Next Magazine (Second opinion A004, 2013.12.19)
Hong Kong’s competition law came into effect on 18 January 2013. Commissioners were appointed from 1 May 2013 and heads of the judicial Competition Tribunal from 1 August. As these appointments take place, it is increasingly clear what the competition law is all about. It is not about a more competitive Hong Kong economy. It is a gravy train for professional advisors.
When the competition law was conceived, advocates reassured Hong Kong businesses that it would be a minimalist law, targeting only “hard core” practices that would not significantly change the way of doing business in Hong Kong. Against this promise, the final law was a shocking incorporation of alien legal concepts, largely from Europe, that threaten economic dynamism but exempt the government itself from imposing some of the most potent threats to competition. Although in private many advocates of the law were also surprised by the final draft and concerned about how it would be implemented, in the difficult dying days of the Tsang administration, a “just do it” mentality pushed through a misconceived law.The inaugural Chair of the Commission Anna Wu Hung Yuk gave the game away: “Commission members and myself have started to establish contact with similar competition authorities of other jurisdictions, international resource networks and various experts in the field, so as to learn from their experience and expertise”. This is about the travel, the networks and experts – not competition in Hong Kong.More disturbing is a recent article in Hong Kong Lawyer by Professor Mark Williams, one of the principal advocates of Competition Law for Hong Kong. Now that the law is passed he deigns to let us know about pitfalls such as “broad definition of undertaking” and “lack of definition” in other areas. He now concedes the point of critics that the ordinance will have a very wide application indeed to “sole traders, small and medium-sized enterprises, partnerships and limited companies”. Now he tells us the commission “will target common business practices in Hong Kong”. This is not the narrow law that we were promised.Never fear though, Professor Williams assures us this is not a “headache” it is an “opportunity”. However, the opportunity is for lawyers to develop “a potentially lucrative new practice area”. There will also be an opening for “advisors of all kinds” creating competition audits and a “wave of competition related advice”. That advice has a compelling pitch according to Williams since as the commission establishes its work “companies should fear such investigations and sanctions”.
So here we have it from one of the leading architects of the push for competition law, an ordinance that comes with many pitfalls, but will create a boom in lucrative legal and advisory work. Who will pay for all of that work? The companies and, ultimately, the people of Hong Kong will pay. This additional burden of legal and compliance work, driven by fear will drag down not just profits, but the capacity of these firms to invest and take on new employees.There are myriad problems with competition law, so much so that there is growing recognition from economists that these laws often become anti-competitive tools at the hands of rivals, promote bureaucratic and political agendas and invariably lag dynamic markets even when in well intentioned pursuit of bad practices that are better eliminated in other ways.In Hong Kong the largest threats to competition come from our government. It turns Hong Kong’s financial market into a monopoly, i.e. The Hong Kong Exchange and Clearing Ltd, and it operates businesses in competition with the private sector in mortgages, financial guarantees, housing and development and conventions. It is the largest purchaser. Its laws frequently restrict competition and grant monopoly privileges. None of this is covered by this misconceived law.It is unbecoming for Hong Kong to abandon its traditions of free and open markets to gain the accouterments of nation states that are less economically successful and provide lawyers and academics with new practice areas at our expense.
Bill Stacey is in his 10th year as a resident of Hong Kong and is Chairman of the Lion Rock Institute.We are now on Facebook http://www.facebook.com/Next2ndOpinion