• Sun
  • Jul 13, 2014
  • Updated: 4:10am

Fizzy drink's price sparks debate

PUBLISHED : Tuesday, 06 December, 2011, 12:00am
UPDATED : Tuesday, 06 December, 2011, 12:00am

The news

The snack food chain store 759 Oshin House (759), with 40 branches throughout Hong Kong, has been in the news over its battle to sell discounted Coca-Cola to customers.

The story highlights concerns about whether Hong kong has a free and fair trade environment.

In July, Swire Coca-Cola HK, which makes, bottles and distributes Coca-Cola in the city, raised the wholesale price of a can of the soft drink from HK$2 to HK$2.2.

The chain alleged that Swire put pressure on it to raise its price for a can of Coca-Cola. It said it agreed to a gradual rise from HK$2.70 to HK$3.80, but Swire had pressed it to raise prices faster.

On October 10, Lam Wai-chun, owner of 759, chose to stop selling Coca-Cola in his stores.

He said his decision soon led to Swire halting supplies of all of its beverages.

'I would like only to benefit residents and believe in a free market. How is that wrong?' he said.

When his company started last year, it had few branches and sold cans of Coca-Cola cheaply without any problem, he said. 'As our company began to develop with more and more branches, maybe large retailer chains came to see us as a possible threat in the market.'

Hong Kong students created a Facebook group calling for a boycott of Swire Coca-Cola HK's drinks. More than 77,000 people signed up in the first three days.

Swire Coca-Cola HK said it had not received any order from 759 since October 7, but had met 759 staff to discuss future co-operation. It said it had increased the wholesale price of some products because of a rise in operational and raw material costs. It said it suggested prices to retailers only as a reference.

Chinese newspaper Apple Daily reported that another trader, Man Ging-wah, who runs a grocery shop in Cheung Sha Wan, alleged Nissin Foods, a maker of instant noodles, told him to raise his prices for a three pack of instant noodles to HK$10 or it would halt its supplies.

He said Nissin had told him ParknShop had complained about the low price of Nissin noodles in his store, Apple Daily reported.

However, both Nissin and ParknShop have denied his claims.

Issues

The government is fine-tuning the details of the competition bill which will be introduced in the Legislative Council soon. Below are two hot topics of discussion regarding the bill.

Why SMEs oppose the competition bill

It has been widely reported that representatives of SMEs have been reluctant to accept the bill because it will mean them incurring extra operational costs.

Big corporations have teams of legal advisers to help them adapt to, and comply with, new regulations, but SMEs do not have such resources.

Owners of SMEs believe they need to spend huge amounts of money to pay for legal consultation to make sure that they have not broken rules set out in the bill.

Also, if a company faces charges for alleged violation of the competition law, it will have to pay legal fees to defend itself. All of these are expenses that SMEs, with limited budgets, cannot afford.

Chan Po-ying, president of Link Watch, an organisation that campaigns against unfair competition in Hong Kong, believes owners of SMEs have overacted. 'SMEs can always turn to the Competition Commission if they have any concerns about whether their business has violated the bill. So I don't think there are any worries about extra legal consultation expenses,' she says.

Can the competition bill protect consumer rights?

One of the main purposes of the competition law is to protect consumer rights, but unfortunately these clauses will not appear in the competition bill. 'There is no clause about protecting consumers' rights in the bill; instead the government has chosen to use the phrase, 'to ensure fair competition',' Chan says.

'The government explained that by simply saying that the bill will ensure fair competition is enough because fair competition means protection of consumer rights. But I disagree; when it comes to legal terms it is better to list the terms clearly.'

Initially, the government set the penalty for violating the competition bill at 10 per cent of the global income of the company. But in its latest amendments, it changed global income to local income. Critics think it is a move that benefits big corporates. 'I don't think local SMEs have much business around the world, so I think this is a move to reduce the penalty for big corporations,' Chan says. 'In my view, the bill is concerned more for the benefits of big corporations than protecting consumers.'

Yet looking on the bright side, the Competition Committee is an upgrade of the Consumer Council. The committee has the power to investigate cases that violate the bill, which will help to nurture a fair trade environment.

Introducing the competition bill is a step forward to fair competition; like all laws, it takes time to mature and improve.

Voices

'From the consumer's perspective, the benefit of the bill is lower prices, high-quality products and a wider choice. It will be a pity if the bill is not passed.'

Thomas Cheng Kin-hon, chairman, Competition Policy Committee of the Consumer Council

'Although I am not against the introduction of a competition law, I am unconvinced that the government's proposal is able to protect consumers and successfully regulate large corporations. The business sector is worried that the new legislation will in fact cause small to medium enterprises to face the risk of complaints and thus create a negative impact in our business environment.'

Stanley Lau, vice-chairman of the Federation of Hong Kong Industries

'No legislation is perfect. In the end, different sectors must compromise. Nevertheless, the competition law will enable Hong Kong's business environment to advance. The introduction of a competition law can be seen as a social compromise. It is a move that, in the long term, will lead to a more favourable and fair business environment.'

Chief Executive Donald Tsang Yam-kuen

Time line

1996 - The Consumer Council submits a report to the government calling for the adoption of a general competition law

1997 - The Competition Policy Advisory Group is created to deal with competition issues, but has no powers to impose any action or investigation.

2005 - The Competition Policy Review Committee (CPRC) is appointed by the government to review the effectiveness of Hong Kong's existing competition policy, and issues the CPRC Report, recommending that Hong Kong adopt a cross-sector competition law.

June 2006 - The CPRC recommends that the Legislative Council introduces a cross-sector competition law that will be enforced by an independent competition commission.

November 2006 - The Economic Development and Labour Bureau issues a public discussion paper setting out 20 key questions in relation to the adoption of a competition law in Hong Kong, generating positive impact and support from the public.

May 2008 - The bureau issues a second round of consultation regarding the bill.

29 June, 2010 - Chief Executive Donald Tsang Yam-kuen orders the introduction of the competition bill into the Legislative Council.

2 July - The government publishes the competition bill, setting out rules against anti-competitive conduct.

17 February 2011 - A Competition Bill Forum is held. Representatives from the Consumer Council and the business sector meet to discuss the competition bill.

18 October - Gregory So, Secretary for Commerce and Economic Development, says the government will discuss and address the concerns of SMEs as well as propose amendments to the competition bill at the Bills Committee.

October 25 - The government removes the right of individuals to file lawsuits against anti-competitive behaviour from the competition bill.

October 27 - The government briefs lawmakers on various proposals addressing the business concerns of small to medium enterprises, determined to push Hong Kong's first competition law back on schedule.

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