1. We feel that the appointment of specialist committees suggested on page 79 as a way of drawing in expertise without having to recruit full time staff to the Authority, needs careful consideration. There are a large number of specialist committees with advisory and other functions in Hong Kong, many of which do not reflect the public interest, or operate effectively at all. While some form of general oversight by a committee or board may be appropriate, we expect that by far the greatest burden of the work would fall on the executive staff of the Authority, and that proper provision should be made to recruit staff of the right calibre, or hire experts on a consulting basis.

2. We feel that the precise drafting of the Competition Law and policy will be very important if "valid" economic activity is not to be penalised. It will be important to distinguish clearly between processes and outcomes. Market dominance (outcome) may result from superior performance, not from anticompetitive practices (processes). Indeed, it is the objective of most businesses to monopolise, if not the whole market, then a segment of it, by differentiating their product as far as possible from competitors. Thus traditional economic analysis based on the assumption of homogenous products may not tell the complete story. We refer you to HKCER letter no.37, "A New Approach to Competition, Monopolies and Cartels" which sets out this argument in detail. Although we do not agree with the conclusion of this article, that no Government action is needed, we feel that the article contains a valid point which needs to be addressed in the formulation of the Competition Policy and the drafting of the law.

3. The paper does not appear to mention the interest of China-controlled firms in the monopolised sectors of the Hong Kong economy. China-controlled firms have acquired interests in a number of franchise-bearing companies, or have sought franchises in their own right. In view of the state - run monopolies that dominate the Chinese economy, this trend represents a serious threat to the Hong Kong consumer and Hong Kong's economic well-being, and should lend a special urgency to action to free up our markets.

4. The paper does not appear to discuss in depth the delineation between public and private sector. This is an important aspect of the competition issue, since presumably some kinds of public service - eg financial market regulation - should not be provided on a competitive basis but should be monopolised by the Government or its agencies. Services of a more commercial nature should be subject to competition. However, in Hong Kong, because of the perception of "natural" monopoly in several sectors, and because many Government agencies are actually engaged in substantial commercial operations, the "public" and "commercial" functions are often bundled together. Examples would be the Housing Authority and the Hospital Authority. If the delineation is not made clearly, it will be easy for opponents of the competition policy to engage in special pleading based on the "public" elements of their functions. We feel that this aspect of competition policy needs deeper study if the initiative is to be successful.

5. Finally, we believe that there are cultural features of the Hong Kong business environment that are anti-competitive in effect but are difficult to pin down with analysis that would be appropriate in Western economies. For example, deference to authority or the dominant supplier, giving of face, and respect for tradition, may have the effect of fixing prices in a particular industry even though there is no overt agreement or detectable collusion. The sheer number of overt agreements that do exist - for example, the schemes of control and the fee schedules that dominate many industries - already suggests a certain cultural predeliction to monopoly, and we feel that the impact of unspoken or implicit price-fixing agreements may be even greater. We do not have an answer to this aspect, but feel that it is worthy of deeper consideration if the initiative is not to run into undue obstacles.