Competition law must put consumers first

PUBLISHED : Friday, 21 October, 2011, 12:00am
UPDATED : Friday, 21 October, 2011, 12:00am


While the effects of Hong Kong's proposed competition law on small and medium-sized enterprises (SMEs) appear to weigh heavily on legislators' minds, it's essential that the interests of consumers will also be prominent in the debate.

SMEs are undeniably important to Hong Kong's economy and way of life. But they are not the only stakeholders affected by competition law. Competitive goods and services markets provide innovation, high product quality, low prices and broad consumer choice.

Yet, so far, consumers' interests seem to have been commanding less attention in debates than small businesses' interests. The minutes of the first 17 meetings of the bills committee considering the Competition Bill indicate that small businesses or family businesses have been mentioned more than twice as often as consumers and households.

SMEs normally are a vital source of competition, but in some circumstances they behave anti-competitively. Some firms will have to change some practices, for which they should be able to count on the assistance of the new Competition Commission that will be tasked with promoting public understanding of the new law.

Additional measures to protect the interests of SMEs might yet be proposed by the government.

In Australia, for example, a mechanism introduced in 2007 allows small businesses to gain immunity from cartel liability for certain 'collective bargaining' arrangements, by voluntarily providing notification of the arrangement to the commission.

The procedure is intended to enable small businesses lacking bargaining power to band together to negotiate more effectively with the big businesses that are their suppliers or customers. A variation of such a procedure (since the Australian arrangement has room for improvement) could have value for Hong Kong.

But while SMEs' interests must be fully articulated and properly taken into account, the interests of Hong Kong consumers are also crucial to formulating a competition law that will serve the community effectively.

It is encouraging that the chief executive's recent policy address referred to the competition bill as being put forward 'to protect consumer interests and maintain our competitive edge'.

The risk attending over-broad exemptions from the law is that competition is prone to be reduced and consumer welfare suffers accordingly: SMEs' gain may be at consumers' expense.

Any measure to accommodate the interests of SMEs (or any group) should be examined carefully in light of its likely effect on the public interest generally and tailored to maximise its economic benefit to the public.

Andrew Simpson is assistant professor of law at Polytechnic University