Hong Kong may change laissez-faire ways

[HenryTo]

It's about time they did something like this in Hong Kong. I am generally not a fan of government intervention, but I think Hong Kong has many things to learn from the United States at least on the subject of anti-trust laws.

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The Associated Press/HONG KONG
By ANDREW BATSON

Hong Kong may change laissez-faire ways

APR. 17 12:52 A.M. ET Asia's bastion of laissez-faire economics may be preparing to take a tougher line on dubious business practices like price-fixing and cartels.

Hong Kong spent the last decade or so fending off the calls of consumer groups and opposition politicians for a more vigorous antitrust policy. Now the government has agreed to set up an independent committee to review its fair-competition regime.

The decision comes as the government faces increasing public criticism for its perceived closeness to big business. Pressure has also been building from Hong Kong's trading partners for the territory to adopt a more forceful set of antitrust rules, of the sort now used by most developed economies.

"The government is showing signs of relenting," said Ronny Tong, a prominent lawmaker who has been pushing for antitrust legislation and the creation of a watchdog with legal powers to investigate wrongdoing.
Though Tong argues that his proposed changes could be put in place relatively quickly, an overhaul is hardly imminent. The government is to appoint the review body in the next two months, and it will then be given a year to come to its conclusions.

The administration doesn't have to be bound by those findings. In 1997, it rejected the recommendations of the last report it commissioned on competition policy. But by launching the first formal debate on the issue since colonial days, the government may have started an argument it will find hard to win.

The public debate is sure to expose the fact that the current policy has no consistent principles. There's strong supervision in some sectors, like telecommunications, and virtually none in others.

Critics say that ad-hoc approach ignores the special problems of Hong Kong's small domestic economy, dominated by a few family-controlled conglomerates whose interests range from real estate to utilities to retailing.

In electricity, the market is split between the Kadoorie family's CLP Holdings, and Hongkong Electric, part of tycoon Li Ka-shing's Cheung Kong and Hutchison Whampoa groups. In supermarkets, two large chains now dominate: Wellcome, part of the old Jardine Matheson trading house, and Park N Shop, another business of Li Ka-shing's. And those two groups also run the two main health-and-beauty retail chains, Mannings and Watson's.

"There are several domestic service sectors where one firm, or a handful or firms, dominate market share," the U.S. Trade Representative office said this year.

The potential for abuse when one company's interests stretch across industry boundaries became clear in last year's Banyan Garden case. Residents of that housing estate, managed by one of Li Ka-shing's property firms, found they were being charged for telephone and Internet services provided by another Li business -- Hutchison Global Communications -- whether they wanted them or not.

Both residents and rival telecom companies complained this arrangement stifled competition. After a lengthy review, the telecom regulator said the real estate company may have acted improperly in making such a deal. But the regulator did nothing, as it has no legal authority over real estate.

Outsiders' views -- especially those from the developed economies to which Hong Kong compares itself -- are nearly unanimous. European Union officials have highlighted Hong Kong's lack of competition law as one of the few problems in an otherwise harmonious economic relationship. The World Trade Organization has criticized Hong Kong on this point, and the U.S. also says it supports antitrust legislation.

But Hong Kong says its "sector-by-sector" approach gives it the flexibility to make rules when problems arise, without overburdening business. Yet one company targeted by the government's latest investigation, into the prices charged by gasoline filling stations, sounds like it would prefer a more standardized approach.

"We would support a fair competition law in Hong Kong, but we oppose selectively introducing legislation for just one sector," said Jane Tang, a spokeswoman for Exxon Mobil Corp.'s Hong Kong arm. "It's like you are saying running a red light is wrong for a taxi, but OK for a bus."

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Andrew Batson is a correspondent for Dow Jones Newswires.