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In a world without auction houses, the idea of art as investment would be less stable and less publicly displayed. It would therefore be a less desirable draw and the infrastructure supporting the market at such record high levels would collapse. The art market, I would say, would return to a more discreet and eccentric group of buyers and aristocrats. The art auction houses add an element of certainty to the prices of works of great art and allow for the valuation of works to come. This is partially though practices of buying in art to prevent it from going unsold at an auction and from the establishment of secret reserve prices set by sellers who wish to insure the value of their art is retained. However, even if the formal auction houses were to collapse, there is reason to believe that they would simply be replaced by an underground alternative. Even before prosecuting the auction houses, the Justice Department was investigating the occurrence of "ring" bidding, were dealers agree not to bid against each other to acquire a work cheap from auction, and then hold a second, secret auction for only dealers.
http://www.artinfo.com/news/story/24595/taubman-memoir-offers-take-on-sothebys-scandal
http://nymag.com/arts/art/features/30620/
http://www.time.com/time/magazine/article/0,9171,996261-2,00.html