Arnault's Auction Bid : Scandal at Sotheby's may give him his big chance.(Bernard Arnault, owner of Phillips auction house)(Brief Article)(Statistical Data Included)

As a former diplomatic adviser to Margaret Thatcher, Lord Powell is far too civilized to gloat. But as chairman of Phillips, the 204-year-old but newly ambitious British auction house, he can't help but see opportunity in the woes of the two giants who control 95 percent of the $5 billion art auction market. The aftershocks of the price-fixing scandal that last year muddied the names of Sotheby's and Christie's continued last week. On Thursday Sotheby's chairman Alfred Taubman, flagged his readiness to sell his controlling stake, and Sotheby's CEO Dede Brooks is due to be sentenced this month. "We are certainly not planning to build Phillips on [their] misfortunes, but seen objectively their troubles must rebound to our benefit," says Powell. "There is a cycle in these things. Companies rise and fall."

Phillips is rising. In late 1999 the LVMH luxury-goods empire of French magnate Bernard Arnault bought Phillips, making it a major player overnight. In the past, Phillips could boast of a swank Mayfair headquarters and a client list that once included the British royals, but its network of provincial salesrooms sold mainly B-list works culled from the British market. Backed by Arnault's cash, Phillips jumped into competition with Sotheby's and Christie's for big-ticket items, including top-end jewelry, furniture and impressionist paintings. The art world will never be the same. "This business has been between two players since the end of World War II," says Francois Curiel, chairman of Christie's in Geneva. "We always knew who the competitor was and we learned to second-guess them. Now we won't."

Phillips doesn't hope to match the big hitters for size. It plans to compete in a few lucrative specialties, and leave the Antiguan postage stamps and other niches to Sotheby's and Christie's. It has also launched headhunting raids on its rivals. Last month Phillips secured the services of a former Sotheby's highflier, Simon de Pury, who will run its operations. The key battleground is New York, the world capital of the art market. This summer Phillips will move out of a tacky white- brick apartment house next to a palm reader near the East River and into a stately bank building on West 57th Street. Insiders insist the symbolic challenge is unintended, but the glitzy new location is halfway between Sotheby's and Christie's. Says Andrew Schoelkopf, a former Christie's staffer who now heads the Internet art company onview.com, "The auction business is all about sizzle, and the type of space where you entertain has a ...