First judicial auction online sparks debate

A BMW 730 sedan, seized in a lawsuit by a local court in East China's Zhejiang province, was sold on Tuesday to a bidder on Taobao.com, China's top online retailer, sparking debate regarding the legality of online auctions.

The BMW car was sold to bidder "L1007" at a price of 330,900 yuan ($52,000) after more than 30 price markups. Another Mitsubishi vehicle was auctioned for 67,000 yuan.

The Beilun District People's Court and Jinzhou District People's Court of the city of Ningbo posted information about the two cars online on June 26 along with starting prices of 199,900 yuan and 50,000 yuan, respectively. The auction began at 10 am Monday and ended at 10 pm Tuesday.

The auction marked the country's first judicial auction to take place on a third-party commercial website without an auction agent.

China has established a national online auction platform to aid in the auction of assets seized by the courts. This platform was established by the Supreme People's Court and requires the involvement of an auction house in any prospective auctions.

"The aim of the online auctions is to avoid corruption and realize zero commission fees," said Rao Wenjun, head of the judicial authentification department of the Zhejiang Provincial High People's Court.

Buyers of assets seized in lawsuits have to pay 0.2 percent to 5 percent of the transaction price to the auction houses as a commission. Taobao auctions, however, feature no commissions.

Chinese courts' handling of assets seized in lawsuits has long been criticized by the public, as the auctions are not transparent and the transaction prices are sometimes much lower than the real value of the items being auctioned.

"Secret auctions that take place through traditional judicial auction channels are not unpopular in China," said Zhang Jingzhong, head of the Zhejiang Provincial Lawyers Association.

"The bidding is often restricted to several auction houses, leaving room for rent-seeking," he said.

Yu Guofu, a Bejing-based lawyer, said the online auction violates "auction law" and the judicial interpretation of the Supreme People's Court.

"Auctioneering is a very professional business and must be presided over by auctioneers," Yu said.

"Auctions that take place without auctioneers are not unlike drivers who operate without licenses. They are illegal," he added.

Zhu Jianping, deputy secretary general of the Shanghai Auction Association, also voiced doubts about the online auction's validity.

"How does one guarantee the interests of the priority buyer if disputes emerge? Do Taobao or the courts shoulder the responsibility?" Zhu wrote in his microblog on web portal Sina.com.

A poll from Caijing.com, a leading business news portal, showed that 94 percent of 336 respondents support the online auction, with 88 percent saying all courts in China should follow suit. A total of 63 percent said they would bid for seized commodities on Taobao.

Rao said authorities are looking into conducting online real estate auctions.

He said another 17 local courts in the province will start conducting auctions on Taobao.