance between watchmakers and a Geneva auction house called Antiquorum Auctioneers.

Antiquorum sometimes stages auctions for a single brand, joining with the watchmakers to organize them, in events at which the makers often bid anonymously. This is a technique of which Patek Philippe and other famous brands, as well, have availed themselves.

"It's an entirely different approach to promoting a brand," says the cofounder of Antiquorum, Osvaldo Patrizzi, "Auctions are much stronger than advertising." Mr. Patrizzi worked with Omega executives for two years on the auction, publishing a 600-page glossy catalog and throwing a fancy party in Los Angeles to promote the event. "We are collaborators," he says.

But now there's ferment in the world of watch auctions. First, they're starting to raise ethical questions, even within the industry. "A lot of the public doesn't know that the biggest records have been made by the companies themselves," says Georges-Henri Meylan, chief executive of Audemars Piguet SA, a high-end Swiss watchmaker. "It's a bit dangerous."

More unsettling, Antiquorum's Mr. Patrizzi, who essentially founded the business of watch auctions, is under fire by the house he cofounded. Its board ousted Mr. Patrizzi as chairman and chief executive two months ago -- and hired auditors to scour the books.

The business of auctions for collectibles is not a model of transparency. The identities of most bidders are known only to the auction houses. Sellers commonly have a "reserve," or minimum, price, and when the bidding is below that, the auctioneer often will bid anonymously on the seller's behalf. However, the most established houses, such as Christie's International PLC, announce when the seller of an item keeps bidding on it after the reserve price has been reached.

Omega's president, Stephen Urquhart, says the company is not hiding the fact that Omega anonymously bid and bought at an auction. He says Omega bought the watches so it could put them in its museum in Bienne, Switzerland. "We didn't bid for the watches just to bid. We bid because we really wanted them," he says. Omega's parent, Swatch Group Ltd., declined to comment.

Through the auctions, Swiss watchmakers have found a solution to a challenge shared by makers of luxury products from jewelry to fashion: getting their wares perceived as things of extraordinary value, worth an out-of-the-ordinary price. When an Omega watch can be sold decades later for more than its original price, shoppers for new ones will be readier to pay up. "If you can get a really good auction price, it gives the illusion that this might be a good buy," says Al Armstrong, a watch and jewelry retailer in Hartford, Conn.

Niche watchmakers have used the auction market for years to raise their profiles and prices, mainly among collectors. As mainstream brands like Omega embrace auctions, increasing numbers of consumers are affected by the higher prices.

Omega and Antiquorum got together at the end of 2004. The watchmaker was struggling to restore its cachet. Omega once equaled Rolex as a brand with appeal to both collectors and consumers, but in the 1980s, Omega sought to compete with cheap Asian-made electronic quartz watches by making quartz timepieces itself. Omega closed most of its production of the fine mechanical watches for which Switzerland was famed, tarnishing its image.

A decade later, Omega tried to revive its luster by reintroducing high-end mechanical models. It raised prices and signed on model Cindy Crawford and Formula 1 driver Michael Schumacher for ads. When this gambit failed to lure the biggest spenders, Omega turned to a man who could help.

Mr. Patrizzi, 62 years old, had gone to work at a watch-repair shop in Milan at 13 after the death of his father, dropping out of school. He later moved to the watchmaking center of Geneva, at first peddling vintage timepieces from stands near watch museums.

He founded Antiquorum, originally called Galerie d'Horlogerie Ancienne, in the early 1970s with a partner. At the time, auctions of used watches were rare, in part because it was hard to authenticate them. But Mr. Patrizzi knew how to examine the watches' intricate movements and identify whether they were genuine.

At first, prominent watchmakers were wary. Mr. Patrizzi approached Philippe Stern, whose family owns one of the most illustrious brands, Patek Philippe, and proposed a "thematic auction" featuring only Pateks. The pitch: Patek would participate as a seller, helping drum up interest, and also as a buyer. A strong result would allow Patek to market its wares not just as fine watches but as auction-grade works of art.

The first Patek auction in 1989 featured 301 old and new watches, with Mr. Patrizzi's assessments, and fetched $15 million. Mr. Stern became a top Patrizzi client, buying hundreds of Patek watches at Antiquorum auctions, sometimes at record prices. The brand's retail prices soared. Over the next decade, the company began charging about $10,000 for relatively simple models and more than $500,000 for limited-edition pieces with elaborate functions known in the watch world as "complications."

Patek began promoting its watches as long-term investments. "You never actually own a Patek Philippe," ads read. "You merely look after it for the next generation." Mr. Stern says he bid on used Patek watches as part of a plan to open a company museum in 2001. Building that collection, he says, was key to preserving and promoting the watchmaker's heritage, the brand's most valuable asset with consumers. "Certainly, through our action, we have been raising prices," he says.

Auctions gradually became recognized as marketing tools. Brands ranging from mass-producers like Rolex and Omega to limited-production names like Audemars Piguet and Gerald Genta flocked to the auction market with Antiquorum and other houses. Cartier and Vacheron Constantin, both owned by the Cie. Financière Richemont SA luxury-goods group in Geneva, have starred in separate single-brand auctions organized by Mr. Patrizzi.

"Patek opened a lot of doors for us, but we also opened a lot of doors for Patek," he says.

Brands began to vie for his attention, sending Mr. Patrizzi watch prototypes to assess and, they hoped, occasionally wear. They hired his assistants at Antiquorum as their auction buyers, cementing ties. "He was a kind of spiritual father for me," says Arnaud Tellier, who worked under Mr. Patrizzi before becoming Patek's main auction buyer and director of the Patek museum.

Friends describe Mr. Patrizzi as a rare intellectual in a market with many coarser types. Guido Mondani, a book publisher and watch collector who met Mr. Patrizzi two decades ago, says he was charmed by the auctioneer's encyclopedic knowledge of watch history. Mr. Patrizzi began advising the publisher on which watches to add to his own growing collection, and wrote volumes on collectible watches that Mr. Mondani published.

Mr. Patrizzi discovered a rare defect in a Rolex Daytona owned by Mr. Mondani: Its dial was sensitive to ultraviolet rays and could change color. The result was a sensation in the collector's world, with the price of what became known as the Patrizzi Daytona reaching nearly 10 times its retail price. Last year, Antiquorum auctioned Mr. Mondani's Rolex collection for about $9.4 million at current exchange rates.

Mr. Patrizzi himself amassed a collection of antique cuckoo clocks and grandfather clocks, which grace his home in Monaco. He recently built an Alpine chalet near the chic French village of Megève and filled it with clocks dating as far back as the 15th century.

When he spoke to Omega executives at the end of 2004, Mr. Patrizzi felt that an Omega-only auction might be what the brand needed to revive its image. There was one problem. Antiquorum couldn't vouch for the authenticity of watches that are mass-produced; since they are worn more, their watch movements have often been opened and tampered with in the course of repair. So in an unusual arrangement, Omega agreed to guarantee the authenticity of all watches sold at the auction, and refurbish those needing it beforehand. Omega supplied vintage timepieces from its own collection for the sale.

To build interest, Mr. Patrizzi and Omega officials traveled to 11 cities, hosting events such as a flashy party at the Beverly Wilshire Hotel with celebrities such as actors Charlie Sheen and Marcia Gay Harden. Antiquorum and Omega joined in publishing the huge, glossy auction catalog. When the sale, dubbed "Omegamania," took place in April, it was shown on jumbo screens at the BaselWorld watch fair and streamed live on the Internet for online bidding.

It brought in $5.5 million. Besides the $351,000 platinum watch, Omega outbid collectors on 46 other lots, including many of the most expensive. Mr. Patrizzi estimates Omega bid on 80 lots in all, out of 300.

A Singaporean collector, told of Omega's role, called it "heinous." Melvyn Teillol-Foo, who bid over the Internet and bought a few pricey watches, added: "If it turns out they bid against me and got me to $8,000, I would be ticked off."

The auction is boosting retail demand just as Omega is introducing pricier models, says a Seattle retailer, Steven Goldfarb. He says his top-selling Omegas used to be $1,400 models, but Omegas costing three times that are selling now. "Customers are conscious of the fact that an Omega watch sold for $300,000," he says. "They have no idea who bought it."

But just as Mr. Patrizzi basks in one of his big successes, his position in the industry is at risk. On Aug. 2, as he vacationed during a traditional holiday time for the industry, Antiquorum's board met and voted him out as chairman and chief executive of the auction house he cofounded. Mr. Patrizzi, who owns a minority stake in the firm, says he learned of his ouster from lieutenants who were locked out of the company's Geneva headquarters the day of the meeting, and later fired.

Named interim chief was Yo Tsukahara, an executive at ArtistHouse Holding, a Tokyo company that owns 50% of Antiquorum. ArtistHouse then formed a different Antiquorum board. Mr. Tsukahara hired auditors from PricewaterhouseCoopers to scour Antiquorum computers, financial records and inventory. Pricewaterhouse wouldn't comment.

Mr. Patrizzi's "thematic auctions" for a single brand of watches weren't an issue, Mr. Tsukahara says in an interview. They were a "win-win situation," he says.

Mr. Patrizzi's relations with ArtistHouse had been worsening for a year. One issue was his resistance to adopting more rigorous accounting in compliance with the Tokyo Stock Exchange. Mr. Patrizzi opposed an ArtistHouse push to replace Antiquorum's accountants, according to Leo Verhoeven, a Patrizzi ally and an executive at Habsburg Feldman, a Geneva company that owns 43% of the auction house.

Mr. Verhoeven adds that when Mr. Patrizzi stuck to the watch industry's summer holiday schedule of mid-July to mid-August, he caused a timing issue for ArtistHouse, which landed on a Tokyo Stock Exchange list for companies that don't report earnings promptly enough. Mr. Tsukahara blames the delay on Antiquorum, saying that auditors were unable to account for several high-priced watches during an inventory check, forcing ArtistHouse to write off their value.

Mr. Patrizzi denies watches were missing. Giving Mr. Patrizzi's version, Mr. Verhoeven says two watches were consigned to retailers and two were sold in private sales that hadn't yet been booked because of an accounting backlog. Messrs. Patrizzi and Verhoeven say they have sought preliminary injunctions in a Geneva civil court challenging the legitimacy of Mr. Tsukahara's newly created board.

Mr. Patrizzi says that days before his ouster, he sensed trouble was brewing. The line of antique cuckoo clocks on the wall of his Alpine chalet went "a bit out of whack," he says. "One was 10 minutes too fast. Another was 10 minutes too slow. I said, 'Oh God, something is about to happen.'"
Posts: 621 | Location: Vallejo, California U.S.A. | Registered: July 10, 2004
Picture of Jessica Lane
This is a really shocking story. It affects pricing at every level of the market, and so far as I can see would be illegal in the US. Don't know about Switzerland.

I expected a number of watch collectors to take strenouous exception. And we've complained about Ebay over the years- without taking account of Antiquorum.

Posts: 834 | Location: New York, New York U.S.A. | Registered: September 06, 2003
In my opinion, this practice is akin to fraud!
Posts: 767 | Location: Los Osos, California USA | Registered: December 12, 2002
Robert, Jessica, et al,

Just for added information, you may want to look at Antiquorum's press release of the auction results.

I'm not so sure that this is as bad as the article makes it appear. It's not unusual in the art world for a museum to be involved in the authentication of a painting, and then to attempt to acquire it for their collection. Nor is it unusual for them to bid anonymously, simply to avoid their name being used to solidify other's interest in the piece. The major auction houses have long participated in this, since accommodating high rollers results in higher bids, and thus greater commissions. It's the application of these ideas to the marketing of still-produced watches that seem to be causing concern. In the world of fine arts, this wouldn't raise an eyebrow.

If Omega owned any of the pieces that they subsequently bid on, and thus achieved higher prices, then yes, that would be fraud.

If Omega had hidden their cooperation in the service and authentication of the pieces, then it could be fraud. These auctions were widely discussed in collector's circles beforehand, and Omega's involvement was well-documented (and their expertise questioned), particularly in regard to a couple of heavily restored pieces.

If Omega's museum acted as an independent entity from Antiquorum, placed bids legally, paid those bids and all fees, then where is the problem? Some may say that the resulting publicity enhanced the value of the firm, and their other products, but is that fraud? They were quite forthcoming prior to the sale that this was part of the whole purpose of their participation. I see it as little different than "providing" Omega (or any other brand) watches for celebrities to wear in high visibility situations. Do you really think that those actors, models and sports stars bought their Omega's at retail, and sent in their testimonials free of charge? Is that fraud?

If you were one of the collectors who consigned a piece through Antiquorum, and you received a much higher than anticipated price, whether Omega bought your watch or not, wouldn't you be pleased with the result? I for one would be tickled pink to know that a watch that I had found might be worthy of inclusion in the Omega factory collection, and I'd certainly be happy with the extra money.

If I wanted one of the watches badly enough to outbid the Omega Museum, regardless if I knew it was them bidding against me, then I got what I wanted at a price I was willing to pay. Yes, if they hadn't bid I would have gotten it for less. And if no one bids against me on eBay, I could get every auction I enter for the starting bid. Sometimes I win, and sometimes I don't, but it's only fraud if the seller (or his accomplices) push my price up with no intention of buying the item should they win. And even if it does happen on eBay (which I know it does)I still control my highest bid. To say that their actions are "heinous" smacks of sour grapes to me.

Please don't forget that for any auction to achieve these prices, two people must be bidding, not just one. If Omega paid $351,000 for the platinum Constellation, then someone else was willing to bid $350,000. Omega didn't own the watch, and someone else wanted it badly enough to bid that high.

None of us likes to lose an auction, and I know I have been frustrated many times when a bidder with known "deep-pockets" knocks me out of contention for an item I really want. I also know that eBay's user ID's (and especially their recent practice of masking those ID's) makes us all effectively "anonymous bidders." I have a good friend who keeps a chart of bidder ID's and their corresponding real names, just so he can keep up with which collectors are buying which things. I don't do this, and there are only a few I know. There are many more I recognize, just from seeing them over and over, but have no idea who that person actually is. While some of us make no attempt to mask our identity on eBay, many use multiple IDs (or frequently change them) just to avoid the kind of attention that I assume Omega was trying to avoid when they bid anonymously. I know that some people track my bid activity, and I've had one well intentioned collector tell me how it made it easier for him to search, knowing that if I was interested in an item, he would probably like it as well. Wouldn't Omega's interest in an item verify it's desirability to others, and thus increase the price achieved? I still don't see how bidding anonymously, assuming those bids were sincere, is fraudulent, illegal, or even unethical. Has anyone checked to see if any of those newly acquired pieces were actually delivered to Omega? I'm assuming that PriceWaterhouseCoopers will verify if they were actually paid for when they complete their audit of Antiquorum.

To address Robert's third point, all of this is separate from whatever issues Mr. Patrizzi may have with the management of Antiquorum and ArtistHouse. It shouldn't surprise anyone who's kept up with collectible watches for the past twenty years that there could be questions with his accounting practices. The fact that he keeps coming back within the field would seem to verify that he eventually makes good on things, even if he's a bit "fast and loose" in the meantime.

Sorry that this turned into a ramble. I'd just like someone to explain to me which part of Omega's conduct rises to the level of fraud. It seems to me to just be another cleverly orchestrated marketing scheme, and a very successful one at that. That may be distasteful to some collectors, but I think that this also illustrates the differences between those of us who thrill to the sight of a fifty year old watch worth a few hundred dollars, and to those who are invited to secret showings of next year's Pateks (or Audemars or Vacherons, etc.) and drop two or three million dollars on watches that will never be worn. That's the market these auctions are hoping to influence, and then to have that effect trickle down so that someone else might pay $2500 for a new Planet Ocean. I haven't seen any "Omegamania" effect on the prices of 1950s Seamaster's or 1930s imported Omega dress watches, two areas where I do pay attention.

As Fitzgerald said, "The very rich are different from you and me".

Best regards,

Posts: 267 | Location: Huntsville, Alabama USA | Registered: December 12, 2005
IHC Member 163
Picture of Mark Cross
Watch magazines and retailers hailed the sale, at an auction in the lush Mandarin Oriental Hotel on the River Rhone. Omega trumpeted it, announcing that a "Swiss bidder" had offered "the highest price ever paid for an Omega watch at auction."

What Omega did not say: The buyer was Omega itself.

I guess this is the part that bothered me the most.

Regards! Mark
Posts: 3821 | Location: Estill Springs, Tennessee, USA | Registered: December 02, 2002
I think the fraud charge will only stick if the underbidder was in cahoots too. Think about this, if Omega did enter agreement with Antiquorem to to intentionally create a stir and promote intererst so that prices will rise, that's just marketing folks. If they they colluded with a third party in order to run up prices, that's illegal. "Pooling", as it is known, is illegal everywhere as far as I know (trust me, I don't). Buying "for the museum"seems noble enough but, one might also conclude that, in the course of bidding up the market, the speculator can often lose(i.e. end up overspending for an item); what better excuse/explanation than pleading for unique museum examples? These could be reconverted later as necessary.

If Omega conceived, contrived or colluded in such a plan in order to delude the market into believing that, if someone is convinced that buying an Omega for 350.000 is a good investment, then this $8,000- one must be a good deal..., a line was crossed.

I was told years ago that the marketers of high end watches fed the big city auction market. It is a phenomena I know little about but have, occasionally, resented.

Very interesting about Patrizzi!

Nice exposē Robert!
Posts: 536 | Location: El Cerrito, California U.S.A. | Registered: October 04, 2004
I am sorry to say that this not surprise me at all. I know the print auctions much better than the watch auctions. That said, I have seen print dealers pay fairly crazy prices for a certain print, knowing full well that they had offered me a different example (perhaps better!) of the same print only weeks before for much less. While this sort of action makes little sense on the surface, when one understands that when dealers buy up all they can of certain artists they soon become the "market maker", book writer, and de facto expert on the artist. Therefore, paying a crazy price for one nice example is reasonable when one knows that they have 4 or more others of the same print to sell also (now likely at a much higher price, since the new auction record sets a new floor value) -- not to mention perhaps hundreds of other impressions from the same artist. I would imagine that the watch artists perform much the same. And since some watchmakers are still in business, I can appreciate why they might like to raise the value on their older examples buy having the auction hit record prices.

What scares me more is the common practice of auction houses owning some (typically mentioned in small print) of the lots they are selling.


Posts: 141 | Location: Michigan in the USA | Registered: October 13, 2005
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