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6. Competition Policy and Competitiveness
- Hong Kong University Press, HKU
- Chapter
- Additional Information
6 Competition Policy and Competitiveness Government stance on competition policy Even the most ardent advocates of laissezjaire would accept that appropriate laws and regulations need to be in force governing various aspects of business or personal life. Most countries recognise, in this context, the need to control or eliminate monopolies and cartels that may operate against the public interest. In Hong Kong, the government's philosophy of non-interference, coupled to its often close ties with leading business personalities, has made it reluctant to introduce wide-ranging pro-competition legislation, although it has constantly avowed itself to be firmly in favour of fair competition and - as evidenced, for example, by its action in 1998 in the stock market, described in the preceding chapter - opposed to any forms of market manipulation. The government's overall approach to the issue of competition has come under increasing challenge. In May 1998 the government, through the Competition Policy Advisory Group (COMPAG), which is a forum under the financial secretary's chairnunship with the remit to review policy issues related to competition, issued a statement ofits stance on competition policy. 41 It declared that it was committed to competition, not as an end in itself but as a means to "enhance economic efficiency and free flow of trade, thereby also benefiting consumer welfare", and that it considered competition to best be nurtured and sustained by allowing the free play of market forces and keeping intervention to the minimum. Thus, We will not interfere with market forces simply on the basis of the number of operators, scale of operations, or nonnal commercial constraints faced by 92 Economic Policies and Their Application new entrants. We will take action only when market imperfections or distortions limit market accessibility or market contestability, and impair economic efficiency or free trade, to the detriment of the overall interest of Hong Kong .... The determination of whether a practice is restrictive, detrimental to economic efficiency or free trade, and against the overall interest ofHong Kong must be made in the light ofthe actual situation. The intended purpose and effects of the practice in question, and the relevant market or economic conditions, etc., must all be taken into account. The statement also listed various examples of restrictive practices which should be "attended" to; these included: price-fixing, bid-rigging, market allocation, sales and production quotas, joint boycotts, and unfair or discriminatory standards. It also included an illustrative list of abuses ofmarket position, e.g. predatory behaviour such as selling below cost; setting retail price minimums for products or services where there are no ready substitutes; and conditioning the supply of specific products or services to the purchase of other specific products or services. The government was of the opinion, at that time, that there was no international standard or consensus on what is the best approach to achieve competition.... For Hong Kong, a small and externally-oriented economy which is already highly competitive, the Government sees no need to enact an all-embracing competition law. The government said that it would nevertheless be active in promoting competition and watchful for obstacles and instances of uncompetitive behaviour. It favoured a sectoral approach to tackling any problems. Attention was drawn to the Consumer Council's work in drawing up codes of practice that promote competition. Also, under the auspices of COMPAG, the authorities have adopted a number of initiatives to enhance competition, and have taken follow-up actions on many competition-related complaints. 42 Pressure for change There have been longstanding critics of the government's reluctance to take more forthright action to promote competition. A flavour of such criticism can be found in the accompanying extracts from a speech given by one respected commentator in 2002 (see Box 6.1). Much of what is said there [52.87.200.112] Project MUSE (2024-03-29 05:34 GMT) Competition Policy and Competitiveness 93 still holds true today. 94 Economic Policies and Their Application [52.87.200.112] Project MUSE (2024-03-29 05:34 GMT) Competition Policy and Competitiveness 95 For its part, the Consumer Council has felt that not enough can be achieved through mere codes of good practice. As long ago as 1996, it recorrul1ended the enactment of a competition law, to cover horizontal and vertical collusive agreements and abuse ofa dominant position.43 Meanwhile, over the years, critics of the official stance have noted that there appears to be a lack of consistency and clarity in policy, with, for example, the telecommunications...