More guidance on competition bill

PUBLISHED : Tuesday, 21 June, 2011, 12:00am
UPDATED : Tuesday, 21 June, 2011, 12:00am


If two restaurants across the street from each other both charged HK$2 extra for iced tea, would that breach the upcoming competition law?

This scenario has been used by lobby groups and opponents of the bill as an example of the draft law's 'vagueness'.

In a government paper released to the legislature yesterday, officials tried to address the issue.

Their answer: it depends.

If a businessman raises the prices of ice tea continually by significant amounts while still maintaining profits, a market monopoly and therefore abuse may exist. This is because customers cannot find substitutes and ice tea amounts to the only 'market'. This may prompt an investigation of an anti-competitive practice.

However, if the hypothetical businessman can no longer maintain profits by raising prices, but customers start switching to alternative drinks, there is no abuse.

The 12-page document focuses on the definition of the market and is the second set of non-binding guidelines issued by the government in an attempt to deal with concerns and queries from lawmakers sceptical of the bill, which is designed to provide a level playing field for companies.

Unlike the 12 examples of possible anti-competitive practices in the 'Guidelines on the First Conduct Rule', which was criticised for trying to stifle common business practices, this guidance on defining the market was found by academics and some lawmakers to be 'standard' and 'in line with international norms'.

Economist and public policy analyst Lam Pun-lee said the method of defining the market boundary in the guidelines was widely used in the United States and seen in secondary school textbooks.

Civic Party lawmaker Ronny Tong Ka-wah, a keen supporter of the bill, said the clear guidelines would help resolve some disputes over the bill.

'This can serve as an educational tool on what amounts to a contravention of the future law,' Tong said.

'But it is important to note that these guidelines serve only as a reference, as finally it is the court that decides where to draw the line.'