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Claim on supermarket prices shows need for credible competition body

PUBLISHED : Wednesday, 01 January, 2014, 11:31pm
UPDATED : Wednesday, 01 January, 2014, 11:31pm
 

Competition and trade practices laws can seem remote from day-to-day life. But the Consumer Council has put Hong Kong's new competition law front and centre of the issue of the cost of living, with a claim that supermarket giants ParknShop and Wellcome are keeping prices artificially high by pressuring suppliers not to sell to smaller rivals who undercut them. In its latest study of the grocery market, the watchdog said the two chains had reached exclusive agreements with suppliers and facilitated a "recommended retail price" system. It said the new Competition Commission should investigate whether this was anti-competitive.

Both chains deny putting pressure on suppliers, with Wellcome saying it upholds free-market principles and ParknShop noting that more than 90 per cent of in-store promotions were initiated by suppliers. The two chains control nearly two-thirds of the grocery market. To be fair, two dominant chains in bigger markets than ours is not unusual. And consumers can benefit through efficiencies of supply chain management and economies of scale. However, the council cited a survey of 43 suppliers, all but two of which said they made price recommendations to retailers and 40 per cent of which said they had exclusive agreements with chains.

The council said that because it lacked investigative powers, it was unable to gather strong evidence. This highlights the importance of the new competition body, under a law that was 15 years in the making. Sadly, as a result of strong business lobbying, it has been watered down. However, the government has enhanced the credibility of the commission with the appointment as chairwoman of executive councillor Anna Wu Hung-yuk, who established a reputation for independence as equal opportunities commissioner. Fears of over-regulation are understandable in a free economy like Hong Kong's. More efforts are needed to assure businesses that legitimate trade activities will not be unreasonably curbed. Fair competition is for consumer protection and for small business to survive.

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