Get ready Hong Kong. Now that Chairperson Wu is off MPF, she’ll be bringing her considerable talents and energy to the Competition Commission. Watch out for this watchdog.
Anna Wu runs things this house loves to hate. The Consumer Council plays a role that can be, and is, done by the mass media, niche consumer media, and existing government inspection agencies. The MPF has seen providers grow fat off fees at the expense of workers and employers forced to direct their earnings into this non-voluntary scheme. Now she has, for the first time in her busy career, only one official position: Chairperson of the Competition Commission.
Better if the Commission didn’t exist at all.
The Competition Commission has been getting its staff in place, apparently not without some hiccups. Australians and Canadians have filled the ranks, and most have European experience as well. Dr. Stanley Wong, the CEO and natural spokesman, has been fairly low key since his arrival last year with only minimal exposure to the media. Draft guidelines and cutesy cartoon examples of acceptable and unacceptable behaviour have been published. But now it gets real.
The energy and direction of the chief matter a great deal in the prosecution of competition law. In normal criminal prosecution, a suspected crime launches an investigation where the crime is normally quickly defined. Competition law is different.
In the absence of a smoking gun (i.e. a recording of a meeting where managers say “let’s all collude!”), competition law is incredibly difficult to evaluate and prove. Debatable economic conjecture is used to prosecute legal ends. The vast amounts of definitional discussions, such as what constitutes a market, and grey zones make for endless speculation – and fat lawyer fees. The vagaries inherent in the law make it hugely political. The Microsoft cases are the classic example as they were on and off the hook as Democrats and Republicans took turns in the White House.
This vagueness makes it a perfect tool for harassing successful competitors if a vigorous body can be found to prosecute. Raids at dawn, endless demands for inside information and exorbitant legal fees are all part of the shakedown, normally to no definitive result.
Ms. Wu, the Chairperson of the Competition Commission, is widely respected as an honest broker. However, an energetic chair pushing a wide range of antitrust cases on Hong Kong’s market will incur a great deal of drag on the economy, make Hong Kong a less attractive investment destination and cause grief to honest business people.
“antitrust is the transfer of funds from the tech industry to lawyers.”
The old bad
The first thing we can expect is a return of bad arguments. In the mid-2000’s, many of the arguments about competition law were put to rest. Like the monsters in a bad zombie movie, they are coming back. The cost of consumer petrol question has been revived, even though the biggest price fixer is the government. In 2005, a 100+ page government sponsored study concluded, “We have found no evidence to support the widely held perception that oil companies are colluding in the Hong Kong auto-fuel market.” The study did show most of the cost is made up of tax. All providers were forced to have their biggest cost to consumer fixed – by the government. And yet, the new Competition Commission has pledged to investigate. Look for other bad arguments for supermarkets and other sectors to make a comeback as well.
The new bad
A new category of terrible arguments could be a great excuse for complicated, drawn out cases to justify the Commission expanding its budgets and powers: technology cases. Europe and the US have seen second tier competitors launch wave after wave of complaints against successful firms in a sector that moves at lightspeed-multiples faster than the lawyers and the courts. If the dotcom boom was a transfer of funds from venture capitalists to media companies via dotcom startups, antitrust is the transfer of funds from the tech industry to lawyers.
Once a complaint gets traction in one jurisdiction, it is repeated around the world. The price of success is not sweat and ingenuity. It is endless legal action with no benefit to consumers or shareholders. Lawyers and bureaucrats reap the rewards of the technology genius.
Antitrust, anti-tech: complicated, drawn out cases to justify the Commission expanding its budgets and powers.
The good forgone
The EU Competition Commission, while one of the most draconian in the world, has one redeeming feature. It was originally conceived to be used to help break down national protectionism and open the European single market. A Competition Commission in Hong Kong that was tasked with finding excessive government regulations that engendered, or guaranteed, market dominance would be a boon. Likewise, one that sought situations where firms that enjoyed unfair advantage over competitors from government subsidy or regulation would be welcome.
That will not be the case, however, in Hong Kong. As expected, the Competition Commission’s terms of reference do not give it the power to investigate these situations. Government guarantees a gambling monopoly, regulates the development and energy sectors and maintains a bizarre and arbitrary control over how many free to air TV stations are to be permitted, saving turkeys like ATV and spiking promising newcomers like HKTV.
Ms Wu will have an immense amount of power to decide which cases go ahead and how vigourously they are prosecuted. Hopefully she will resist the depradations of nuisance cases and limit the Commission to tracking down smoking gun type cases. However, with a full time economist with time on his hands and a bureaucratic impulse to grow,the Commission will be in a position to ‘create the crime’, by finding some economic dominance requiring their attention. With Ms Wu hoping for LegCo approval in April or May and the ordinance to take effect in Q3, there is plenty of time for the team to train its sights on a broad range of targets.
Competition in TV? Government saves turkeys like ATV and spikes promising newcomers like HKTV.
Après Wu, the deluge
More worrisome is what comes after the first Chair. If Ms Wu is successful in growing the manpower, budget and powers of the Commission, more overtly political successors would be in a position to undermine Hong Kong’s rule of law. Our mature market tends to be dominated by international and Hong Kong based players. In China, antitrust has often (but not exclusively) been used to keep foreign firms at arms’ length. WTO regulations are one thing, but everyone has their own version of antitrust and can’t complain about China’s. Some dispute the ‘anti-foreign’ story regarding application of China’s antitrust law, but the vague nature of the law leaves Hong Kong exposed.
Better if the Commission didn’t exist at all and was replaced with a commission with a mandate to identify and reduce regulations and subsidies that distort the market and, in many cases, directly ban competition. However, the current Competition Commission was designed to avoid just that.
Dealing with reality on the ground, however, means that a great deal of trust has been placed in Ms Wu’s hands for now – and a great deal of uncertainty exists about the future.