Hong Kong’s Competition Ordinance, which is being fully implemented from today, could lead to a spate of bankruptcies among small retailers, industry players said.
While the new law is deemed beneficial to consumers as it will encourage businesses to lower their prices, bigger retailers can easily undercut their rivals and force them out of the market, the players said.
In effect, the ordinance may hinder rather than help foster competition, Apple Daily reported on Wednesday.
Over the weekend, major consumer electronic chains, including Broadway, Suning and Fortress, started lowering the prices of some of their mobile phones by more than HK$1,000 (US$129) each, while those of Apple Inc.’s latest iPhone 6S and 6S Plus were also cut by HK$200 to HK$300.
A survey conducted by the newspaper among several phone shops in Sham Shui Po showed that certain handset models were cheaper by several hundred Hong Kong dollars in bigger outlets than in smaller shops.
The ordinance, which was launched by Secretary for Commerce and Economic Development Gregory So on Sunday, seeks to put a stop to price fixing, big rigging and other anti-competitive practices.
But a major concern is that while retailers no longer need to abide by instructions from their suppliers in setting prices, they can also push down prices to excessively low levels to undercut competitors.
Francis Fong, chairman of the Hong Kong Consumer Electronics Alliance, said such predatory pricing would deal a fatal blow to small shops, which are already reeling from high rents and have no tie-ups with banks to offer credit card discounts.
Fong is worried that such a situation could spark a wave of bankruptcies, with only big distributors ruling the market, and thus lower competition in the market.
Thomas Cheng, an associate professor at the Faculty of Law of the University of Hong Kong and a member of the Competition Commission, said it is hard to determine if full implementation of the ordinance will trigger a wave of bankruptcies.
He noted that Hong Kong has fallen behind other mature economies by so many years and therefore it cannot refer to the experiences of other markets to guide its implementation of the competition ordinance.
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