Competition Law

Imagine driving around town and you need to fill up your car, you try to find the gas station with lowest gas price, but all listed price are identical leaving you with no choice. Imagine looking for the best deal of a washing machine and no matter where you look, all prices are the same.

There are few possibilities, one of them is by coincidence (Who would believe that?), maybe all of those companies belong to the same owner (Again, not likely!), most likely of all, is those companies secretly set the selling prices between themselves to maximize the profits.

If you are living in the EU or USA, congratulations, you are protected by competition law! But in many countries where competition law doesn't apply, people are suffering in a daily basis.

Competition law has different names and definitions in different countries, such as antitrust law, anti-monopoly law and Fair Trading Act etc. Despite the name of such law, it is considered as a tool to stimulate economic growth in many of Asia's developing countries, such as India. Furthermore, competition law has promoted fairness in China and Indonesia as well as international integration in Vietnam.

In Hong Kong, the Competition Ordinance (Ordinance) was passed by the Legislative Council in June 2012 and is set to commence full operation on 14 December 2015. You'd be surprised that a metropolitan is so far behind in passing this important law.

The Ordinance prohibits restrictions on competition in Hong Kong through three competition rules:

(1) The First Conduct Rule prohibits anti-competitive agreements;

(2) The Second Conduct Rule prohibits abuse of market power;

(3) The Merger Rule prohibits anti-competitive mergers and acquisitions.

Mobile phone shops were the first to react, prices of some mobiles phones such as LG, Sony and HTC dropped 20% even before the law applied. A chain jewelry shop cancelled a 2% commission against the gold price, which they have been charging for 30 years.

Good news? There are two sides to every story. It could be the beginning of a price war, or it could be bad news for small shops. A lot of companies in Hong Kong have already been monopolizing for decades, they already have the bargaining power to get the best deal from their suppliers, they can just set the price really low and make minimal profits, after a certain period of time small shops will disappear and the giants once again, will dominate the market.

It is still early to judge how the law will affect the market, but for customers, having more choices can only be good news.

(Image Credits: Patrick Emerson)

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