China’s new antitrust law a template for HK, Macau?

Caixin has a good story about the new draft antitrust law released last week in Beijing, which has much sharper teeth and is clearly aimed at the country’s digital conglomerates. 

Carrying penalties of between 1% and 10% of a company’s previous year’s revenues, or as much as 50 million yuan for those not yet generating revenues, the new law carries a heavy stick. 

There are other interesting details in the draft, such as: 

The draft mandates considering the effect businesses have on the web as a whole, their economies of scale, the “lock-in” effects of their products or services, and their ability to handle and process data, among other things.

Considering this law will be applied to the nine GBA cities within Guangdong, it has to be wondered whether Hong Kong and Macau will consider following similar guidelines. Otherwise, a gap will likely open between their regulatory mechanisms that could lead to legal arbitrage opportunities for mainland companies choosing to operate offshore – like the underground banks, which flout PRC laws in Hong Kong, where the facilitation of capital flight is not a crime.

Macau might have less of a problem with it. Under the new Chief Executive, Ho Iat Seng, it seems that oligopolies will likely have less protection than they did previously. It will nevertheless be interesting to see what the new CE might do about Suncity’s dominance of the junket industry – it is widely believed to control as much as half of all VIP revenues. The six concessionaires are not a problem, as none of their fiercely competitive owners could likely agree on whose room to sit in to have a market-rigging conversation. But junket commissions have been held high for too long, unchanged through market cycles, not to attract antitrust scrutiny.

Hong Kong has a much bigger problem in dealing with cartels, because they were woven into the fabric of the economy by the British. Its Competition Commission has made a lot of noises over the years, especially since appointing a new chief executive in 2017, but it has a low-key track record. That is for obvious reason: most of the territory’s business bigwigs are political heavyweights, too. 

Could the new Liaison Office chief, Luo Huining, be the antidote to Hong Kong’s antitrust ailments? Will he give the hapless Carrie Lam the support she needs to get “GBA integration” focused where it should be? Could the mainland actually teach Hong Kong something about how to build a better business regulatory environment founded on the rule of law? 

From supermarkets to drugstores to, yes, the property, banking and stock markets, an antitrust regime with real teeth could do wonders to boost Hong Kong’s competitiveness. And get the masses back on board.

Time will tell. Stay tuned.

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