China's online auctions of court-seized property draw industry criticism

China's online auctions of court-seized property draw industry criticism

Summary: Following a record US$26 million raised in an online auction of court-seized property on Taobao, leading figures from the sector have raised doubts over the practice's legality and liability, and its threat to them.

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Online auctions of court-seized property and goods have attracted criticism from the auction industry, which have raised doubts over their legality and its creating of an unlevel playing field.

Last Friday, judicial authorities of Haining, in Zhejiang province sold a workshop, facilities and land-use rights owned by a bankrupt leather company for 159 million yuan (US$26 million), China Daily reported on Monday. This was the largest amount raised in an online auction of real estate in China since local authorities partnered Chinese online marketplace Taobao in June 2012.

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Industry players say auctions of court-seized property online may not be legal and could affect businesses of traditional auction houses.

The auction had been advertised for two weeks with bidding open for 24 hours, garnering the site 32,000 page views, and the winner was an investment company in the city, according to Taobao in the report. It hosted 127 court auctions since June for vehicles, homes and machinery, with 83 successfully concluded, the company statement last Friday said.

Legal and business issues

Leading figures from the auction industry have criticized the online auctions.

Ou Shuying, deputy secretary-general of the China Association of Auctioneers, supported the move but said the way it had been conducted in Zhejiang had been questionable.

According to her, courts should only supervise and not deal with the sales directly. Ou was referring to a judicial regulations from the country's Civil Procedure Law which requires the commission of auction houses to handle the sale of seized property and goods.

"If this process [in Zhejiang] has problems, who will get the blame? We can't see who should be the responsible party in line with current laws," Ou said.

Wang Litian, secretary-general of the association's Zhejiang branch also added if all courts handled auctions for seized items through Web sites, many companies would "go out of business".

As opposed to traditional auctions where the house takes a cut of the final price, buyers in Taobao do not need to pay the commission. The investment company for example, had saved 1 million yuan (US$161,082) by snapping up the workshop and land-use rights online, the report noted.

"All companies should be given a chance to host the auctions, not only Taobao." she said. "At the moment, it's just not a fair environment for Web companies to compete for court auctions."

Fang Zhizong, a judge from the Guangxi Zhuang autonomous region, also urged caution among authorities as regulations need to be improved first. China should set up an online platform, or third party institute which specializes in handling judicial auctions to avoid potential problems in supervision and to handle sales in a professional way, Fang said.

The Haining people's court did not respond when contacted by the Chinese news site. However, Shen  maintained the Web site simply provided a platform for court officials to deal with buyers directly, and no Taobao employers are involved in the sales.

Topics: E-Commerce, Government Asia, Legal, China

Ellyne Phneah

About Ellyne Phneah

Elly grew up on the adrenaline of crime fiction and it spurred her interest in cybercrime, privacy and the terror on the dark side of IT. At ZDNet Asia, she has made it her mission to warn readers of upcoming security threats, while also covering other tech issues.

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