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

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

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

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

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

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

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

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

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

10 Hong Kongs Competition Regime COMPAG Sector-specific legislation CPRCs recommendation Consultation Cross-sector competition law

11 Overseas cases Price-fixing of replica football kit in UK Eight airlines and fare dissemination system 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

12 Thank you