Loeb's roughly $13 billion fund wants to replace Sotheby's leadership for what it sees as weak financial results and loss of ground to rival Christie's.

Sotheby's and its CEO and Chairman William Ruprecht are fighting back, pointing to a rising stock price, blockbuster sales such as last year's $120 million auction of Edvard Munch's "The Scream, and its recent undertaking of a review of its financial strategies

The shareholder rights plan - better known as a poison pill - will be triggered if any one investor, with exceptions, buys more than 10 percent of Sotheby's common shares.

"Poison pills" are a strategy to stop hostile attempts to take over or increase control of a company by forcibly diluting the holdings of certain investors if they exceed a given threshold.

"It is intended to protect Sotheby's and its shareholders from efforts to obtain control that are inconsistent with the best interests of the company and its shareholders," the company said in a statement.

No shareholder currently owns more than 10 percent of Sotheby's. Third Point, its largest shareholder, holds a 9.3 percent stake. Mick McGuire's Marcato Capital Management holds a roughly 7 percent stake in the company. Nelson Peltz's Trian Partners also held a 3 percent stake at the end of the second quarter.

On Friday Third Point said it was "disappointed" that the Sotheby's board had "trotted out the poison pill" in response to the concerns outlined in its October 2 letter. Third Point, which has criticized the company for failing to innovate, called the provision "a relic from the 1980s."

"Rather than address our well-documented citations of mismanagement and initiate a constructive dialogue with its largest shareholder, the Board and the CEO have attempted to further entrench themselves," Third Point said in the statement, released Friday afternoon.

"It is clear that today, the Chief Executive Officer and his hand-picked directors have put their job security ahead of shareholders."

In Third Point's October 2 letter, Loeb said he was seeking to replace Sotheby's current CEO and chairman once he gains a board seat. The activist investor likened the 269-year-old auction house to "an old master painting in desperate need of restoration."

He criticized management expenses and pay packages, and said he wants to reinvigorate auctions as well as private and internet sales. Loeb wants the company's global footprint to expand and to "exploit the Sotheby's brand through adjacent businesses."

Sotheby's shares were down roughly 0.4 percent at $50.75 on the New York Stock Exchange in afternoon trading on Friday. The stock has risen about 46 percent since the beginning of the year.

In September Sotheby's said it would review its capital allocation strategy, leaving the door open to raising its dividend and taking on debt, after Loeb, McGuire and Peltz revealed big stakes in the company.

The announcement of Sotheby's poison comes two weeks after supermarket operator Safeway Inc. adopted a similar move after hedge fund JANA Partners LLC amassed a large stake in the company.

(Reporting By Katya Wachtel, Siddharth Cavale; editing by Andrew Hay)

By Katya Wachtel