Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy What are anti-competitive practices? Impacts of anti-competitive practices & competition policy
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy 2. 1 What are anti-competitive practices? A. B. Monopoly & anticompetition Different forms of anti-competitive practice
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy A. Monopoly & anti-competition To analyze the relationship between monopoly & anticompetition To understand the definition of anti-competitive practice
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Elimination of weaker competitors through + competition Economies of scale Monopoly = Anticompetition? Monopoly Not necessarily anti-competition
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Why is monopoly often seen as being anti-competitive? Monopoly Engage in anti-competitive practices Abuse market dominance
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy What is anti-competition? Anti-competition: Enterprises use unfair or inappropriate ways to reduce or restrict market competition.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy B. Different forms of anti-competitive practice To learn about the forms of anti-competitive practice To examine some anticompetitive practices in Hong Kong
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Anti-competitive practices: All behaviours that distort or restrict market competition Mergers Horizontal agreements Vertical agreements
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Horizontal mergers The merging of firms producing the same type of goods The merging of KCR and MTR The merging of restaurants
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Potential competition mergers The merging of a firm and another firm that plans to enter the market and compete with it. The potential competitor is removed. Price
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Vertical mergers The merging of firms which are in different production stages & have a buyer-seller relationship. Competitors lose raw material supply or retail outlets. A flour company merges with a bread shop. The newly merged enterprise has more control of the market prices.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Competitors in the same industry work together to reach an agreement on price & output that they can so jointly control prices. Competitors in the same industry may work together to control prices.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Price-fixing An agreement between firms to fix or raise the price to restrict price competition and increase profits. Suspected of price-fixing Price-fixing distorts the normal operation of the market Increases buyer’s costs
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Sales & production quotas An agreement among producers or suppliers to fix a sales or production quota so that their joint reduction in output can raise the product price. The Organization of the Petroleum Exporting Countries (OPEC) influences the oil price through controlling their output.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy New Year Fair stalls bidding & the construction of the gates for public housing units have been suspected Firms agreeing to submit of bid rigging. Bid rigging common bids. Firms agreeing to submit the lowest bid to win the contract by rotation The price for the project will be much higher than the market price. Share the profits & eliminate competition.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Market division: in products & locations An agreement among producers or suppliers on the scope of operation Each firm in the agreement sells only the specified products or operates only at the specified locations and will not enter others’ scop of operation. Most housing estates in Hong Kong have only one supermarket.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Customer allocation An agreement among market participants on the source of customers With different sources of customers, there is no competition. Colluding firms can charge higher prices.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy An agreement among competitors not to trade with certain suppliers or customers. Joint boycotts The joint effort of competitors to force suppliers or customers not to trade with another competitor. Colluding competitors Let’s not buy from this supplier so that it will leave the market.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Unfair or discriminatory standards Standards agreed upon among members of a trade union or professional body, which deny newcomers the change to body enter or compete in the market. Trade union Let’s draw up some standards to prevent newcomers from entering the market.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy An agreement on purchasing or sales conditions made between firms in different stages in the production or sales chain Cement production companies, building construction companies & property agents may enter vertical agreements.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Exclusive dealing The agreement made between a supplier and its distributors so that the distributors cannot sell products of the same kind provided by other suppliers Supplier A Supplier B You can only sell what I provide you. The distributor only sells Supplier A’s products. My sales channel is blocked. I may have to close down.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Sole distributor The arrangement that the producer only assigns one distributor for its products in a specified sales territory Ng Fung Hong is the sole distributor of live cows imported from the mainland.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Tie-in sales & bundling Tie-in sales Bundling of services The buyer can buy the desired good or services (i. e. , the tying good) only if he agrees also to buy a different good or service (i. e. , the tied good) from the seller. The sale of a package of several services (or products) and buyers cannot buy only one item. The sale of Windows products is bundled with browsers.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Resale price maintenance A supplier specifying the minimum or maximum price at which a product must be re-sold to customers by downstream firms. The prices of football T-shirts have once been said to be specified by the supplier.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Retail price minimum Predatory pricing Abuse of dominance Price discrimination Tie-in sales
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy 2. 2 Impacts of anti-competitive practices & competition policy To analyze the impacts of anticompetitive practices on consumers & the economy as a whole To examine the justifications & concerns for competition policy in Hong Kong To examine the debate on competition law
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy What impact does anticompetitive practices have? Hindering the development of the industry Unfavourable to consumers Harmful to economic efficiency
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Major justification for competition policy To provide a legal basis for the investigation & sanctioning of anti-competitive conduct. To strengthen the competition regulatory framework in order to promote market discipline. To improve the business environment & provide a level playing -field for business.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Major justification for competition policy To improve transparency through delineating what constitutes anti-competitive conduct so that firms & the public are fully aware of them and can prevent their occurrence in society. Without such regulation through legislation, in the long run there might be an adverse effect on the relative competitiveness of Hong Kong, especially in those sectors with high entry barriers. The newspaper industry and the rail industry have very high entry barriers.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Concerns for competition policy Nee ded ? Interference with the market structure Increase in the cost of doing business Effects on the development of small& medium-sized enterprises Use of alternative ways to enhance market competition
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Concerns for competition policy Cro Sec ss-se c tor -sp tor? ecif ic? To tackle cross-sector ‘bundling of services’ effectively and to avoid discrimination against certain business sectors or consumers, the Competition Policy Review Committee (CPRC) suggests that competition law should apply to all. Competition Policy Advisory Group
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Concerns for competition policy The practices are not illegal unless they are found: Pra ctic es c ove red ? To have been carried out with the intent to distort the market. To have the effect of distorting normal market operations & lessening competition.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Concerns for competition policy Exe CPRC recommended that the new legislation should allow the government to exempt certain specified situations from the application of the law on public policy or economic grounds. mp tion s? The new law does not point against the rail merger. A group opposed the exemption of government departments from the competition law.
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy Concerns for competition policy The CPRC suggests civil penalties. Civ Cri il of min fen al o ce? ffen ce?
Elective Part 1 (2) Anti-competitive Behaviours & Competition Policy
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