Unfair competition

PUBLISHED : Monday, 03 March, 2008, 12:00am
UPDATED : Monday, 03 March, 2008, 12:00am

Hong Kong has long enjoyed the reputation of a shopping paradise. A free market has always been cherished as one of its hallmarks, and a level playing field is something treasured by business, professionals and society at large. Yet, from time to time, there have been complaints of anti-competitive practices by big business. Complaints received by the Consumer Council have more than doubled, from 16,470 in 1999, to 38,521 last year; of these, 16 per cent were about unfair and dishonest trade practices.

The city also lags behind other developed or even developing economies in terms of legislation and regulations on fair competition and fair trading.

Since the 1990s, the Consumer Council has been advocating the enactment of a fair competition law. External bodies like the International Monetary Fund have also advised similarly. In the past, the government has refused to consider such legislation on the grounds that it would be counter to its non-interventionist economic policy.

Such a rigid policy mindset only began to change more recently. After public consultation, Chief Executive Donald Tsang Yam-kuen has decided to introduce a comprehensive cross-sector competition law.

Although most would have expected such a law to be welcomed by small traders who might face predatory pressures from big firms, surprisingly there seems to be scepticism on the part of some small and medium enterprises. They worry that the law might instead invite more complaints and impose a greater legal burden on them. Some critics, on the other hand, fault the proposed fair competition law for not going far enough to adopt an anti-trust regime, like in the US.

One has to distinguish between anti-competitive mergers and acquisitions on the one hand, and anti-competitive practices in business operations in general. Following the United Nations Commission on Trade and Development, the test of anti-competitive market conduct is whether it hinders, impedes or substantially lessens the competitive processes in a market. The government should explain the exact purpose and scope of the proposed competition law more clearly, to avoid any misunderstanding and secure its passage without further delay.

Unfair trade practices exist in several forms: false and misleading descriptions of goods and services; insufficient information; misleading advertisements with dubious and exaggerated claims; aggressive or high-pressure tactics bordering on harassment by sales people; bait-and-switch tactics; accepting payment without ability or intention to supply; and, unfair terms in standard contracts such as unilateral variation clauses.

The existing legislative and regulatory framework is piecemeal and unco-ordinated, leaving gaps for unscrupulous practices to slip through the net. Like competition law, many other jurisdictions already have comprehensive trade practices or consumer protection statutes. These include the European Union, Britain, United States, Australia, New Zealand, India, Malaysia and Singapore.

Hong Kong lacks such laws. The Trade Descriptions Ordinance is limited to trade practices within the scope of 'trade descriptions', and does not extend to services.

The Telecommunications Authority regulates that sector under the Telecommunications Ordinance, but its section 7M, though targeting misleading or deceptive conduct, may not effectively cover some practices harming consumer interests, such as sales tactics involving harassment and even intimidation.

No such provision exists in the Broadcasting Ordinance, even though the number of complaints against unfair trade practices of pay-TV operators soared last year.

It is time Hong Kong caught up with its rivals and introduced a comprehensive trade practices law. Last week, the Consumer Council published a report, 'Fairness in the Marketplace for Consumers and Business', recommending new laws and regulations that would tighten consumer protection against unfair, misleading and deceptive marketplace conduct across all sectors, and covering all manner of consumer goods and services, including residential property and contractual rights and obligations.

The report recommends a range of remedies, starting with mainly administrative-cum-civil sanctions but rising in severity through mediation, written court-enforceable undertakings from traders, and cease-and-comply notices issued by the enforcement agency and backed by civil penalties.

Although the proposed framework aims to regulate business-to-consumer transactions, its impact will, at the same time, ensure fair competition among honest and responsible traders in the marketplace.

Anthony Cheung Bing-leung is an executive councillor and founder of SynergyNet, a policy think-tank. He is also chairman of the Hong Kong Consumer Council