Selling noodles in the world’s freest economy

China Daily reports that ‘a prominent supermarket chain’, pressured the sole distributor of a food brand to force a small retailer to raise the price of its noodles. Could it be that the Beijing-financed paper is unaware that Hong Kong has freedom of the press and you are allowed to name names provided you word them in a libel-sensitive manner? The Standard, by contrast, part of the tycoon-owned and tycoon-worshipping Sing Tao Group, spells it out. The small retailer was one Josh Man of low-income Shamshuipo, who says he was approached by the Nissin Foods agent, who told him that ParknShop had complained and he should hike the price from HK$3 a pack back to three-for-HK$10.

On reading this report this morning, I looked around the street to see how many people had fainted in shock upon learning that the subsidiary of Li Ka-shing’s Hutchison conglomerate – one of the two big supermarket chains in town – has been thus accused. The number of passers-by swooning in amazement totaled a big fat zero.

We know that cartels exist in Hong Kong because the place is small, half a dozen family-controlled conglomerates run a big chunk of the domestic economy, and – crucially – there is no law against it. As Adam Smith famously pointed out, no businessman with a duty to maximize returns to shareholders will refrain from colluding with peers on pricing or stamping out small competitors if legally allowed to do so.

(He also noted a type of hypocrisy that rings a bell in Hong Kong over 200 years later: “Our merchants and master manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”)

I have never paid much attention to the Competition Bill wending its way through the Legislative Council. Like sewerage systems or Wi-Fi networks, laws are necessary, but tedious to look at and understand, so we pay someone else to do it. A summary written by lawyers capable of plain English looks promising; the bill seems to ban cartels. However, the thing is being gutted in the legislature, apparently by small companies – like Josh Man’s perhaps – who are afraid of frivolous lawsuits. But wait: why would Josh Man do that? And since when have people like Josh Man had that sort of clout in the Legislative Council?

The Consumer Council says the government’s concessions to business lobbies hurt consumers and small enterprises. The Lion Rock Institute delights in opposing the whole idea of a competition law on the classic ideological grounds that it doesn’t work in theory and therefore can’t and mustn’t in practice. Still, their notion that a competition law could open the door to ambulance-chasing scumbags who sue anything for a quick buck is bolstered a bit by an intriguing article in Asian Lawyer in which an American bemoans the fact that no litigator in Hong Kong earns US$1 million a year and that the Big Lychee is “not the most receptive place for innovative legal theories and claims that are pushing the envelope.”

Meanwhile, the city’s mega-tycoons are silent and apparently unperturbed by the competition bill that is deformed and limping through the Legislative Council, destined not to push any envelopes. Blissful, almost. Even ParknShop PR officer Athena Lee, who denies everything.

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18 Responses to Selling noodles in the world’s freest economy

  1. Revolution says:

    It is baffling why the SME lobby, which stands to benefit from a competition bill, is leading attempts to kill it.

  2. Darovia says:

    I understand that it was pressure from the big 2 on suppliers that ended Carrefour’s brief dalliance with Hong Kong.

  3. Joe Blow says:

    As was the case with Jimmy Lai’s internet home-delivery business.

  4. Ramer Kang says:

    It’s odd that in many countries in Asia you come across Tesco, Carrefour and other big international supermarket chains. Even in the PRC you can find Carrefour and Wal-Mart. But in HK, the ‘world’s freest economy’, not a sniff.

  5. nulle says:

    anyone considered boycotting dealing with any businesses that any of the hong kong tycoons own?

  6. Sen says:

    Try just to live just one day in Hong Kong without giving one cent to Mr Li-oh and be sure to tell us about your harrowing experience

  7. Sen says:

    Not for want of trying

    correction:

    my statement above should of course have read
    “Try just try to live just one day…”

    but then you knew that already.

  8. Stephen says:

    Ramer,

    It’s is not “odd” it’s is Tycoon landlord collusion.

    The shop I would like to see here is Boots the Chemist (seen in many other Asian cities). Li Ka Shing’s Watsons disgusts me on so many levels and Jardine’s Mannings is worse.

    Perhaps The Link REIT’s better malls in Stanley, Hang Hau and Lok Fu etc might consider breaking the Tycoon Landlord Collusion. Sadly the competition law is not going to change Li Ka Shing’s, The Kwoks, Swire’s, HK Land’s, The Wharf’s malls any time soon.

  9. Peter says:

    Revolution

    The latest amendments to the Competition Bill are said to be for the SMEs benefit, but it’s possible if not likely these changes are being made at the urging of the larger corporations in Hong Kong ( http://hkcompetitionlaw.com/2011/10/24/sme-amendments-a-front-for-big-business/ ).

    Given the approach taken by Gregory So at last week’s Bills Committee hearing in LegCo ( http://hkcompetitionlaw.com/2011/10/26/when-the-finish-line-is-everything/ ) and Donald Tsang’s comments yesterday at the Joint Business Community Lunchen ( http://hkcompetitionlaw.com/2011/11/03/the-thing-which-you-and-i-hold-dear/ ), it looks increasingly likely that we will get a general competition law next year (though enforceable much later) but it will be very much a “gutted” version as noted above.

    Pretty disappointing after almost 20 years of talking about fixing this gaping whole in the regulatory infrastructure of our supposedly world-class city.

    I also hear that the Consumer Council will be doing another supermarket study soon, which will yet again highlight the kinds of problems reported in The Standard and elsewhere today.

  10. Hmmm. Living out in Hong Kong’s sticks in the punti villages pretty much grants tycoon independence with everything except electricity. LPG, farmer’s markets, yadda yadda.

    Maybe this just need to be done Hong Kong style? If you can’t attack their bottom line… attack their stock price? :3

  11. Real Tax Payer says:

    I am as pissed off as anyone about the supermarket and chemists cartel

    But at least with chemists ( pharmacies) there’s a lot more free-lance shops

    And of course one can go to the wet markets to buy stuff, and there’s a few free-lance supermarkets still around

    But I must admit that P&S’s new ” Fusion” layout beats anywhere for true convenience shopping : a 1 hour trip with our Amah buys ALL for the week/ month + free delivery ( and free parking if at Garden Road P&S)

    I have often seen young people with notebooks writing down the prices of every item , so I guess this is how P&S and Welcome standarize their prices without exchanging xls files openly

    But what REALLY puzzles me is the dual price system , eg a 4 pack of Schweppes tonic water has been priced at $22 (crossed out) and discounted to $14.90 for as long as I have been drinking G&T – which is many years. So what does the $22 (crossed out) price mean ? F**k -All

    Oh what the heck : let’s all bow down and pay our dues at the unholy shrine of superman / super devil great uncle Li ( I bet his hero is Kim Il Sung )

  12. Gerald says:

    There’s also something pretty fishy about lots of pharmaceutical products here – even independent pharmacies are apparently unable to offer any significant discount on items such as statins, diuretics etc. When asked independent pharmacists just look a bit nervous and say ‘Sorry, can’t be done’.

  13. paul says:

    The Lion Rock Institute waxes lyrical about how it actively promotes Free Trade, although to be fair it is remarkably free of details about what it has actually done to further these aims.

    Its Press Release about the Competition Bill proudly lays claim to achieving quite the opposite result. How is it possible to narrow the ambit of a draft law, based upon even China’s own law, let alone EU law, and claim that this is an example of Free Trade?

    Am I missing something or are they just hypocrites?

  14. Old Timer says:

    The Watsons and Mannings cartel at least forces many standalone chemists to try and earn a living by selling prescription drugs with no prescription, so it ain’t all bad.

  15. Big Al says:

    In order to help the SMEs, I’m going to restrict my shoplifting to Park’n’Rob and Unwelcome only.

  16. jluo says:

    Has the LRI come to Josh Man’s defense? I believe it’s against a competition law because, as it stated in the past, new competitors would enter the market if it’s uncompetitive.

    But the LRI does the bidding of those who fund its operations. I wonder if Mr. Man is one of its benefactors.

  17. Hugo says:

    Playing “devil’s advocate” here (apologies to Rev. Law), it seems Nissin has a minimum price that it forces all retailers to accept. If Park ‘n’ Shop observes another retailer breaking the contract, doesn’t it have a right to complain? Perhaps the better question here is whether Nissin should have the right to set the retail price of its products. Go boycott Nissin Cup Noodles if you don’t like it.

    In other words, let’s not let our hatred for devil KS Li blind us to the other anticompetitive devils.

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