The tide begins to turn in favour of the consumer

Andy Ho

THE Legislative Council will hold a motion debate next Wednesday on how to stop cartels dominating certain industries in the territory.

The Governor, Mr Chris Patten, raised the issue of fair trade and business competition in his policy address last October but it has been eclipsed by the controversy over the political reform package.

Wednesday's debate has been proposed by Meeting Point's Mr Li Wah-ming, whose motion reads: ''This Council urges the Government to formulate a fair trade policy promptly to rectify the phenomenon of market dominance, institute the appropriate legislation and establish a Fair Trade Commission for the implementation of the policy, so as to safeguard fair competition and protect the consumers.'' In his maiden address to Legco, Mr Patten observed that Hongkong ''has become unwilling to accept unfair and discriminatory business practices''.

''The public,'' he asserted, ''has already begun to voice alarm at the use of market power by suppliers in areas of special importance.'' A Governor's Business Council was subsequently appointed to devise, among other tasks, a comprehensive competition policy. But the public remains sceptical of the panel as its 18 appointees are mostly connected with existing cartels and monopolies.

The council has yet to impress residents that it is committed to maintaining a free market mechanism in Hongkong.

The only official step in this direction is the allocation of $800,000 to the Consumer Council to look into five areas of particular concern - supermarket chains, financial services, fuel supply, telecommunications and broadcasting.

Policy branches are also said to have requested relevant information from other countries with a fair trade ordinance or anti-trust provisions. Britain, the United States, Japan and Taiwan already have such legislation.

The Economic Services Branch is said to favour the British model which seeks to enshrine consumer rights while refraining from undue restrictions on the business sector.

The US Government encourages free competition in all areas and a system of regulating agencies has been established for various industries.

But Hongkong officials are worried that there would be a surge in anti-trust litigation if the American legislative approach were adopted here.

The Hongkong administration does not feel it advisable to get too involved in devising detailed regulations for each of the main industries. Officials are also concerned about the potentially high legal costs stemming from enforcing such regulations.

In Britain, a special commission has been established to look into business proposals, such as corporate mergers, and make recommendations to the relevant bodies.

An inquiry into the proposed acquisition by Tate and Lyle of British Sugar was mounted in September 1990. The two companies together account for more than 90 per cent of sugar consumption in the UK. Three months later, the commission concluded that a merger between the two corporations might operate against the public interest and recommended that it should not be permitted to proceed.

In another case, Bluebird Securities was acquired by Caldaire Holdings. Following the merger, Caldaire's market share, in terms of registered bus miles, in the counties of Durham and Cleveland increased from about 38 per cent to 49 per cent.

Competition was largely removed on several routes serving the Trimdon area of southeast Durham. The commission again found that this might be expected to operate against the public interest. Measures to encourage competition were laid down to limit any increase in Caldaire's increase in fares or reduction in its services for a two-year period.

Mr Li is looking forward to a similar regulating mechanism to be set up in Hongkong.

The issue was identified by the Consumer Council last September. It notes in an internal paper that: ''The Council considers that the monopolistic tendencies and restrictive practices in the Hongkong market will have a harmful effect on the consumer. Members strongly advocate the enactment of a Fair Trading Ordinance in Hongkong.'' Within the legislature, fair trade previously fell within the domain of Professor Edward Chen, an economist who chairs the Consumer Council. Since he was elevated to the Executive Council last year, Mr Li Wah-ming has tried to fill the gap. The issue offers a convenient battleground for politicians who can project themselves as defenders of the public interest by taking on big business.

Those opposed to a fair trading policy will find themselves at odds with public opinion. Since direct elections to the Legislative Council were introduced in 1991, politicians have long recognised that bread-and-butter issues can often be exploited to score political points.

Another Meeting Point leader, Dr Leong Che-hung, has proposed a debate on insurance industry practices. But Legco has yet to find time to discuss this.

Despite the pledge by the Governor, the Government is not expected to make a commitment to enact a Fair Trading Ordinance during Wednesday's debate. Officials are more likely to wait until the Consumer Council study is completed.

Consumer protection, however, should occupy a conspicuous place on the public agenda for the foreseeable future as it may take years for the bureaucracy to translate the policy objective into legislation.

There is also the question of how the vast business interests will act to block or minimise possible restrictions on their activities. The Legco debate, however, will be a significant step in the right direction. After all, it took the Taiwanese a decade to deliberate over a proposed Fair Trading Act before it was finally implemented a year ago.