“SIẾT” DOANH NGHIỆP ĐẤU GIÁ KHOÁNG SẢN / “TIGHTENING” CONTROL OVER MINERAL AUCTION ENTERPRISES

It is necessary to impose strict mechanism on acts of auction disruption, deposit forfeiture, or failure to implement projects in accordance with the approved schedule in order to tighten control over enterprises participating in mineral auctions.

When numerous mineral auctions have recorded winning bids dozens or evens hundreds of times higher than the reserve price, dicussing with Enterprise Forum, Lawyer Pham Thao – FDVN Law Firm, Da Nang Bar Association, supposed that it is now time to apply stringent measures against acts of auction disruption.

Recently, there have been numerous mineral auctions where the winning bid was dozens or even hundreds of times higher than the reserve price. In Lawyer’s opinion, what are the reasons behind such excessively high bidding prices?

Mineral extraction right auction means a form of public sale of mineral extraction right by increasing bids under the principles and procedures specified in the Law on Property Auction 2016, amended and supplemented 2024, and Decree No. 22/2012/ND-CP dated March 26th, 2012 of the Government stipulates on Mineral Extraction Right Auction, amended and supplemented by Decree No. 10/2025/ND-CP, detailed in Section 2, Chapter 3 of Decree No. 22/2012/ND-CP dated March 26th, 2012. Accordingly, all mineral extraction right auction proceedings must be carried out in accordance with regulated procedures and strictly supervised to minimize any possible misconduct in auction activities.

Currently, there are numerous auction sessions in which certain units participating in submit exceptionally high bids compared to the actual market value, and after winning the bid, they subsequently choose an unconvincing reason to forfeit their deposits. This is abnormal in the operation of an auction process. Sand and minerals, construction materials have demonstrated significant scarcity for many years. It is common for many enterprises engaged in the extraction and supply of construction materials to aggressively compete for mining rights under such conditions.

Therefore, the phenomenon of abnormally high bidding price in mineral auctions may stem from several causes, such as enterprises anticipating excessive profits when mineral prices arise, while the reserve prices of many minerals remain relatively low. In addition, there may exist unfair competition, collusion, and price manipulation intended to elimitnate competitors, forfeit deposits, or disrupt the market.

Besides, the appraisal of investors’ capacity remains inadequate, which easily leads to participation in auctions for non-transparent purposes, some enterprises participate mainly to obtain licenses for subsequent transfer, without any actual exploitation activities.

Even won the auctions, some enterprises fail to implement and forfeit their deposits, thereby raising suspicions of auctions disruption. From a legal perspective, how will enterprises engaging in auction-disrupting acts be dealth with?

According to clause 1 Article 70 of the Law on Property Auction 2016, amended and supplemented 2024, any bidder, auction winner or another relevant organization or individual that commits a violation against provisions of clause 5 Article 9 or other provisions of the Law on Property Auction 2016 shall, depending on the nature and severity of the violation, be disciplined or liable to administrative penalties or criminal prosecution, and make compensation for damage (if any) in accordance with regulations of law

According to point d clause 4 Article 24 of Decree No. 82/2020/ND-CP stipulates on cases where bidders have acts of collusion, or consipre with the person having property auction, other bidders, appraisal price organizations, appraisal property organization, other individuals and organizations to distort information about the auctioned property, depress the price, falsify the auction dossiers, or manipulate the auction result, but such acts have not yet reached the level of criminal prosecution, they may be subject to a fine of up to 30.000.000 VND together with additional penalties, and remedial measures as prescibed by law.

On the other hand, any person who engages in acts of collusion to depress or inflate prices during a property auction for earning an illegal profit may, depending on the nature and severity of the violation, be subject to criminal prosecution for the Offence against regulations of law property auction under Article 218 of the Criminal Code 2015, amended and supplemented 2017 with fines, community sentence, or up to 05 years’ imprisonment. 

For cases where powerful person in auction organizations or relevant agencies abuse his/her position in performance to illegaly interfere into auction proceedings, cause damage, may be subject to criminal prosecution of Abuse of power or position in performance of official duties according to Article 356 of the Criminal Code 2015, amended and supplemented 2017 with highest sentence of 15 years’ imprisonment and other additional penalties.

In addition, excessively high winning bid prices will drive up the cost of minerals, thereby putting pressure on the market. Does Lawyer have any recommendations for the competent authorities and localities to stabilize prices as well as to manage mining enterprises in accordance with the approved scope and reserves?

The act of raising price nonsensely shows signs of market manipulation for illicit profit, driving up the prices of construction sand and having an adverse impact on economic security and social order. There have been various instances of “green troops, red troops” in auctions, colluding prices, forfeiting deposits in order to disturbe the sand extraction, mineral and other construction materials markets, indicating that the interests and underlying issues within this market require stricter control.

For the state management authorities, it is necessary to re-evaluate the auction method to prevent “price inflation” and speculation of mining rights for profit-seeking purposes. Consideration should be given to combining criteria such as extraction capacity, environmental protection plans, and socio-economic efficiency, instead of solely relying on the highest bid; strengthen the publicity and transparency of auction information; strictly supervise the proceedings of auction establishment to ensure the integrity and avoid market manipulation; and maintain price stability through regulating supply and demand, as well as controlling output sale prices, particularly for essential minerals such as construction sand, backfill soil, raw stone, etc.

For local authorities, strict supervision of enterprises’ post-auction activities is required to ensure that mining operations comply with approved plans, within the allowed scope and reserves. This necessitates coordination between inspection bodies and local administrations; control to prevent opportunistic over-extraction, resource loss, environment dustruction, and negative impacts on the surrounding community, and encourage enterprises to apply clean technology, conserve resources, protect the environment, etc.

Regarding auctions, what should be done, in Lawyer’s opinion, to prevent auction disruption and “tighten” control over enterprises so that they participate transparently and properly implement after winning the auction?

To prevent auction disruption and “tighten” control over enterprises participating auction transparently, properly implement after winning the auction, a comprehensive set of measures should be adopted, as follows:

First, the regulations on mineral auctions should be reviewed and improved towards tightening the conditions for participation. Enterprises must prove their financial, technical and actual experience capacity, to avoid the situation of “winning bids without the means to implement them”.

Second, the amount of deposits and performance guarantees for project implementation should be increased, as well as impose strict mechanisms on acts of auction disruption, deposit forfeiture, or failure to implement on schedule. In particular, making public the identity of violating enterprises and prohibiting them from participating in the future auctions for an extended period would serve as an effective deterrent.

Third, the competent authorities must strengthen post-auction inspections, and strictly supervise the extraction process after enterprises have won the auction. In cases of delays or violations, mining rights should be revoked and violators stricly sanctioned in accordance with the law.

Lastly, it is essential to enhance the application of information technology in publicing auction information, from the list of participants to results and implementation progress. Full transparency of the proceed will help minimize negative practices and create a healthier and more sustainable playing field for the mineral extraction market.