Can a 50% Deposit Hike Curb Land Auction Manipulation and Profiteering?

Concerns Over Increased Deposit and Additional Penalties in Auctions

Addressing challenges in asset auctions, the Judicial Support Department (Ministry of Justice) acknowledged instances of bidders deliberately placing unusually high bids, only to forfeit their deposits later. This, along with collusion and price manipulation in land auctions across various localities, has led to profiteering.

In response, the draft Government Resolution on addressing difficulties in asset auctions stipulates that for residential land allocation or land leasing for investment projects, the minimum deposit for participating in land use rights auctions is 10%, with a maximum of 50% of the starting price.

Regarding penalties for violations by successful bidders in land allocation or leasing, the draft Resolution states: Individuals who fail to fulfill payment obligations, leading to the cancellation of auction results, will be banned from participating in auctions for 6 months to 5 years. They are also responsible for covering all auction-related expenses, including organizational costs and service fees, as notified by the competent authority…

During the meeting on the draft Resolution, Deputy Minister of Justice Nguyen Thanh Tu suggested reconsidering the proposed ban on auction participation for 6 months to 5 years. According to Article 70 of the Asset Auction Law, such bans currently apply only to cases involving investment projects and mineral exploitation. Increasing the deposit to 50% is already a strong deterrent. Bidders would hesitate to forfeit such a substantial amount, making additional penalties unnecessary.

Regarding fees and deposits, Deputy Minister Nguyen Thanh Tu emphasized that with a high deposit and forfeiture risk, additional fees would be redundant and complicate matters. He supported raising the minimum deposit from 20% to 50% as a reasonable and effective deterrent.

Meanwhile, Deputy Minister of Justice Phan Chi Hieu expressed concerns about raising the maximum deposit to 50%. He argued that localities might set the deposit at the maximum level, deterring participation or limiting it to large enterprises specializing in reselling auctioned properties, potentially increasing profiteering.

Hieu attributed the root cause of deposit forfeiture to starting prices being significantly lower than market values. He suggested focusing on setting starting prices closer to market rates, making even a 20% deposit a substantial amount that bidders would not risk losing. He also recommended flexible deposit regulations, allowing asset owners to determine specific deposit amounts and exploring additional sanctions under civil law.

Maximum 50% Deposit: Filtering Out Opportunists, Not Investors

In an interview with Tien Phong, lawyer Tran Xuan Tien (Head of Dong Doi Law Firm) argued that relying solely on high deposits for deterrence is insufficient.

“There are financially capable individuals willing to forfeit deposits if their primary goal is market disruption or preventing competitors from participating,” stated lawyer Tien.

He noted that intentional deposit forfeiture not only harms the state but also undermines trust in the fairness of auction mechanisms.

Therefore, lawyer Tien emphasized the need for temporary auction participation bans as supplementary measures to exclude dishonest behavior from public and private asset auctions.

While current laws do not explicitly ban participation in residential land auctions, lawyer Tien believes the Government’s Resolution can address this gap. Flexible legal provisions are essential for timely guidance and addressing existing loopholes.

Lawyer Le Hong Hien (Le Hong Hien & Associates Law Firm – Hanoi Bar Association) added that low deposits enable ill-intentioned individuals to easily place bids and later forfeit, disrupting the market. This issue is not about favoring small or large investors but about filtering out those seeking unfair advantages. A reasonable deposit protects genuine investors, including small and medium enterprises, as they participate with legitimate investment intentions rather than price manipulation or place-holding.

He stressed that the fundamental solution is setting starting prices close to market values. With realistic starting prices, even a 20% deposit is a strong deterrent, preventing fictitious bidding and deposit forfeiture.

Both lawyers agreed that administrative or criminal penalties for auction manipulation, collusion, and price suppression need clearer specifications.

Land auctions are crucial for allocating national land resources and public assets through market mechanisms. To ensure transparency and fairness, legal frameworks must be robust enough to deter profiteering and manipulation while attracting capable investors.

“Increasing the maximum deposit to 50%, along with flexible mechanisms, temporary participation bans, and strict penalties for violations, are essential steps in the current context. Minor inconveniences should not delay tightening regulations in public asset auctions. These measures will enhance transparency, fairness, and attract genuinely capable investors to the land auction market,” emphasized lawyer Le Hong Hien.