Competition Laws in Hong Kong
Competition is a mainstay in business just as much as it is for any sports team. Businesses, in general, would probably rather that they have their industry all to themselves, but healthy competition drives the market. Without it there would be no need for innovation, and the one company could set the price of goods wherever they wanted to. Therefore, competition is good for a business because it is good for the consumers. In recent years, the governments of Hong Kong and the People's Republic of China (PRC) have both enacted competition or merger law which is supposed to make for a fair free market within the country. This has been met with opposition and with skepticism, but the general feeling is that it could open markets to both smaller investors and foreign firms. This essay will focus on defining what competition law is, the specifics of the Hong Kong proposals, and then look at how Hong Kong will possibly be affected by the new slate of laws.
To give every individual who wants to enter a market the ability to, governments have found it necessary to induce fair competition practices. A free market system is the best way for an economy to run, but if people were allowed to have completely free reign in a market there would be collusion, price fixing and other non-desirable free competition hampering activities. As Li and Young (2008) said;
"Competition law is generally enacted to control and influence certain business conduct deemed harmful to the smooth functioning of a competitive market. This is usually a byproduct of deregulation and opening up of markets to competition, as market forces alone might not be able to ensure allocative efficiency and competitive pricing is achieved"
Because the good of the consumer is the goal, competition that allows companies into the market is encouraged.
Governments are forced to regulate companies because there must be some way for every business to bid for market share within an industry. Therefore, there are usually two basic stances that competition law takes. These are;
"a prohibition of cartel arrangements, which impacts the types of discussions and arrangements that Association members may become involved in through the Association, and what directions or guidance the Association itself may provide to the members; and a prohibition of the 'abuse' of market power, which may impact the manner in which an Association can provide services to its members - particularly where it is the sole provider of such services" (HA, Hickin & Obrien, 2010).
Large companies, or even a small one that has a lot of market share, and thus power, within a market, will often use that advantage to harm others. Another form of competitive drain occurs when several companies get together and work together to control the processes within a market. Both of these outcomes are undesirable to both competition and fair market pricing. Thus, governments generally try to regulate these actions.
Another problem that can directly affect whether there is collusion or favoritism in a market is government involvement in industry. As Dan Ryan (2008) said in an article in The Australian "Industries are constantly changing. True cartels can only be created by government regulation. The key point is that competition laws do not focus on removing these government-imposed barriers to entry." This particular barrier is one that has directly affected the ability of businesses in the Asian community to operate fairly. Hong Kong and the PRC are prime examples of governments who helped foster cartels and power abuse by some families and their companies (Ryan, 2008). These countries have tried to right the wrongs in the past, but have come to realize that without adequate competition, they will not long be have the ability to compete with other nations.
The PRC enacted merger reform in August of 2007 (Li & Young, 2009) in response to the international grumbling, and they have been followed by the Hong Kong government in 2010 with their competition laws soon coming into effect. The Hong Kong and China statutes have many similarities, but since this paper is to focus on the competition laws of Hong Kong, that will be the major focus.
For the past decade Hong Kong has been talking about how they would create these laws and exactly what they would say. First proposals came to the public eye in 2006, and then a more finalized proposal in 2008 (Carnabuci, Potter, & Han, 2008). The agreements proposed law did not change much in that time except to clearly delineate what penalties would be handed out.
First, Hong Kong had created a...
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