How much bite will HK's competition law really have?

PUBLISHED : Friday, 27 January, 2012, 12:00am
UPDATED : Friday, 27 January, 2012, 12:00am


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When the minimum wage law was going through the Legislative Council, there was confusion over its implications. Labour leaders of course lobbied for a high dollar figure, while employers of low-paid workers demanded much less. Some people expected a loss of low-paid jobs; if anything, the higher wage attracted some retired people back into the labour market.

Some industries and sectors probably paid relatively little interest to it. My own company, a modern, services-based business in which most employees are educated and skilled, did not expect to be affected by it. As it happened, we were wrong. The law's wording can in theory get any company into trouble if it does not take care about keeping records of staff working hours. So all prudently run firms had to take measures to comply with the law.

A competition bill is now being put through the legislative process, and the situation reminds me of this. People have long demanded such a law, and there is a lot of debate about it among lawyers and business lobbies.

There has been discussion about mergers, which do not happen often in modern Hong Kong. Potentially, if two big players in an industry united, we would be left with a dominant group coming close to being a monopoly. But big companies are often run by rival families who would never give up control to one another.

Perhaps the biggest fuss surrounding the proposed legislation concerns small and medium-sized enterprises. SMEs complained that the original draft of the law was too vague, and that they would incur heavy legal costs making sure they complied. There were also fears that bigger players would - in essence - get smaller ones into trouble on competition grounds as an aggressive business tactic.

I must confess that I have not followed this subject very closely. My company is focused on the general insurance industry; it is a services-based business with a large number of players of varying sizes and national backgrounds. It is so competitive that some companies lose money on underwriting in order to gain market share. I assumed a competition law would not really affect us.

But we have not heard much about what the new law says on the subject of cartels. We are often told that Hong Kong's domestic economy is heavily cartelised. Many people assume that this goes on because it is not illegal, and groups of companies able to form cartels would be crazy not to push their profits up by colluding in such anti-consumer activities. The usual suspects are the property development, supermarket and construction sectors.

The Competition Policy Advisory Group reported three complaints of this nature in retail last year. In two, retail chains allegedly pressured a supplier to ask a local retailer to raise prices of some soft drinks and electrical goods to the supplier's recommended price. In the third, a chain allegedly pressured a supplier not to sell a brand of noodles to a retailer who refused to raise prices.

If such activity is widespread, these chains - and probably other cartels in other industries - are hurting families and damaging Hong Kong's competitiveness as a business centre by raising costs. That means they are hurting the employees and the clients of companies like mine, which brings the problem even closer to home.

For an idea of what competition can do, remember what happened after telecommunications services were liberalised in the 1990s. The price of international phone calls came down a lot, and it proved a major boost in particular to some small businesses.

The competition bill does include provisions to outlaw price-fixing and similar anti-competitive actions by companies. But there seems to be little debate about it, and little discussion about whether consumers can expect more choice and lower prices when the law comes into effect. This leads me to wonder whether cartels really exist in Hong Kong at all.

Or is it that the new law will not in fact have any teeth?

Bernard Chan is a former member of the executive and legislative councils