Adhere to the market-oriented direction of auction - the digital economy empowers the development of the auction industry

Wang Xu

Doctor of Law, research direction: Chinese traditional legal culture and commercial law, member of the Legal Consultation and Theoretical Research Professional Committee of China Auction Industry Association, professor of Law School of Shanghai Lixin University of Accounting and Finance

China Auction: As a member of the CAA's Legal Advisory Committee, can you tell us what attracted you to the auction industry, what specific work have you done since joining the Advisory Committee, and what impact do you think the Advisory Committee has had on the auction industry over the past 20 years?

Wang Xu: I have been in the auction industry for more than 20 years. I started to get in touch with the auction industry because of a special academic relationship. Around May 2002, Mr. Tian Tao began teaching at Shanghai University Law School, where he supervised me and several other students. Since Mr. Tian's research interests include auction laws and regulations, and he served as the director of the Legal Advisory Committee of the China Auction Association at that time, it was natural for us to start studying auction law. Later, through Mr. Tian's introduction, several of our classmates were fortunate to be familiar with Mr. Zheng Xinyao, Mr. Fan Ganping, etc., and under their care and guidance, we gradually became familiar with the knowledge and information of auction theory and practice. After graduating with a Ph.D., with the encouragement of my teachers and the trust of the China Auction Association, I began to teach auction law and auction theory.

I joined the CAAC in 2021 when it was re-elected. Over the past two years, under the leadership of Mr. Long Yifei, Director of the Legal Advisory Committee, I have done some work within my ability, including participating in and drafting the Report on the Reform and Development of China's Auction Industry (a project commissioned by the Ministry of Commerce) and participating in the revision of the "Auction Management Measures" (a project entrusted by the Ministry of Commerce). Over the past two years, I have made suggestions and suggestions for the development of the industry in the performance of my duties as a member of the Advisory Committee, and I have also benefited a lot from my work, not only having the opportunity to learn from other members of the Advisory Committee, but also gaining a deeper understanding of the development of the industry.

For more than 20 years, the Legal Advisory Committee, as an important working department of the CAA, has grown together with the auction industry. The results of the work of the Advisory Committee and the development of the industry have been inseparable. From my observations, the Advisory Committee has contributed to the development of China's auction industry in at least the following ways: First, the work of the Advisory Committee has well promoted the formulation and revision of laws and regulations such as the Auction Law and the Measures for the Administration of Auctions, so that the operation of auction enterprises and the management of the auction industry can be based on the law; second, the accurate interpretation of auction laws and regulations by the Advisory Committee has greatly promoted the standardized development of the industry. We can see that today's auction companies are basically no longer the targets of litigation due to technical or procedural defects; third, a special "case law" has been condensed. One of the important tasks of the Advisory Committee is to solve the difficult problems raised by auction enterprises. Over the past 20 years, the ACA's replies to "individual cases" have not only solved the practical problems encountered by enterprises, but also precipitated them in the form of academic achievements, making due contributions to the development of civil and commercial law in the mainland. At present, the reason why auction enterprises are able to carry out such a high level of compliance operation is related to the high level of knowledge and compliance of auction practitioners, which is also directly related to the continuous training of practitioners on auction laws and regulations by the Legal Advisory Committee over the years.

China Auction: What do you think are the legal problems in the auction industry today, and how should we study and solve the legal problems in the auction industry in order to better promote the legal system of the auction industry?

Wang Xu: Judging from the auction work practice I have participated in, the operation of auction enterprises is currently in a very critical stage of transformation, and the market competition is almost cruel. In the process of this transformation, many fierce contradictions have also emerged, and the contradictions are too intense to force industry managers (including practitioners) to ask, that is, what are the institutional (or legal) problems in the current auction operation?

Personally, I think there are three types of institutional (or legal) issues: some are true, some are false, and some are issues that require sufficient observation before we can understand them. Let's start with the first two. First, the real question. For example, under the condition of the increasing maturity of online auction technology, the legal status of auctioneers. The current Auction Law stipulates the auctioneer and its right to preside, but in online auctions, blindly insisting on the auctioneer's on-site presiding not only increases operating costs, but also sometimes restricts the realization of the advantages of network technology, so redesigning the legal status of auctioneers is an urgent practical issue. Another example is the administrative monopoly problem often encountered in auction operations. In the process of research, we often find or learn that there are market monopolistic behaviors based on "red-headed documents" in many fields and places. In the name of avoiding the loss of state-owned assets, some government departments (or local governments) often issue "red-headed documents", entrusting (or establishing) a certain platform, requiring all state-owned assets within their power to enter the platform before they can be traded, and the result is to restrict and eliminate normal market competition and form a monopoly. Such a business format makes it difficult for many auction companies to operate and unsustainable. Of course, in response to administrative monopoly behavior in the market, the state amended the Anti-Monopoly Law last year (2022). However, how to implement and promote it is still in the exploration stage. All in all, for the above-mentioned "real" legal issues, I believe that it is necessary to organize multiple forces of industry, academia and research to conduct research and draw constructive opinions based on facts.

Second, fake questions. Many people think that the current auction market is chaotic, and I think that most of the sources of this understanding are due to the problem of fakes. For example, some market operators now rename "auction" to "bidding". He also vowed to conclude the difference between "bidding" and "auction", and its purpose was nothing more than to circumvent the application of the Auction Law. Personally, I think it's a self-inflicted clever idea, and to pay attention to it or to be confused by it is to recognize the existence of a false problem. First of all, the reason is that in the process of enforcing the law, the market supervision departments have their own power to make rational judgments in accordance with the law, and they will not be overly confused by quibbles. Second, taking a step back, even if the market regulation authorities do not apply the Auction Law to impose penalties, there are still other enforcement grounds, such as contract laws and regulations, the E-Commerce Law, etc. As long as it is an improper market behavior, whether it is expressed as "auction" or "bidding", it is nothing more than choosing a different basis for punishment. In view of this, it is not advisable to take false questions seriously.

Auctions in China: More and more auction companies have begun to move towards the digital transformation of auctions, and digital products such as "digital exhibition halls", "digital marketing" and "public auction live broadcast" have also emerged. How do you see digital transformation driving auctions?

Wang Xu: Digital transformation, or digital empowerment industry development, is a new format that various industries will face now and for a long time to come. What kind of impact this transformation will have on the auction industry is the third type of question mentioned above, that is, "problems that we need to fully observe before we can understand them". But there is an experience to share, to make an analogy, that is, the development of "online auctions". Around 2010, according to the network technology conditions at that time, the Chinese auction industry came up with the idea of online auctions, and began to explore and practice among Shanghai auction enterprises. Today, we can see that online auctions or online auctions have become irreversible mainstream methods. What is commendable is that the two online auction platforms organized and built by the auction industry, China Auction Network and Public Auction Network, have finally survived and found development opportunities in the unfair competition of large platforms operating online auctions monopolistically. In view of this, I personally believe that how the digital economy can empower the auction industry is a major issue that needs to be met and practiced together.

Auctions in China: After entering the era of convergent media, many auction companies have expanded their business online. From a legal point of view, what do you think are the pros and cons of this development, what legal risks may arise, and how should online auctions be regulated?

Wang Xu: It is inevitable for auction companies to expand their business to online, which is the application of network technology to auction activities, and it is customary to call it "online auction". The change in business model largely means a change in the industry's profit model. At present, compared with the traditional "live auction", online auctions have an absolute advantage in terms of both practitioners and transaction volume. The survey found that more and more Internet companies are pouring into the auction industry after obtaining the qualification to engage in auction activities. It should be said that auctions, as one of the ways to buy and sell, are increasingly "favored" by Internet companies. Their participation has enriched the team of practitioners in the auction industry and transformed their business ideas. Of course, the rapid development of online auctions is inevitably accompanied by the emergence of contradictions, some of which have even turned into legal risks, such as the application of auction laws and regulations, whether it is the auctioneer system or the auction procedure system, which have been greatly challenged and need to be adjusted. As far as I know, the Ministry of Commerce has organized a preliminary investigation on the revision of the "Auction Management Measures" this year, and the main content of the investigation is to include online auctions in the scope of regulation. It is believed that after the promulgation of the new "Auction Management Measures", many legal risks caused by online auctions will be smoothly resolved, and the market supervision authorities will be able to enforce the law in accordance with regulations.

Auctions in China: The development of the auction industry is inseparable from the construction of the rule of law and the popularization of legal knowledge.

Wang Xu: It is often said that the market economy is an economy based on the rule of law and a rule-based economy. Judging from the development experience of the auction industry in the past 20 years, the degree of marketization has become higher and higher, accompanied by the continuous development and progress of auction law. Reflecting on the process of marketization, we can find a law of legal development, that is, auction law has undergone a process of "from identity to contract". For example, the controversial Article 2 of the Auction Law stipulates that the Auction Law only applies to "auction enterprises". This kind of identity-based legislation was born out of the "rut" of the planned economy and has the characteristics of the times. And in the early years of the auction industry, it was true that only auction companies did auctions. However, with the deepening of marketization, this kind of identity legal provision can no longer meet the needs of more entities engaged in auction activities. As a result, the market access mechanism was reformed, and the Auction Law (2015) was amended, and Article 11 of the Auction Law stipulates that the market access conditions are liberalized and non-auction enterprises are allowed to engage in auction business concurrently. Of course, the pace of market-oriented reform has not stopped since then, and by 2021, according to the arrangement of the State Council and the Ministry of Commerce, the auction industry has carried out the reform of "separation of licenses and licenses". This reform has basically abolished the entry threshold for the operation of the auction market, and a large number of practitioners have poured into the auction industry overnight. At present, the auction industry is no longer an auction business for auction companies, but an auction industry engaged in auction activities. This is a legal change "from identity to contract". In view of this, I personally believe that in the future work of the Advisory Committee, adhering to the market-oriented orientation is the basic orientation of our legal system building and legal publicity.