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Gold traders concerned competition law could force small firms to close

PUBLISHED : Monday, 28 April, 2014, 6:05am
UPDATED : Monday, 28 April, 2014, 5:26pm

Gold retailers fear small companies will be forced out of business if the competition law bans the current system in which two trade associations set a daily price across the industry.

They argue that shoppers will be confused by price differences from store to store and that big companies with financial muscle will sweep aside small operators.

But Thomas Cheng, a member of the Consumer Council and associate law professor at the University of Hong Kong, said price recommendations could violate the competition law if widely followed.

The Competition Ordinance, passed in 2012, is intended to prevent price-fixing and other anti-competitive behaviour and to ensure consumers benefit from a competitive environment.

Currently a daily price is recommended by two trade associations - the Kowloon Pearls, Precious Stones, Jade, Gold and Silver Ornament Merchants Association and the Hong Kong Jewellers' and Goldsmiths' Association - to their 600 members. A 10 per cent profit margin is added on. To get the "raw material" gold price for a jewellery piece, traders multiply the recommended price by a ratio that varies according to gold weight and quality.

William Wong Wai-sheung, chief executive of the Lukfook jewellery chain, said: "Customers may get upset if they make a purchase and then notice the shop next door is offering a lower gold price. It will be chaotic when people don't know where they should shop."

Wong said that although the "raw material" gold price was the same across retailers, prices of individual pieces are not. "There are handicraft fees and discounts," he said.

If the uniform gold price were removed, consumers would have to compare prices among outlets, said Dennis Lau Hak-bun, the vice-chairman of the Kowloon association. "Gold prices may not necessarily get lower, as the existing profit margin is not big," he argued.

Lau said his group's members were worried that without a uniform gold price, small and medium-sized companies would be priced out by big corporations. But Cheng tried to reassure small shops by saying large retailers could not price below costs.

The two trade associations are seeking a meeting with the Competition Commission, which is drafting enforcement guidelines for the law, to obtain an exemption. But a commission spokeswoman said since the ordinance had not come into full effect, it was not in a position to handle a request for an exemption.