Economy of Hong Kong

It's still a super market for brazen Big Two

PUBLISHED : Monday, 20 April, 2009, 12:00am
UPDATED : Monday, 20 April, 2009, 12:00am

We are being ripped off by our local supermarket duopoly again, or so we were told - again - by the Consumer Council last week. Most recently, according to the watchdog, the Big Two have been messing with our heads - by raising the prices of groceries, say on Friday, then offering 'discounts' at the weekend that actually turn out to be more expensive than before the prices were raised.

Ironically, the slogan of one supermarket ad campaign is 'a dollar does matter', which is meant to be the equivalent of 'a penny saved is a penny earned'. Every mark-up certainly does wonders for their bottom lines!

When French supermarket giant Carrefour arrived in Hong Kong in the mid-1990s, it cut prices aggressively, upsetting the two main operators - Li Ka-shing-owned ParknShop and Jardines-owned Wellcome - and, most likely, some hush-hush system of resale price maintenance (RPM). This is designed to protect profit margins, after suppliers and resellers agree on minimum prices at which the products are sold. Suppliers stopped supplying Carrefour.

The company complained to the council, but the delivery trucks only returned after the French interloper vowed not to undercut the Big Two by more than 10 per cent.

Carrefour left Hong Kong in 2000, but not before giving the council the names of 22 companies it claimed had pressured them not to undercut prices. But no competition law was in place to outlaw practices like RPM in Hong Kong. Since then, the two supermarket giants have opened up specialty high-end chains: Great, Taste, Gourmet, Market Place, Oliver's, and ThreeSixty. None are 'competitors' in the real sense - the first three are stablemates of ParknShop; the other three belong alongside Wellcome to Jardines' Dairy Farm group.

Even amid the devastating economic fallout of the severe acute respiratory syndrome outbreak, when deflation was running at 3.1 per cent, the Consumer Council's August 2003 report revealed that supermarket prices had risen by 1.5 per cent compared with 2002. Again, to no one's surprise, the Big Two dismissed the findings.

At the same time, the council received complaints from suppliers that the supermarkets were setting prices in tandem, prompting it to make a formal call to outlaw anti-competitive practices, including price collusion and cartels.

The Economic Development and Labour Bureau, then headed by Stephen Ip Shui-kwan, saw no evidence of any anti-competitive behaviour by the Big Two, and instead issued voluntary guidelines.

The Consumer Council, one of our most popular statutory bodies, has done its job well. But without a competition law, or legal powers to investigate allegations of unfair competition, the best it can do is run price surveys, publish public reports and hold press conferences.

The government needs to hold its end of the bargain and 'redress the balance in favour of the consumer' - by getting the necessary laws enacted.

Alice Wu is a political consultant and a former associate director of the Asia Pacific Media Network at UCLA