Mr Alex Fong
SCMP (11 December 2008)
Getting a competition law right is more important than rushing legislation through, writes Alex Fong
Too many unresolved issues and flaws will undermine the effectiveness of a competition law if the government proceeds with its plans to rush ahead, introducing a bill in the current legislative session. More thorough consideration is needed before proceeding further. This should not be a race.
More is at stake than ever before. Chief Executive Donald Tsang Yam-kuen has recognised that maintaining Hong Kong's competitiveness is a major challenge. He has also identified the risk of global recession, in line with worries of the business sector and Hong Kong people.
However, it is doubtful that rushing into drafting the Competition Bill over a short period of time in the next few months can really help us face the challenges. The business community is more concerned that the legislation will only create more uncertainty and increase the cost of doing business, such as expenditure on legal advice, accounting and consulting services, which will weaken our ability to weather the financial turmoil as well as cause long-term problems.
A competition law has to be well designed and minimalist. It must also have enough safeguards to address business concerns while being pro-market and business friendly.
Unfortunately, a number of the proposals tabled by the government in the public consultation this year are full of flaws and ambiguity. Many businesses, including small and medium-sized enterprises, as well as big corporations, find these unacceptable.
The government needs to address concerns raised by business before it finalises the bill. Hong Kong will be moving in the right direction by introducing a competition law but risks creating too much uncertainty for business if legislation is rushed to meet a stiff deadline.
Some basic elements of the competition law proposals, such as its objectives and coverage, are problematic and ambiguous. The government also needs to better explain how it determines thresholds for action, infringing behaviour and penalties.
Proposals so far have created concerns in the business sector that the legislation could lead to regulations for mergers, stand-alone actions, and overlapping regulation for individual sectors. Exempting government and statutory bodies will be unacceptable as they are active participants in the market.
So many problems and loopholes have been detected during public consultation that the government must now address these before moving forward. Discussions aimed at resolving these crucial points will take time.
The global financial crisis is already affecting many businesses. Hong Kong's suffering should not be worsened by another unnecessary hit.
A competition law that is good for Hong Kong should be based on a principle of "minimalist law, incremental implementation".
A minimalist law fits well with the long-established core values of Hong Kong where the "big market, small government" approach has underpinned business success.
The case for incremental implementation, rather than the big-bang approach currently being pursued, is now more necessary than ever to ensure businesses and the broader economy can cope with the new law as the economic situation deteriorates.
The law's coverage must be restricted to a limited range of anti-competitive behaviour.
What should be outlawed are the seven categories of conduct in the government's proposals: price fixing; bid rigging; market allocation; sales and production quotas; joint boycotts; unfair or discriminatory standards; and abuse of dominant position.
Not every one of these seven types of conduct is equally well defined and the law should be made effective in stages. It should apply first to the most clearly defined behaviour, such as price fixing and bid rigging, then provide more time for the regulator to prepare for implementation of more contentious aspects, such as abuse of dominant position.
It is important for a competition law to be in place as soon as possible, but the overriding consideration must be that it truly benefits Hong Kong people - business and consumers alike.
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