HomeAsia society Index
(5)
|
High price for the wrong cup of tea
Inundated with stories of food shortages around
the world, it is no wonder Hong Kong is worried about supply and costs.
We were also greeted this month with findings on price differences
between various grocers in Hong Kong, notably that supermarkets charge up
to 12 percent more than corner shops.
The Consumer Council followed up and found the gap between prices
charged by different kinds of retailer has only increased. While the
council is committed to helping the public become better shoppers, is this
information surprising or beneficial?
Most Hong Kong estates have at least one or two supermarkets, as well
as corner shops and wet markets nearby. With multiple choices offered to
consumers, competition is high.
However, the council still believes we need a competition law to
address the supermarket/corner shop percentage difference, even though it
has admitted to understanding this may stem from supermarkets' better
environment.
Still, if the council understands that the extras supermarkets provide
- clean, air-conditioned environments, for example - are costly, and it
sees no evidence of price collusion, but still wants a competition law, it
must not understand what the concept really involves, and sadly, it isn't
the only one.
While the theory of such laws is to promote competition by placing
businesses on a level playing field, countless studies and economists have
found it does the opposite, creating more harm than good, decreasing
public choice and fairness, and marginalizing small and medium-sized
enterprises by giving larger corporations the upper hand.
Competition policy hasn't proved it can influence where people shop. It
may come as a disappointment, but competition policy isn't the cup of tea
we thought it would be.
Recently in the UK, the competition regulator found supermarkets
exhibiting anticompetitive behavior in supply- chain practices and
land-related barriers to entry. Though no evidence suggested coordination
or distortions in competition, the regulator still suggested the creation
of an ombudsman to oversee the supply chain and a set of least cost, least
intrusive remedies to address the adverse effects on competition.
While it is yet to be seen if this package is effective, it is
important to note that regulators make the point of expressing that they
favor the least intrusive remedies.
In Hong Kong, our situation is slightly better, as supermarkets have
proved no barrier to competitors establishing themselves nor prevented
corner shops from opening. There is no reason to worry about price-fixing
in today's supermarkets, as no evidence can be found, and we also need not
worry for the future. Economist George Stigler pointed out that even when
few companies compete in a market, it is difficult for them to reach a
consensus on price, and even if they do, they may not be able to
discourage cheating.
Competition law leads to overdeterrence, spurring excessive costs from
overmonitoring and prevention while raising production costs and thus,
consumer prices.
There is no evidence that competition policy has deterred companies
from engaging in actions that would have seriously harmed consumers.
If we have choice in the market and competition is functioning, then
why do we need a messy and biased law that lacks relief and creates more
problems?
The gaps in public and government knowledge show that competition law
is really not understood and it would be very unfitting of the government
to ruin its reputation and pass a misunderstood policy into law, forever
staining Hong Kong. This lack of knowledge provides enough evidence that
the public needs to be educated about competition law and that as it
stands now it is thought of as a fairy godmother's magic wand.
Until economists have hard evidence that competition policy will
generate social benefits, the government should focus on the violations
within our economy, such as blatant barriers to entry and
government-caused monopolies, while watching, but treating most other
apparent threats to competition with "benign neglect" - as the
well demonstrated functions of competitive markets will combat
anticompetitive behavior.
If Hong Kong proceeds as it is today, promoting a competitive
environment without competition law, we will avoid unnecessary
legislation, higher prices, and gain world status. Internationally,
academics who are interested in improving the consumer welfare effects of
anticompetitive policy will rejoice. 2008-04-26 |
|
|
|
More story |
|
.Pop Goes the Easel |
Copyright © SHUIMOHUA GALLERY All Rights Reserved
