Speeches and Presentations

SCED's speech at Asian Competition Forum Conference

Following is a speech by the Secretary for Commerce and Economic Development, Mr Gregory So, at the Asian Competition Forum Conference today (December 5):

Mark (Williams), Professor (Frederic) Jenny, distinguished speakers, ladies and gentlemen,

It gives me great pleasure to join you today at the opening of the 7th Asian Competition Forum Conference. My joy is multiplied by the fact that this is the fourth consecutive year I am joining this annual event.

The theme of this year's conference is "Establishing Sound Competition Cultures in Asia". There just can't be a better theme than this when Hong Kong is right at the watershed of getting a competition law passed to establish a cross-sector competition regime.

With Hong Kong's wide recognition as one of the world's most competitive and free economies, you may think that a competition culture is a sine qua non for Hong Kong's success. My response is yes, and no.

Yes, because our people and business sector have so steadfastly subscribed to the spirit of entrepreneurship and innovation in conducting their businesses, bringing out the very best of free competition in a market. But for our belief in competition, Hong Kong could not have trumped in the region and worldwide as a small and open economy with a population of just 7 million and virtually no endowment of natural resources.

No, when you get a closer look at the daily lives of our people. Many are complaining about anti-competitive malpractices. Take a recent example in Hong Kong to illustrate the extent of competition culture here. There have been press reports that small retailers selling groceries at a price lower than the recommended price range imposed by the suppliers are refused supply. This is a typical case of resale price maintenance for which many jurisdictions have cautioned about its potential damage on competition. There are also allegations that large retailers have pressurised their suppliers in different ways to foreclose their competitors. Such abuse of market power equally raises competition concerns.

We do not know for sure if these seemingly blatant contraventions of competition principles are real or not. The reason is that those involved currently face no investigation and sanctions in the absence of a competition law. Neither will those who suffered have any redress. The unfortunate consequence is that anti-competitive practices continue to exist, and people are forced, reluctantly, to acquiesce and live with it.

Nothing like these should be tolerated if we have a sound competition culture.

Competition culture is not just about having competition. It's the understanding about the true meaning of competition. There can't be fair competition if competitors distort market operation through cartels, or if a dominant player wins by forcing its competitors out of the market through artificially blocking or raising market entry. These distortions stifle the genuine competitive process inherent in a market economy, and any short-term gains as a result would come at the expense of consumers at different levels, including end users who have to pay more for fewer, lower quality choices of products and services.

Having a competition culture is about nurturing the belief that one should win by outperforming rivals with efficiency, innovation and fairness. That is why we need a competition law in Hong Kong, because we need to set the rules straight, promote what is right, and sanction what is wrong.

Enacting a competition law to build a competition culture is like promoting a soccer game to me. Everyone knows how to play soccer with a ball and a kick, just like everyone knows what competition is. But if we want to take a child's pastime in the backyard to the next level, we need to promote the concept of fair play which is to be shared by all participating in the game no matter who they are and where they come from. We have to let people know that scoring is not by force, but by technique and skills. We need to let people know that winning is not by tricks, but by tactics. What's more, we need people to respect all players on the field, and reject all vices that will defeat the purpose of the game. Only then will the popularity and credibility of the game be sustained for a culture to be built.

That's exactly what we want to achieve through the competition law. The draft law which has been studied by our legislature for just over a year has followed the international rules about what competition should be. We have prohibitions to combat cartel conduct and abuse of market power. We have independent competition authorities to act as referees. We have measures to help undertakings to get things right. We also have penalties to deter and punish wrongdoings. With a competition law, we hope to take Hong Kong players beyond the home ground and join others seamlessly in the international arena.

The draft law cuts across all sectors and, understandably, there are concerns that the law may be sweeping, leading to high compliance costs and causing difficulties to small businesses which are already having a hard time. In the past couple of months, we have worked very hard to address these concerns.

As you can imagine, this is no easy task. We are basically advocating a competition culture to stakeholders, some of whom are accustomed to certain practices which will no longer be permitted under the new rules. Some might have the inertia to stay where they are and fear any change arising from the law. To the extreme, some simply do not see the need of the law as they thought the market force will be the best umpire and promoting competition culture through a piece of legislation is bureaucratic and costly.

For Hong Kong to continue to prosper as a free and competitive place of doing business, we can't just talk the talk but have to walk the walk. We need a legal framework to help us investigate into and rectify any alleged anti-competitive conduct in the market, not only to see if anyone violates the law, but also to give the accused a fair chance to defend themselves against any misconceptions which have been lingering without any recourse to a transparent and proper adjudication. The competition law should represent a fair play to both the plaintiffs and the defendants. When you get the rules and see them operate, you educate people on what fair competition is about.

Getting the competition law passed is just an important step of a long journey of establishing a sound competition culture in Hong Kong. The law itself is not a magician's stick to make things happen overnight. But seeing is believing. When the law is in place, people know what the rules of the game are. When there is foul play and misconduct, the players can complain and ask the referees for a ruling. Penalties are imposed and malpractices can be rectified. With fair play, all involved will respect one another, see the beauty of the rules, and reap the benefits of the game. The whole process will reinforce the value of competition. A culture is established when the value takes its root.

I hope the wait for that day won't be long for Hong Kong. We are committed to enacting the competition law before the legislature ends its term in July 2012. Once the soil is ploughed upon the passage of the law, we would be sowing the seeds of establishing the institutional structure and preparing for the operation of the competition rules. I sincerely hope that in the not too distant future, you would be sharing our joy of harvest under a competition culture in Hong Kong.

Before I go, I wish to thank the Asian Competition Forum for their sterling efforts in promoting a competition culture in Hong Kong by bringing knowledgeable and distinguished people to share their experience with us. I wish you great success again this year.

Thank you.

Monday, December 5, 2011