Hong Kong's competition regulator faces challenges in supermarket sector
Hopes are high for HK's competition law but its enforcers will have much to do when probing a murky world of supermarket pricing
Ahead of next year's long-awaited competition law, food industry insiders describe a sector where prices are controlled and shenanigans commonplace as suppliers and supermarkets jostle for margin and market share in the fight over who fills your shopping basket.
The dominance of two companies in the supermarket industry - Dairy Farm International Holdings and AS Watson Group - has long concerned consumer rights advocates. Last year, the industry was the subject of a Consumer Council investigation.
Is [near identical pricing] a pure coincidence or a tacit agreement not to compete?
Several suppliers explained how in-store prices are regulated.
Larger supermarkets monitor prices at competitors and if they see a supplier's product selling cheaper elsewhere, depending on the contract terms, they can claim the difference back.
"For example, one litre of milk, if Dairy Farm sells it at HK$17 and maybe 759 [Store] sells it at HK$15, Dairy Farm has the right to charge the HK$2 per pack back to the supplier," said Ringo Wong, a director at Wilson Fine Foods, a division of Wilson International Frozen Foods (HK), the city's largest privately owned food supplier.
Supermarkets rarely enforced this provision, said two suppliers, but it gave them the upper hand during negotiations, and it put the onus on suppliers, rather than supermarkets, to control prices.