Fair Competition Bill-Proponents and Opponents

There is a clear-cut oligopolies in  two chain super shops in Hong Kong,  one is Wellcome and the other is ParknShop. They were suspected to have price discrimination and collusion for some of their products recently. They were accused of jointly fixing prices at a higher level to eliminate price discrimination. By way of mutual agreement, both of them can capture more market share and profit and reduce the loss through competition.

Actually this price collusion breaches the principle of fair competition in the open market because with an agreed price, no competition is needed, so vendors have no intention to lower the price to attract customers. And customers will be forced to accept a higher price no matter which supermarket they choose. Therefore, some believe that  there is an eventual need for the fair competition bill in order to stop these kinds of unethical practices to protect consumer’s rights and interests.

What is a fair competition bill?

Competition bill will work as a safeguard to the consumers which will preserve their interest in purchasing at a legitimate price. Fair Competition bill aims to protect a fair trade environment by removing any entry barriers; avoiding any price fixing behavior or concerted decisions by companies; regulating the abuse of substantial market power to distort fair competition.

Should we propose competition bill?

Economists believe that the market will adjust to equilibrium automatically, in which traders will compete in an efficient way, so Hong Kong government adopts the positive non-intervention policy to help establish the freest economy in the world.

However, efficient market is just an ideal situation; in reality, without perfect information, the market will easily give rise to some unfair competition situations, like monopoly pricing, or the use of dominate power to eliminate small vendors. From the perspective of law, upholding fairness and protecting people’s freedom of competition are always the most important things, so I believe that even introducing the competition bill will increase the scope of government intervention, but it is still our top priority to protect small traders’ interests and rights.

What should be included in the legislation?

Firstly, restrictions should be made to prohibit any private agreement secretly done by those companies, like price fixing practice, big-rigging behavior. This remains chances for customers to enjoy price differentiation.

Secondly, regulation is needed on the use of dominant market power to set a high fixed price or practice exclusive trading strategy. This allows small vendors with small bargaining power can maintain a chance to survive in the market.

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