Overcoming collusion and price suppression in auctions

Many delegates argued that strong sanctions are needed to prevent price dumping for the benefit of groups and individuals, manipulation, disruption, collusion, and price suppression.

Deputy Speaker of the National Assembly Nguyen Duc Hai chaired the discussion session on the morning of November 28.

Sanctions are needed for violations in determining the starting price.

According to delegate Nguyen Duy Thanh ( Ca Mau delegation), it is necessary to supplement regulations on the rights, responsibilities, and sanctions for violations in determining the starting price in close relation to other legal regulations on price management, land management, and public asset management...

Delegate Nguyen Duy Thanh (Ca Mau delegation) delivered a speech.

Delegates argued that while oral auctions are stipulated in current law, they are less frequently used in practice compared to other forms of auction. To ensure transparency and openness, only two forms of auction—oral auctions and direct auctions—should be maintained. Furthermore, the rights and responsibilities of all parties involved should be clearly defined, protecting the legitimate rights of auction participants, property owners, and auction organizers.

"In addition, regulations need to be amended and supplemented to restrict the abandonment of deposits, prevent price dumping for group or personal gain, manipulation, and disruption," the delegate emphasized.

Representative Tran Van Khai ( Ha Nam delegation) agreed with the proposed amendments and additions to the Law on Auctioning Assets. He noted that the situation of auction participants lacking sufficient financial capacity is becoming increasingly common.

In the current Law on Auctioning Assets, Clause 5, Article 9, regarding prohibited acts for participants in asset auctions, does not specify the financial resources of the participants. This leads to situations where auctions are exploited to disrupt the land market or involve "auctioning on behalf of others"... Many cases rely entirely on bank guarantees. Or, in cases of deposit forfeiture, recovery of the deposit is difficult; or, after winning the auction, project implementation is delayed…

Delegate Tran Van Khai (Ha Nam delegation) delivered a speech.

"In the recent practice of auctioning land use rights, the biggest obstacle and the biggest legal loophole is determining the financial capacity of the auction participants," the representative stated.

Review the regulations regarding the deadline for submitting the deposit.

Representative Ho Thi Kim Ngan (Bac Kan Delegation) expressed her opinion on the auction of land use rights for cases of land allocation and land lease for investment projects and mineral exploitation, stating that those who meet the requirements and conditions for participation (in Clause 2a, Article 38 of the draft) must deposit the advance payment to the auction organization no later than one working day before the auction date.

Delegate Ho Thi Kim Ngan (Bac Kan delegation) delivered a speech.

According to the delegates, the period from the deadline for submitting auction participation documents (15 days before the auction) to the deadline for submitting the deposit (1 day before the auction) is relatively long. This regulation could lead to collusion among auction participants: When submitting documents, a large number of people might create a "virtual market frenzy." However, when it comes to submitting the deposit, only one or a few people might pay. This would create difficulties for the auction organizer as well as the asset owner.

To prevent collusion and "fake applications," Representative Ho Thi Kim Ngan suggested that instead of dividing the process into too many cases as in the draft, the regulations should be structured as follows: For all auction cases, regardless of the type of asset, a deposit must be paid upon submission of the application; if the application is deemed ineligible after assessment and approval, the deposit will be returned. The deadlines for submitting applications and the deposit should be set within a reasonable and consistent timeframe.

During the discussion session, Minister of Justice Le Thanh Long reported on, addressed, and clarified issues of concern to the delegates. The Minister also explained some specific details regarding procedures aimed at preventing collusion, price manipulation, and dummy bidders.

Minister of Justice Le Thanh Long delivered a statement explaining the situation.

The Minister stated that the Auction Law is merely a formality, while regulations regarding starting prices or handling procedures follow specialized laws.

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