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Hammer Time

China's online 'judicial auctions' face growing pains

02·05·2018

The November auction of two Boeing 747 jets, seized by the Shenzhen Intermediate People’s Court from a bankrupt airline in 2013, brought attention to an aspect of China’s booming e-commerce sector that few realized existed: judicial auctions.

Taobao’s platform, called simply “Judicial Auction” (Sifa Paimai), began in 2012, initially in collaboration with a district court in Ningbo, Zhejiang province. The first item under the hammer was a BMW sedan seized in a lawsuit. Since then, more than 2,000 people’s courts in 30 provinces have jumped on the bandwagon, and sales have ranged from bad loans to company shares to assets seized from officials charged with corruption, including property developments and art collections.

In 2016, the Supreme People’s Court issued regulations on their procedure, while applauding Taobao’s system for lowering costs by eliminating third-party commissions and increasing transparency of sales—in the past, offline auctions risked under-the-table deals between auction agents and court staff to fix bids.

Online auctions also remove barriers for bidders, such as geography and inexperience—the Boeing jets had languished since 2015 in local auctions, which tended only to be announced in newspapers and court websites. They were snapped up by courier firm SF Express within two days of listing online. Taobao’s “disruption” has naturally made enemies. In a recent editorial, Henan newspaper Dahebao argued in favor of “professionalism”: Commissioned agents are likely to be more thorough than local courts in the matters of appraising and auditing the lots. The editorial came in response to news that a woman in Zhengzhou won an apartment online for 2.3 million RMB, and found she owed 460,000 RMB of taxes on the property, due to a technicality that the court had been unaware of.

And corruption has been not so much eliminated, as adapted: Several recent cases of “malicious bidding” on SifaPaimai had owners arranging with online bidders to bid up the price of the item, then refusing to pay, allowing the owner to potentially keep the item.

In September, authorities made their first arrest of a malicious online bidder, and are now calling for stricter rules and penalties for participants. Meanwhile, the e-auction mania continues to grow. Cities like Beijing and Nanjing have opened up their own platforms for local courts, and recent assets sold include an “auspicious” cell phone number from a debtor in Shandong province (193,800 RMB, via Taobao) and 11 horses from a dispute between co-owners of an closed-down equestrian club in Beijing (224,000 RMB on JD.com).

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