BLACKBUSHE, UK - Asked why it has been such a struggle to establish wholesale auto auctions on the European continent, British Car Auctions Chairman Tom Gibson launches into his ordeals with commissaires priseurs.
Since Napoleon's time, auctions in France have been controlled by members of this profession, roughly the French equivalent of auctioneers.
The difference between commissaires priseurs in France and auctioneers in the UK or the USA, is that the CPs, as they are known, are the only people in France allowed to auction second-hand goods. So they enjoy a virtual monopoly, Gibson says. That monopoly is a major reason wholesale auctions have not taken hold in France, one of the largest potential markets.
To conduct auctions, the CPs must receive what Gibson refers to as the equivalent of a law degree. In exchange for their trouble, they can receive a commission of up to 10 percent of the sale price of the goods being sold. The buyer pays that commission.
The arrangement works fine for a painting or an antique dresser being auctioned privately, but not for the wholesale auto auction business. An auto dealer who has to pay such a fee for a wholesale purchase is essentially forfeiting his profit margin, Gibson says. Gibson's lawyers tell him that there will soon be a resolution with the French government over the issue of the CPs.
The CP companies, several of whom operate car auctions in France on a limited scale, will probably give up their monopoly in exchange for some kind of fee or commission. But Gibson has seen too many delays before to be overly optimistic about a quick resolution.
The primary European obstacle to auctions, value-added tax regimes in continental Europe, disappeared by European Commission directive in 1995.
Until the directive was issued, the buyer of a used car or antique painting at auction had to pay VAT based on the entire selling price. In the UK, the buyer of a used car was taxed only on his profit margin.
Gibson says the VAT regimes 'drove the used car market out of the hands of professionals and into the hands of the public.'
People either held on to their new cars forever, or sold them privately in order to avoid dealing with the authorities.
Even if obstacles like commissaires priseurs disappear, auctions still face an uphill struggle.
'Everybody we talk to on the mainland agrees the auction infrastructure is needed,' said John Bailey, Managing Director of ICA Holdings in Bristol, UK, British Car Auctions' main rival.
But Gibson says getting big sellers is one thing. Finding dealers to buy the cars is another.
'The single most important dynamic that drives the auction business anywhere is the retail sale of used cars,' he said. 'It's easy to get excited about demand for vendors, but if you don't deliver the buyer to the seller, it doesn't matter. So there's no quick fix with the auction business.'