The Auction Law of the People's Republic of China

Published: October 26, 2015 | Keywords: Auction Law

The Auction Law of the People's Republic of China

The Auction Law of the People's Republic of China

(Adopted at the 20th Meeting of the Standing Committee of the Eighth National People's Congress on July 5, 1996; Amended in accordance with the Decision on Amending the Auction Law of the People's Republic of China adopted at the 11th Meeting of the Standing Committee of the Tenth National People's Congress on August 28, 2004.)

Table of Contents

Chapter 1 General Provisions

Chapter 2 Auction Items

Chapter 3 Auction Parties

Section 1 Auctioneer

Section 2 Consignor

Section 3 Bidder

Section 4 Purchaser

Chapter 4 Auction Procedures

Section 1 Auction Consignment

Section 2 Auction Notice and Display

Section 3 Implementation of the Auction

Section 4 Commission

Chapter 5 Legal Liability

Chapter 6 Supplementary Provisions

 

Chapter 1 General Provisions

Article 1 This Law is formulated to regulate auction activities, maintain auction order, and protect the legitimate rights and interests of all parties involved in auction activities.

Article 2 This Law applies to auction activities conducted by auction enterprises within the territory of the People's Republic of China.

Article 3 Auction refers to a method of sale in which specific goods or property rights are transferred to the highest bidder through open bidding.

Article 4 Auction activities shall comply with relevant laws and administrative regulations, and follow the principles of openness, fairness, impartiality, and good faith.

Article 5 The department of the State Council responsible for managing the auction industry shall implement supervision and management of the national auction industry.

The departments of the people's governments of provinces, autonomous regions, and municipalities directly under the Central Government, and the people's governments of cities divided into districts, responsible for managing the auction industry, shall implement supervision and management of the auction industry within their respective administrative regions.

 

Chapter 2 Auction Items

Article 6 Auction items shall be goods or property rights owned by the consignor or that can be disposed of by law.

Article 7 Goods or property rights prohibited from being bought and sold by law or administrative regulations shall not be used as auction items.

Article 8 For goods or property rights that require approval before transfer in accordance with the law or State Council regulations, the approval procedures shall be completed in accordance with the law before the auction.

Cultural relics consigned for auction shall be appraised and licensed in accordance with the law by the cultural relics administrative department at the location of the auctioneer before the auction.

Article 9 Goods confiscated by state administrative organs in accordance with the law, goods used to offset taxes or fines, and other goods that should be consigned for auction in accordance with State Council regulations shall be auctioned by the auctioneer designated by the people's governments of provinces, autonomous regions, and municipalities directly under the Central Government, and cities divided into districts, at the location of the property. The provisions of the preceding paragraph shall apply to goods confiscated by the people's courts in accordance with the law, goods used to offset fines, and recovered goods that cannot be returned.

Chapter 3 Auction Parties

Section 1 Auctioneer

Article 10 An auctioneer refers to an enterprise legal person established in accordance with this Law and the Company Law of the People's Republic of China that engages in auction activities.

Article 11 Enterprises must obtain approval from the department of the people's government of the province, autonomous region, or municipality directly under the Central Government responsible for managing the auction industry at their location to obtain a license to engage in auction business. Auction enterprises may establish branches in cities divided into districts. (2015.4.24)

Article 12 To apply for a license to engage in auction business, an enterprise shall meet the following conditions: (2015.4.24)

(1) Registered capital of not less than one million RMB;

(2) Its own name, organizational structure, address, and articles of association;

(3) Auctioneers and other staff suitable for auction business;

(4) Auction business rules that comply with this Law and other relevant laws and regulations;

(5) Compliance with State Council regulations on the development of the auction industry;

(6) Other conditions prescribed by laws and administrative regulations.

Article 13 Auction enterprises operating cultural relic auctions shall have registered capital of not less than ten million RMB and personnel with professional knowledge of cultural relic auctions.

Article 14 Auction activities shall be presided over by an auctioneer.

Article 15 An auctioneer shall meet the following conditions:

(1) A college diploma or above and professional knowledge of auctions;

(2) At least two years of work experience in an auction enterprise;

(3) Good conduct.

Persons who have been dismissed from public office or whose auctioneer qualification certificates have been revoked within five years, or who have been criminally punished for intentional crimes, shall not serve as auctioneers.

Article 16 Auctioneer qualification assessment shall be organized uniformly by the auction industry association. Those who pass the assessment shall be issued an auctioneer qualification certificate by the auction industry association.

Article 17 The auction industry association is a legally established social group legal person and is a self-regulatory organization of the auction industry. The auction industry association shall supervise auction enterprises and auctioneers in accordance with this Law and its articles of association.

Article 18 The auctioneer has the right to request the consignor to explain the source and defects of the auction items.

The auctioneer shall explain the defects of the auction items to the bidders.

Article 19 The auctioneer has a duty of care for the items delivered for auction by the consignor.

Article 20 After accepting the consignment, the auctioneer shall not entrust another auctioneer to conduct the auction without the consent of the consignor.

Article 21 If the consignor or purchaser requests confidentiality of their identity, the auctioneer shall keep it confidential.

Article 22 Auctioneers and their staff shall not participate in auctions organized by themselves as bidders, nor shall they entrust others to bid on their behalf.

Article 23: Auctioneers shall not auction their own goods or property rights in auctions they organize.

Article 24: After the auction is concluded, the auctioneer shall deliver the proceeds of the auctioned item to the consignor as agreed, and transfer the auctioned item to the buyer as agreed.

Section 2 Consignor

Article 25: The consignor refers to a citizen, legal person, or other organization that entrusts an auctioneer to auction goods or property rights.

Article 26: The consignor may handle the consignment auction procedures themselves, or they may have their agent handle the consignment auction procedures on their behalf.

Article 27: The consignor shall explain the source and defects of the auctioned item to the auctioneer.

Article 28: The consignor has the right to determine the reserve price of the auctioned item and request the auctioneer to keep it confidential.

For the auction of state-owned assets, if an assessment is required according to law or State Council regulations, an assessment shall be conducted by a legally established assessment institution, and the reserve price of the auctioned item shall be determined based on the assessment results.

Article 29: The consignor may withdraw the auctioned item before the auction begins. If the consignor withdraws the auctioned item, they shall pay the agreed fees to the auctioneer; if no agreement is made, they shall pay the auctioneer reasonable expenses incurred for the auction.

Article 30: The consignor shall not participate in bidding, nor shall they entrust others to bid on their behalf.

Article 31: If the consignor is to transfer the auctioned item as agreed, after the auction is concluded, the consignor shall transfer the auctioned item to the buyer.

Section 3 Bidder

Article 32: A bidder refers to a citizen, legal person, or other organization that participates in bidding for the auctioned item.

Article 33: If laws and administrative regulations stipulate conditions for the sale of the auctioned item, the bidder shall meet the stipulated conditions.

Article 34: Bidders may participate in bidding themselves, or they may entrust their agent to participate in bidding.

Article 35: Bidders have the right to understand the defects of the auctioned item, and have the right to inspect the auctioned item and review relevant auction materials.

Article 36: Once a bidder has bid, they may not withdraw their bid. When another bidder makes a higher bid, their bid loses its binding force.

Article 37: Bidders among themselves, and bidders and auctioneers, shall not collude maliciously to harm the interests of others.

Section 4 Purchaser

Article 38: The buyer refers to the bidder who purchased the auctioned item with the highest bid.

Article 39: The buyer shall pay the price of the auctioned item as agreed. Failure to pay the price as agreed shall result in breach of contract liability, or the auctioneer may, with the consent of the consignor, re-auction the auctioned item. If the auctioned item is re-auctioned, the original buyer shall pay the commission that they and the consignor should have paid in the first auction. If the price of the re-auction is lower than the original auction price, the original buyer shall make up the difference.

Article 40: If the buyer fails to obtain the auctioned item as agreed, they have the right to demand that the auctioneer or consignor bear the liability for breach of contract. If the buyer fails to receive the auctioned item as agreed, they shall pay the resulting storage fees.

Chapter 4 Auction Procedures

Section 1 Auction Consignment

Article 41: When entrusting the auction of goods or property rights, the consignor shall provide proof of identity and proof of ownership of the auctioned item or proof that they can legally dispose of the auctioned item, as well as other materials required by the auctioneer.

Article 42: The auctioneer shall verify the documents and materials provided by the consignor. Upon accepting the consignment, the auctioneer shall sign a written consignment auction contract with the consignor.

Article 43: If the auctioneer deems it necessary to appraise the auctioned item, they may do so.

If the appraisal conclusion is inconsistent with the condition of the auctioned item stated in the consignment auction contract, the auctioneer has the right to request a change or termination of the contract.

Article 44: The consignment auction contract shall specify the following matters:

(1) The name or name, address of the consignor and auctioneer;

(2) The name, specifications, quantity, and quality of the auctioned item;

(3) The reserve price proposed by the consignor;

(4) The time and place of the auction;

(5) The time and method of delivery or transfer of the auctioned item;

(6) Commission and its payment method and deadline;

(7) Payment method and deadline for the price;

(8) Liability for breach of contract;

(9) Other matters agreed upon by both parties.

Section 2 Auction Notice and Display

Article 45: The auctioneer shall issue an auction announcement seven days prior to the auction date.

Article 46: The auction announcement shall specify the following matters:

(1) The time and place of the auction;

(2) The auctioned item;

(3) The time and place for displaying the auctioned item;

(4) Procedures to be followed for participating in bidding;

(5) Other matters that need to be announced.

Article 47: The auction announcement shall be published through newspapers or other news media.

Article 48: The auctioneer shall display the auctioned item before the auction and provide conditions for viewing the auctioned item and relevant materials. The display time of the auctioned item shall not be less than two days.

Section 3 Implementation of the Auction

Article 49: The auctioneer shall announce the auction rules and precautions before the auction.

Article 50: If the auctioned item has no reserve price, the auctioneer shall explain this before the auction.

If the auctioned item has a reserve price, and the highest bid of the bidder does not reach the reserve price, the bid shall not be effective, and the auctioneer shall stop the auction of the auctioned item.

Article 51: The auction is concluded when the highest bid of the bidder is confirmed by the auctioneer's gavel or other public means of acceptance.

Article 52 After the auction is concluded, the buyer and the auctioneer shall sign a confirmation of the transaction.

Article 53 When conducting an auction, the auctioneer shall prepare auction minutes. The auction minutes shall be signed by the auctioneer and the recorder; if the auction is successful, the buyer shall also sign it.

Article 54 The auctioneer shall properly keep complete account books, auction minutes, and other relevant materials related to business operations. The retention period for the account books, auction minutes, and other relevant materials stipulated in the preceding paragraph shall be calculated from the termination date of the consignment auction contract and shall not be less than five years.

Article 55 If the auctioned item needs to go through procedures for changes in licenses and certificates and transfer of ownership in accordance with the law, the consignor and the buyer shall handle the procedures with the relevant administrative authorities with the transaction certificate and relevant materials issued by the auctioneer.

Section 4 Commission

Article 56 The consignor and the buyer may agree with the auctioneer on the commission rate.

If the consignor and the buyer have not agreed on the commission rate with the auctioneer, and the auction is successful, the auctioneer may charge each of the consignor and the buyer a commission not exceeding 5% of the auction transaction price. The commission rate shall be determined in inverse proportion to the auction transaction price.

If the auction is unsuccessful, the auctioneer may charge the consignor the agreed fee; if no agreement is made, the auctioneer may charge the consignor reasonable expenses incurred for the auction.

Article 57 If the auction of the items stipulated in Article 9 of this Law is successful, the auctioneer may charge the buyer a commission not exceeding 5% of the auction transaction price. The commission rate shall be determined in inverse proportion to the auction transaction price. If the auction is unsuccessful, the provisions of Article 56, paragraph 3 of this Law shall apply.

Chapter 5 Legal Liability

Article 58 If the consignor violates the provisions of Article 6 of this Law and entrusts the auction of items or property rights that he/she does not own or that cannot be disposed of by law, he/she shall bear the legal liability. If the auctioneer knows that the consignor does not own the auctioned items or property rights or that they cannot be disposed of by law, he/she shall bear joint and several liability.

Article 59 If a state organ violates the provisions of Article 9 of this Law and handles items that should be auctioned by the auctioneer designated by the people's government of the province, autonomous region, or municipality directly under the Central Government or the people's government of a city with districts where the property is located, the person in charge and other directly responsible personnel who bear direct responsibility shall be given administrative sanctions according to law; if losses are caused to the state, they shall also bear the liability for compensation.

Article 60 For violations of the provisions of Article 11 of this Law, those who engage in auction business without permission shall be banned by the industrial and commercial administrative department, their illegal gains shall be confiscated, and a fine of not less than one time and not more than five times the illegal gains may be imposed. (2015.4.24)

Article 61 If the auctioneer or the consignor violates the provisions of Article 18, paragraph 2 and Article 27 of this Law and fails to explain the defects of the auctioned item, causing damage to the buyer, the buyer has the right to claim compensation from the auctioneer; if it is the responsibility of the consignor, the auctioneer has the right to claim compensation from the consignor. If the auctioneer or the consignor declares before the auction that the authenticity or quality of the auctioned item cannot be guaranteed, they shall not bear the liability for defects. For claims for compensation due to undeclared defects in the auctioned item, the statute of limitations is one year, calculated from the date on which the party knows or should have known that its rights have been infringed.

The statute of limitations for claims for compensation for personal injury or property damage caused by defects in the auctioned item shall apply to the relevant provisions of the Product Quality Law of the People's Republic of China and other laws.

Article 62 If an auctioneer and its staff violate the provisions of Article 22 of this Law by participating in bidding or entrusting others to bid on their behalf, the industrial and commercial administrative department shall give a warning to the auctioneer and may impose a fine of not less than one time and not more than five times the auction commission; in serious cases, the business license shall be revoked.

Article 63 If an auctioneer violates the provisions of Article 23 of this Law by auctioning its own items or property rights in its own organized auction activities, the industrial and commercial administrative department shall confiscate the auction proceeds.

Article 64 If a consignor violates the provisions of Article 30 of this Law by participating in bidding or entrusting others to bid on their behalf, the industrial and commercial administrative department may impose a fine on the consignor of not more than 30% of the auction transaction price.

Article 65 If bidders collude with each other or with the auctioneer in violation of the provisions of Article 37 of this Law, causing damage to others, the auction shall be invalid, and they shall bear the liability for compensation according to law. The industrial and commercial administrative department shall impose a fine on the bidders who participated in the malicious collusion of not less than 10% and not more than 30% of the highest bid; and a fine on the auctioneer who participated in the malicious collusion of not less than 10% and not more than 50% of the highest bid.

Article 66 If the commission is charged in violation of the provisions on the commission rate in Section 4 of Chapter 4 of this Law, the auctioneer shall return the overcharged portion to the consignor and the buyer. The price administration department may impose a fine on the auctioneer of not less than one time and not more than five times the auction commission.

Chapter 6 Supplementary Provisions

Article 67 This Law shall apply to foreigners, foreign enterprises, and organizations that entrust auctions or participate in bidding within the People's Republic of China.

Article 68 This Law shall come into force on January 1, 1997.

--Source: China Auction Association