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ParknShop

ParknShop is a supermarket chain that is part of Hutchison Whampoa, which is controlled by the Cheung Kong Group, and headed by Li Ka-shing, Asia’s wealthiest man, who has been nicknamed “Superman” because of his investment prowess. Its operations include ports, with property and hotels, retailing telecommunications (Hutchison Telecommunications International) and infrastructure (Cheung Kong Infrastructure).

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Grocery giants ParknShop, Wellcome accused of pressuring suppliers

Council says behaviour of Wellcome, ParknShop should be investigated as being anti-competitive

PUBLISHED : Friday, 20 December, 2013, 4:29am
UPDATED : Friday, 20 December, 2013, 4:29am
 

Supermarket giants ParknShop and Wellcome are keeping prices artificially high by pressuring suppliers not to sell to rivals who undercut them, the Consumer Council says.

The council says the new Competition Commission should investigate whether their behaviour is anti-competitive.

The watchdog yesterday released its latest study of the grocery market. It claimed the two chains had reached exclusive agreements with suppliers and facilitated a "recommended retail price" system for products.

Both activities can be illegal in the European Union, the jurisdiction Hong Kong used as a point of reference for the competition law passed last year which is yet to be put in operation.

ParknShop has 28.6 per cent of the grocery market while Wellcome takes 33.9 per cent.

"If supermarkets secure exclusive deals with a majority of suppliers for a vital product such as rice, consumers must go to the chains to shop," council member Thomas Cheng Kin-hon said.

Meanwhile, suppliers could find themselves under pressure if supermarkets found that smaller stores were selling their goods cheaper, the watchdog said.

Federation of Restaurants and Related Trades president Simon Wong Ka-wo said supermarkets sought a bigger profit margin than small stores.

"There are other shops which do not demand as much profit and … sell products more cheaply. But the supermarkets will complain," he said.

Suppliers are subject to harsh conditions, he added: ParknShop, with more than 260 stores, charges up to HK$300,000 to put a new product on shelves.

The council cited a survey of 43 suppliers, all but two of which said they made recommendations on price to retailers.

Some 37 per cent said bigger clients complained about competitors selling products at lower prices and sometimes asked suppliers to intervene. Another 40 per cent said they had exclusive agreements with chain stores. Some clients would raise questions or require prior consent for them to deal with other retailers.

Both supermarkets deny putting pressure on suppliers.

Wellcome said it "continues to uphold and respect free market principles". ParknShop said more than 90 per cent of in-store promotions were initiated by suppliers.

The council said that, given it lacked investigative powers, it "could gather no strong evidence that … supermarket chains have misused their market power".

A spokesman for the Competition Commission said it would begin to deal with individual cases when the Competition Ordinance that was passed last year aimed at distortion by companies with "substantial market power" comes into full effect.

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This article is now closed to comments

captam
In USA the guys that run these chains would be had for "racketeering". Only bankers can get away with this type of behaviour there.
If only the world had level playing fields!
gkuhl
>> "Both supermarkets deny putting pressure on suppliers. Wellcome said it "continues to uphold and respect free market principles". <<
It may be a good idea to restrict the free market principles, if they are used against the interest of the Hong Kong community.
dynamco
I bought some Danish Brie in a South African supermarket. After import from Denmark to SA, distributed hundreds of kms around the country, a sales tax of 14% added, the retail was Rand 24 (HK$20). On return to HK I contacted the mfr, Casino, in Denmark telling them the product could not be found here. Lo + behold they followed up + 3 months later the Casino range appeared in Park 'n Shop. Since the shipping cost is effectively the same + distribution distance far less + no sales tax here I was astounded to see the product on sale here at HK$42. (why are PnS allowed to advertise their cheeses in pounds instead of grams ?)
Likewise with the SA wines costing double here what they are sold for in SA, incl sales tax + distribution (imported by AS Watson, marked up to PnS then marked up + sold to HK mugs).
I spoke to the head buyer at PnS about the Casino Brie discrepancy - the reply provided was 'RENT'
The real answer of course is GREED
johnyuan
To dyn....
.
It is the same guy who pockets whatever profits from renting the space to ParknShop and selling the groceries. We can’t blame high rent alone really. LKS has two birds in one hand that a conglomerate in Hong Kong can apply its so call business acumen and pragmatism to work in disfavor to consumers. This is more than duopoly of just having two giant supermarkets.
.
Our conglomerates in Hong Kong most likely are in the position to skin the customers many times in a single transaction. The single ownership of multiple mercantile also applies in our functional constituency representatives. How many of these different sectors actually have to report back to the one single boss.
.
All of these realities are no secret and they persist since the colonial days in Hong Kong because of collusion with government in stonewalling the public from setting laws for a real free market in Hong Kong. Yes, LKS is obligated to buy land from Government. But there goes another way to make a fortune instead just dosing our cash to government.
.
I like to remind everyone in our grocery shopping at ParknShop, we are paying extra twice – rent and grocery all to the same guy.
Byebye
As a consumer living with a budget, I would like my tea (coffee too), rice, oil, and the basic of my essential items of food at fair prices. The two dominant supermarkets both belong or have affiliation with two "giants" / multinational conglomeration here in Hong Kong. It would be blind not to see cartel of some sort is at play. Time for government to take some interest in the ordinary citizen's daily life, not to be controlled or manipulated by cartels.
lucifer
Ummmm.....Wasn't this well know when the two supermarkets colludes to drive Carrefour out of Hong Kong?
pragmatist
ok - great ....but you know something should be done. it is quite disappointing to see how we have become a society that can accurately list the problems without ever explaining what measures are being tried.
btw, it is the same situation in universities where management can quite mechanically list the problems without necessarily explaining if they have tried something to solve the problems. Dangerous mindset !!
rpasea
This has been common knowledge in HK for as long as I can recall and the Consumer Council is just catching on? Grocery stores like so much in this city are controlled by a price fixing cartel making it impossible for any competition to develop. I was really hoping LKS would sell PnS to someone like Walmart so we can get realistic prices but WM probably realized that local suppliers would be told not to supply them.
pragmatist
This is shocking really - no wonder people feel the squeeze.
Btw, it is the same things for baby toys in HK. they cost about 2x the price of the US and many other countries in Asia (including Singapore). There must be something wrong with this (cartels, price fixing??) given that most of the production is in China....very close to HK.
Investigation please?
johnyuan
To pragmatist:
.
No shocking news to locals. It is just old news. SCMP back in the 90s had a report of the same. Carrefour was run out of town twice because it shared suppliers with the local two which were warned and stopped supplying. The second time after few years, it couldn't find a place to open because no landlords were willing to rent space to Carrefour. Hong Kong just continues eating expansive rice.
.
This repeated coverage of offensive practice seems itself is a way as if problem is resolved. So let us wait for more news of the same a decade from now. Without some tremendous primitive power in shutting out public awareness the shocking news just can’t be a recurrance. That power must be examined. At the mean time it remains being clever but immense dishonest to make oneself a billionaire or multi-billionaire this way.

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