Competition Policy and Competition Law 23 April 2008

Competition Policy and Competition Law 23 April 2008 Adolph Leung Senior Economist Commerce and Economic Development Bureau

Objective of Competition Policy/Law Hong Kong Ø To enhance economic efficiency and free flow of trade, thereby also benefiting consumer welfare Other places Ø Ø Economic efficiency Consumer welfare SME Export promotion Increasing shift towards economic efficiency and consumer welfare 2

Competition Law Ø Deal with market power Ø Prohibit conduct that substantially lessen competition ² Anti-competitive agreement (Sherman Act section 1 and EC Treaty article 81) ² Monopolisation/Abuse of a dominant position (Sherman Act section 2 and EC Treaty article 82) ² Merger regulation 3

Purpose or Effect Test Ø Facts specific Ø Involve detailed economic analysis Ø Similar form of conduct may constitute infringement in some cases and noninfringement in others 4

Exemption Ø Improve production or distribution Ø Promote technical or economic progress Ø Not indispensible Ø Do not eliminate competition 5

Hard Core Conduct Ø Almost always have anti-competitive harm and rarely have redeeming economic benefit Ø Presumed to have the purpose of substantially lessening competition Ø Price-fixing, bid-rigging, output quota, market allocation 6

Market Definition (Product and Geographic) Ø Demand-side substitution Ø Supply-side substitution Ø “Small but Significant and Nontransitory Increase in Price” (SSNIP) test Ø Effect of globalisation 7

Market power Ø The power to raise prices consistently and profitably above competitive levels ² Market shares and market concentration (concentration ratios and HHI) ² Barriers to entry ² Barriers to expansion ² Buyer power 8

Paradox Ø Uniform price Ø Price transparency Ø Lowest price guarantee Ø Quality regulation Ø Safeguards against misleading information 9

Hong Kong’s Competition Regime Ø COMPAG Ø Sector-specific legislation Ø CPRC’s recommendation Ø Consultation Ø Cross-sector competition law 10

Overseas cases Ø Price-fixing of replica football kit in UK Ø Eight airlines and fare dissemination system Ø Ø in US Accreditation of law schools in US Bread market in Australia Sales of sustained release morphine in UK Broadcast Music, Inc v. Columbia Broadcasting System 11

Thank you 12