policy papers

HONG KONG DEMOCRATIC FOUNDATION

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HKDF

Consultation Paper on Detailed Proposals for a Competition Law

15 July 2008

Commerce, Industry and Tourism Branch (Division 2)
Commerce and Economic Development Bureau
Level 29, One Pacific Place
88 Queensway
Hong Kong

Dear Sir/Madam,

Consultation Paper on Detailed Proposals for a Competition Law

We are writing to submit our comments on the above Consultation Paper.

Overall, we welcome the paper as setting out proposals for a generally balanced and comprehensive competition law. Such a law is long overdue in Hong Kong; almost all developed and many developing economies have one. The Foundation has advocated action on competition policy for many years. We wrote our first paper on Competition Policy in 1994, made our first submission to the Government on the subject in 1997, and released a joint policy paper with the Frontier on Competition in 2003. We attach a link to our most recent paper for your reference (http://www.hkdf.org/download/comppol8.pdf). We hope that the proposals in the Consultation Paper will be put into effect, and Hong Kong can finally catch up.

We will restrict our remarks in this submission to remaining points of concern. These are as follows.

Lack of merger control regime. We note that the Government has recognised the need to consider this area but has not yet made up its mind. However, mergers may often restrict competition and as such are a major focus of competition legislation overseas. We urge the Government to revisit this area with the aim of installing a strong merger control regime as soon as possible.
Exemption for undertakings operating 'services of general economic interest'. This is a disturbingly vague concept in the paper, and we are seriously concerned that it could be used to exempt large swathes of the economy from the reach of the proposed Competition Law. We urge the adoption of a deliberately narrow approach in granting exemptions and much more transparent and objective criteria for determining whether exemptions are justified. If this provision is to be retained, at a minimum the criteria for exemption must be published and subject to public debate.
Exemption of all Government activities. Such blanket exemption is unacceptable. As in respect of point 2 above, any of its operations which the Government feels need exemption should be specifically identified and the justification given. Again, the criteria and the justifications should be published and subject to public debate.
Industries with anti-competitive structures not addressed. UK law, for example, provides powers for the competition authority to investigate industries where the structure itself has anti-competitive effects and if so to require the business entities concerned to divest themselves of part of their business. Whether Hong Kong's Competition Law needs such a provision needs to be discussed.
Vertical arrangements not the focus. We note that the proposed Competition Law will focus on horizontal agreements. However, we are concerned that in the Hong Kong context vertical arrangements can have the effect of excluding competitors. For example, it is common for property developers in Hong Kong to own property management companies and retailers, and to install both in favoured locations in the estates and retail malls that they develop. This has the result of reducing consumer choice and residents' welfare. We would encourage the Government to review this area.