The Consumer Council has reaffirmed its position on the need for a cross-sector competition law in Hong Kong.
The Council commends the Government's decision to consult the public on this issue crucial to economic and consumer well-being. The three-month consultation period ended yesterday (February 5).
In its submission, the Council supports the enactment of a cross-sector competition law against that of a piecemeal sector-specific approach which it considers inconsistent with the objective of sound competition policy.
The submission addresses some of the general misconceptions about a cross-sector competition law while sets out its responses in such key areas as the need, the scope, the regulatory framework, and the enforcement of the proposed competition law.
First and foremost, the Council is convinced that a cross-sector competition law will not jeopardize Hong Kong's favourable business environment, but will add to its competitiveness as evidenced in the rapidly growing number of market economies around the world enacting competition law in recent years.
The United States which has the highest ranking in competitiveness according to the 2006 Heritage Foundation Country Competitiveness Rankings, is one of the earliest economies to have a cross-sector law.
The Council is concerned that in the absence of a cross-sector competition law, collusive arrangements, for instance, to set prices or share markets among competitors are not illegal and are permissible in all markets except the telecommunications and broadcasting sectors. This is clearly a situation that needs to be remedied.
Further, the Council can see no strong grounds for targeting only certain individual sectors or industries for regulation.
Second, the Council considers that the scope of the legislation should focus on only market conduct designed with the "purpose and effect" to substantially lessen the competition of the market.
Though the proposed law will not cover merger or acquisition, the Council believes it prudent for the Government to have in place a legislative 'reserve power' for oversight where a merger or acquisition might arise and have a detrimental effect on public interest.
In addition, the proposed law should allow for exempting parties from the application of the law where it can be demonstrated that the conduct delivers an overall benefit to the public that outweighs the detriment to competition.
This should provide a degree of comfort to some small and medium enterprises (SMEs) that have voiced concerns over their need to join with other SMEs to increase their competitiveness in the marketplace.
Third, in line with other similar advanced economies on the regulatory framework, the proposed Hong Kong competition authority should be independent of government and comprised of a full-time Chairman, and investigative staff, assisted by members of the community, with relevant experience, serving on the board.
The authority should possess the power to adjudicate and impose sanctions, rather than taking a matter through the courts, over allegations of anti-competitive conduct.
Fourth, on enforcement, the Council believes that there is no cause for concerns for SMEs that the new competition law would put them under constant threat of big businesses bringing actions against them.
This is because of the Government's proposal that only the regulatory authority should have the enforcement power to conduct formal investigations and to bring actions, to help minimize trivial, frivolous or malicious complaints.
The regulator, therefore, will have no cause for action since SMEs by definition do not have the market power to abuse, and competition laws are structured around the prevention of abuse of dominant position.
In all the 28 cases of alleged anti-competitive conduct investigated by the Telecommunications Authority since 1999, none involved SMEs.
Despite the concerns of some SMEs, there is ample support from many SMEs who have come to recognize the benefits of a cross-sector competition law, as manifested in their contact with the Consumer Council. But for various reasons, some SMEs were reluctant to publicly voice their support to such legislation.
Crucial to its effectiveness, the competition authority should have the power to obtain documents, examine witnesses under oath, and require the production of relevant information to assist in the proper examination of alleged anti-competitive conduct.
The Council also supports the use of a leniency programme as a means of encouraging cartel participants to disclose the existence and activities of cartel, and, in return, receive immunity from prosecution.
Furthermore, any breach of the competition provision of the new law should only be considered as civil infringements - as the competition authority is not constituted to convict persons of a criminal offence which should be left to the court system.
As a basic rule, the Council considers that monetary penalties should be commensurate with the economic benefits that have accrued from the breach, and at a level that acts as a deterrent.
The Council also stresses the importance of continuing competition policy oversight, to implement a continual process of review in Government policy formulation and in reviewing current policies (for example, opening up the energy sector in Hong Kong to competition).
The full text of the Consumer Council submission on the Government discussion document "Promoting Competition - Maintaining our Economic Drive" is available on the Council website at www.consumer.org.hk.