- Dan Ryan exaggerates the "vagueness and arbitrariness" of Hong Kong's proposed competition law; most businesses can pinpoint the distinction between when they are competing and when they are collaborating or exerting their market power.
- In more than 100 countries with competition law, businesses have not been led to seek clearance from competition authorities for everything they do; this is a fairly small portion of a competition authority's operations, in general.
- Competition law will not radically change Hong Kong's free market tradition, but rather it will better protect it from those who seek to extract profits in ways that subvert competition.
Showing posts with label DAN RYAN. Show all posts
Showing posts with label DAN RYAN. Show all posts
Thursday, July 22, 2010
Response to Dan Ryan: "Competition Law Will Benefit Hong Kong "
In a letter to the WSJ dated July 20, 2010, Andrew Simpson and Marc Waha responded to Dan Ryan's article "Competition Law and (Dis)order" with the following claims:
Thursday, July 15, 2010
Competition Law and (Dis)order
Dan Ryan, Director LRI (Wall Street Journal, 15 July 2010)
Hong Kong's antitrust bill threatens the rule of law that makes the territory so attractive to business.
One of Hong Kong's greatest commercial strengths is the rule of law. Both global and local businesses operate right on the doorstep of China with all the traditional common-law protections found in America or Britain. The territory has the additional advantage of not having suffered in the same way from the massive growth of the regulatory state that has affected other "developed" jurisdictions over the years. Yet a new bill presented to the territory's legislature by the government yesterday would undermine Hong Kong's advantage, ironically enough in the name of defending "competition."
Read the full article at http://online.wsj.com/article/SB10001424052748704518904575365963723383280.html
Hong Kong's antitrust bill threatens the rule of law that makes the territory so attractive to business.
One of Hong Kong's greatest commercial strengths is the rule of law. Both global and local businesses operate right on the doorstep of China with all the traditional common-law protections found in America or Britain. The territory has the additional advantage of not having suffered in the same way from the massive growth of the regulatory state that has affected other "developed" jurisdictions over the years. Yet a new bill presented to the territory's legislature by the government yesterday would undermine Hong Kong's advantage, ironically enough in the name of defending "competition."
Read the full article at http://online.wsj.com/article/SB10001424052748704518904575365963723383280.html
Thursday, July 8, 2010
Bad Buy
DAN RYAN (SCMP, 2010. 07. 08)
For over five years, the Lion Rock Institute has been trying to draw public attention to the flaws in the government's plan to introduce a cross-sector competition law in Hong Kong. The central problem with the proposed law is that it is based on a misdiagnosis of what causes monopolies. Our view has always been that the creation of monopolies and the reduction in competition in Hong Kong are ultimately the result of government action. Unfair competition occurs where the government offers sweetheart deals to companies (for example, Hong Kong Disneyland and Cyberport), restricts the entry of new competitors into a particular market (the stock exchange, Hong Kong Jockey Club), or underwrites organisations which compete against private businesses (the Trade Development Council).
The proposed competition law does nothing to address any of these concerns.
The focus of the government's law instead is on agreements between purely private businesses - agreements to sell goods at the same price, for example. The assumption is that these types of agreements must automatically result in a reduction in competition. Yet one must acknowledge that economists differ as to whether such agreements can be said to cause economic harm. We believe that all agreements to sell goods at the same price provide an opportunity for a third party to enter the market and sell the same or replacement goods at a lower cost.
It is unfair to prosecute businesses through a law that is based on contested economic theory. A more sensible approach would have been to limit the application of any competition law to those markets where the government restricts the entry of new competitors. Yet, regardless of which side you stand on these economic arguments, from a purely legal perspective, it is simply impossible to accept the competition bill as it is worded. Indeed, it is impossible for anyone who cares about the rule of law in Hong Kong to support this proposed law.
Say the government decided to introduce a patriotism bill but did not actually define patriotism and instead gave an unelected patriotism commission the open-ended right to decide what types of conduct "prevent, restrict or distort patriotism in Hong Kong". Change "patriotism" to "competition" and that is exactly what the competition bill proposes.
More troubling is the justification by officials for such vague laws by claiming that it is important that one is "not too prescriptive" about what type of conduct is unpatriotic (sorry, anti-competitive), otherwise businesses engaged in such conduct will "just find ways to get around such laws".
It is odd that no one from the government has actually been able to point out any current examples of anti-competitive conduct by private businesses.
And it would be no reassurance at all if a patriotism commission says it will provide exemptions for particular types of unpatriotic conduct or that, if anyone is concerned about whether their planned conduct would be considered unpatriotic or not, all they need to do is apply to the patriotic commission for approval. Yet that is exactly the framework of powers the competition commission will have under the proposed law.
Vaguely worded laws where bureaucrats have wide discretion to punish a range of conduct are the hallmark of third-rate legal systems. The absence of these types of laws is ultimately what preserves the integrity of Hong Kong's legal system and distinguishes it from that found across the border.
It is true that if the competition law is passed it will not be as immediately dramatic as the passing of a patriotism law but, because the nature of the law is the same, it will have the same corrosive effect on the rule of law in Hong Kong. But no doubt legislators will simply dismiss such concerns with the tired line that competition, like patriotism, is a good thing - and who could possibly be against a law to promote it?
Dan Ryan is director of The Lion Rock Institute, Hong Kong's leading free-market think tank.
http://www.scmp.com/portal/site/SCMP/menuitem.2af62ecb329d3d7733492d9253a0a0a0/?vgnextoid=d9f5383c6dca9210VgnVCM100000360a0a0aRCRD&ss=Hong+Kong&s=News
For over five years, the Lion Rock Institute has been trying to draw public attention to the flaws in the government's plan to introduce a cross-sector competition law in Hong Kong. The central problem with the proposed law is that it is based on a misdiagnosis of what causes monopolies. Our view has always been that the creation of monopolies and the reduction in competition in Hong Kong are ultimately the result of government action. Unfair competition occurs where the government offers sweetheart deals to companies (for example, Hong Kong Disneyland and Cyberport), restricts the entry of new competitors into a particular market (the stock exchange, Hong Kong Jockey Club), or underwrites organisations which compete against private businesses (the Trade Development Council).
The proposed competition law does nothing to address any of these concerns.
The focus of the government's law instead is on agreements between purely private businesses - agreements to sell goods at the same price, for example. The assumption is that these types of agreements must automatically result in a reduction in competition. Yet one must acknowledge that economists differ as to whether such agreements can be said to cause economic harm. We believe that all agreements to sell goods at the same price provide an opportunity for a third party to enter the market and sell the same or replacement goods at a lower cost.
It is unfair to prosecute businesses through a law that is based on contested economic theory. A more sensible approach would have been to limit the application of any competition law to those markets where the government restricts the entry of new competitors. Yet, regardless of which side you stand on these economic arguments, from a purely legal perspective, it is simply impossible to accept the competition bill as it is worded. Indeed, it is impossible for anyone who cares about the rule of law in Hong Kong to support this proposed law.
Say the government decided to introduce a patriotism bill but did not actually define patriotism and instead gave an unelected patriotism commission the open-ended right to decide what types of conduct "prevent, restrict or distort patriotism in Hong Kong". Change "patriotism" to "competition" and that is exactly what the competition bill proposes.
More troubling is the justification by officials for such vague laws by claiming that it is important that one is "not too prescriptive" about what type of conduct is unpatriotic (sorry, anti-competitive), otherwise businesses engaged in such conduct will "just find ways to get around such laws".
It is odd that no one from the government has actually been able to point out any current examples of anti-competitive conduct by private businesses.
And it would be no reassurance at all if a patriotism commission says it will provide exemptions for particular types of unpatriotic conduct or that, if anyone is concerned about whether their planned conduct would be considered unpatriotic or not, all they need to do is apply to the patriotic commission for approval. Yet that is exactly the framework of powers the competition commission will have under the proposed law.
Vaguely worded laws where bureaucrats have wide discretion to punish a range of conduct are the hallmark of third-rate legal systems. The absence of these types of laws is ultimately what preserves the integrity of Hong Kong's legal system and distinguishes it from that found across the border.
It is true that if the competition law is passed it will not be as immediately dramatic as the passing of a patriotism law but, because the nature of the law is the same, it will have the same corrosive effect on the rule of law in Hong Kong. But no doubt legislators will simply dismiss such concerns with the tired line that competition, like patriotism, is a good thing - and who could possibly be against a law to promote it?
Dan Ryan is director of The Lion Rock Institute, Hong Kong's leading free-market think tank.
http://www.scmp.com/portal/site/SCMP/menuitem.2af62ecb329d3d7733492d9253a0a0a0/?vgnextoid=d9f5383c6dca9210VgnVCM100000360a0a0aRCRD&ss=Hong+Kong&s=News
Monday, December 15, 2008
Competition Law Reform – The Way Forward
Dan Ryan is a Director of the Lion Rock Institute - 2008.12.15
The Hong Kong government has raised expectations that some sort of competition-related reform will be introduced in the territory in 2009. Although it may surprise some, we are in favor of this. What we are against is that nature of the proposal that the government wants to introduce. From the outset The Lion Rock Institute has been one of the leading (and lonely) critics of the proposal. Now the chorus of critics is growing.
The key problem with the proposal is that it subjects private enterprises to a regulatory regime which is inappropriate for those that operate in extremely open and competitive markets. At the same time the proposal does nothing about those entities which operate in those markets that are protected from new competitors by government regulations. The proposal also excludes and contains principles which are inappropriate for regulating statutory entities which engage in commercial activities that unfairly compete with the private sector. If the current proposal is enacted we would thus get the worse of both worlds – legal uncertainty and unnecessary costs on private business and inertia in those government-protected industries which do require reform.
In the interests of moving the debate forward we believe it is better to focus on those areas where there is wide agreement on the need reform and which, unlike the current proposal, would actually do some good. The key focus should be on those statutory entities, regulations or regulatory bodies which restrict competition in Hong Kong. Let me give you a couple of examples.
The Law Society is charged with regulating the legal profession in Hong Kong. Unfortunately many of its regulations impose overly-restrictive burdens on foreign solicitors practicing in this city that go beyond the need to simply ensure quality & standards. For example, foreign practitioners who have already gone through years of practical and university training have to sit exams in Hong Kong's arcane system of land tenure even though they will never practice in that area in their lives. Ask any foreign lawyer who has had to sit they exam and they will tell you how crazy this is. This type of restrictive barrier forces up the price of legal services for all Hong Kong consumers and makes the legal market less competitive than it should be.
Another good example is the Hong Kong Exchange. The exchange is a for-profit company which is sheltered from foreign competition by overly restrictive government regulations. In Europe and the United States regulatory changes have allowed alternative trading systems such as Chi-X a greater role in the market. These entities have provided competition to the existing exchanges and drastically cut trading costs and improved efficiency. In Hong Kong the regulatory regime is such that it restricts their operations here.
The Hong Kong Jockey Club is another area in need of competition reform. Like others, we acknowledge there may be good social policy reasons for limiting gambling in the city. However, this does not automatically mean that one entity should be given a monopoly on the provision of gambling services. We believe there is scope for an open and transparent inquiry into how new operators may be introduced while retaining those restrictions which are deemed necessary for social policy reasons.
One of the most politically sensitive areas is the retail grocery and petrol markets. It is an area which people rely on every day but also an area where a great deal of unsubstantiated allegations have been made. The argument (often presented with very little hard evidence) is that the government land auction process and other regulations favor existing incumbents. We would be in favor an open and transparent inquiry into the way that land auctions take place in Hong Kong which would also examine any government regulatory restrictions which might prevent the entry of new entities into the retail supermarket and petrol markets.
We believe that the reforms of the type we have outlined above are something that all those who genuinely believe in increasing competition in Hong Kong can get behind. They are proposals which can be supported while staying true to the city's pro-market principles and at the same time exposing to rightful scrutiny those areas where existing government regulations favor particular businesses over others. We look forward to working with all those who want to make this reform happen.
The Hong Kong government has raised expectations that some sort of competition-related reform will be introduced in the territory in 2009. Although it may surprise some, we are in favor of this. What we are against is that nature of the proposal that the government wants to introduce. From the outset The Lion Rock Institute has been one of the leading (and lonely) critics of the proposal. Now the chorus of critics is growing.
The key problem with the proposal is that it subjects private enterprises to a regulatory regime which is inappropriate for those that operate in extremely open and competitive markets. At the same time the proposal does nothing about those entities which operate in those markets that are protected from new competitors by government regulations. The proposal also excludes and contains principles which are inappropriate for regulating statutory entities which engage in commercial activities that unfairly compete with the private sector. If the current proposal is enacted we would thus get the worse of both worlds – legal uncertainty and unnecessary costs on private business and inertia in those government-protected industries which do require reform.
In the interests of moving the debate forward we believe it is better to focus on those areas where there is wide agreement on the need reform and which, unlike the current proposal, would actually do some good. The key focus should be on those statutory entities, regulations or regulatory bodies which restrict competition in Hong Kong. Let me give you a couple of examples.
The Law Society is charged with regulating the legal profession in Hong Kong. Unfortunately many of its regulations impose overly-restrictive burdens on foreign solicitors practicing in this city that go beyond the need to simply ensure quality & standards. For example, foreign practitioners who have already gone through years of practical and university training have to sit exams in Hong Kong's arcane system of land tenure even though they will never practice in that area in their lives. Ask any foreign lawyer who has had to sit they exam and they will tell you how crazy this is. This type of restrictive barrier forces up the price of legal services for all Hong Kong consumers and makes the legal market less competitive than it should be.
Another good example is the Hong Kong Exchange. The exchange is a for-profit company which is sheltered from foreign competition by overly restrictive government regulations. In Europe and the United States regulatory changes have allowed alternative trading systems such as Chi-X a greater role in the market. These entities have provided competition to the existing exchanges and drastically cut trading costs and improved efficiency. In Hong Kong the regulatory regime is such that it restricts their operations here.
The Hong Kong Jockey Club is another area in need of competition reform. Like others, we acknowledge there may be good social policy reasons for limiting gambling in the city. However, this does not automatically mean that one entity should be given a monopoly on the provision of gambling services. We believe there is scope for an open and transparent inquiry into how new operators may be introduced while retaining those restrictions which are deemed necessary for social policy reasons.
One of the most politically sensitive areas is the retail grocery and petrol markets. It is an area which people rely on every day but also an area where a great deal of unsubstantiated allegations have been made. The argument (often presented with very little hard evidence) is that the government land auction process and other regulations favor existing incumbents. We would be in favor an open and transparent inquiry into the way that land auctions take place in Hong Kong which would also examine any government regulatory restrictions which might prevent the entry of new entities into the retail supermarket and petrol markets.
We believe that the reforms of the type we have outlined above are something that all those who genuinely believe in increasing competition in Hong Kong can get behind. They are proposals which can be supported while staying true to the city's pro-market principles and at the same time exposing to rightful scrutiny those areas where existing government regulations favor particular businesses over others. We look forward to working with all those who want to make this reform happen.
Wednesday, April 2, 2008
How to Make Hong Kong Uncompetitive
How to Make Hong Kong Uncompetitive
A series of record-breaking fines in American and European competition cases is focusing attention and concern again on the power and purpose of competition regulators themselves – just ask Microsoft. So the Hong Kong government's ongoing attempt to create such a regulator of its own is puzzling, to say the least. Unlike most jurisdictions around the world, Hong Kong does not have a general competition law regulator. (The sole exception is a limited – and unnecessary – regime governing the telecommunications and broadcasting industries.) Yet somehow without such a regulator Hong Kong is consistently rated the freest and most competitive economy on the planet. How can this be? Hong Kong's current "competition regulator" is its economic freedom and open market. The government keeps tariffs low and, with a few well-known and limited exceptions like the horse racing monopoly, it has maintained few government-imposed barriers to entry. This doesn't mean that certain companies haven't been able to dominate particular industries. But their ability to exploit that dominance to consumers' detriment is constrained by the constant threat that new competitors could pop up to challenge them...
To read more, visit http://online.wsj.com/article/SB120708273137381351.html
Mr. Ryan is a director at the Lion Rock Institute, (The Wall Street Journal , 2008-4-2)
A series of record-breaking fines in American and European competition cases is focusing attention and concern again on the power and purpose of competition regulators themselves – just ask Microsoft. So the Hong Kong government's ongoing attempt to create such a regulator of its own is puzzling, to say the least. Unlike most jurisdictions around the world, Hong Kong does not have a general competition law regulator. (The sole exception is a limited – and unnecessary – regime governing the telecommunications and broadcasting industries.) Yet somehow without such a regulator Hong Kong is consistently rated the freest and most competitive economy on the planet. How can this be? Hong Kong's current "competition regulator" is its economic freedom and open market. The government keeps tariffs low and, with a few well-known and limited exceptions like the horse racing monopoly, it has maintained few government-imposed barriers to entry. This doesn't mean that certain companies haven't been able to dominate particular industries. But their ability to exploit that dominance to consumers' detriment is constrained by the constant threat that new competitors could pop up to challenge them...
To read more, visit http://online.wsj.com/article/SB120708273137381351.html
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