Bryan Caplan  

Antitrust for Hong Kong?

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When the Lion Rock Institute asked me to sign its petition against possible antitrust laws for Hong Kong, the decision was a no-brainer. After all, I oppose antitrust laws. At best, antitrust laws are unnecessary, legislating outcomes that free competition would have given us anyway. In practice, they're a recipe for scapegoating of successful firms, frivolous lawsuits, and bizarre shakedowns.

But even if you don't agree with my assessment, antitrust laws are clearly pointless for small open economies like Hong Kong. A country with 7 million people couldn't make the world economy more competitive if it tried. But if Hong Kong decided to give antitrust laws a chance, it could tarnish its world-class reputation for minimal regulation and a secure legal climate.

The upshot: Even if you're a mainstream economist who thinks my general critique of antitrust is overblown, you should still grant that for Hong Kong, I'm right. And doesn't the fact that Hong Kong's made it this far without antitrust give you a moment's pause about the domestic benefits of these laws?


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COMMENTS (4 to date)
Richard W writes:

Bryan,

How can you be opposed to regulations against hard-core anticompetitive behavior such as cartelization and price fixing, which are rife in Hong Kong?

Food prices are substantially higher than elsewhere in Asia. About 10 years ago, Carrefour had plans to open hypermarkets in Hong Kong. It was forced to abandon its plans when it couldn't get the cooperation of suppliers, who faced pressure from the two dominant supermarket chains.

The one sector of Hong Kong's economy which is currently subject to antitrust regulation is the telecom sector, where prices are lower and service quality higher than almost anywhere else in the world.

Antitrust laws have only ever been used against companies that have ceased to pay off members of the government. Monopolies don't actually exist in a free market system for more than extremely short periods of time (a year or less). The most famous anti-trust cases in the US prove this, with US steel losing market share for several years before the government came in to break up the "monopoly" that hadn't been even close to one for several years. Antitrust laws in Hong Kong will do nothing more than be used against political enemies, as they are similarly used here.

Yeung Wai-hong writes:

If it is true that food costs more in Hong Kong than neighboring countries, that is because income, wages and rental are all higher here, too. Hong Kong people certainly don't spend a higher portion of their income/wealth on food than their neighbors.

There is no barrier to enter the supermarket sector in Hong Kong. Without a higher income level, food prices cannot sustain at the alleged high level. Food costs less in Mississippi than in Manhattan, not because the former has more effective competition laws than the latter. It should not take a degree in economics to know that.

Hong Kong once had a government-run telephone monopoly. It was then privatized and deregulated -- but with lingering disturbingly restrictive control. Had government not restricted new entrants to the telephone market, we will certainly enjoy even cheaper rates than what we have at the present time. The regulatory authority thus protects incumbent service providers at the expenses of consumers.

A true believer in competition should be calling for the complete removal of all entry restrictions to the telephone market, rather than advocating extending these protective measures to the rest of Hong Kong's economy.

Andrew writes:

The supermarket arguement is old and even the proponents don't use it anymore. Check www.yp.com.hk and put in 'groceries'. This is what you get:
Canned Goods (15) Food Importers & Exporters (188) Food Supplies (200) Grocery Stores (1349) Native Products-Retailers (148)

My personal favourite is the Yuk Kee Seafood (Yau Tong) and Yuk Kee Vegetable (Yuen Long).

Carrefour did not lose out because CocaCola and other suppliers wouldn't deal with them. Really? Wellcome vs. Carrefour? It's laughable.

Where Carrefour can't compete is on the negotiation of land fees. Arcane, complex and arbitrary govenment regulations mean that you must be an expert in negotitating said fees. Most people working in this field, negotiating with the governemnt, used to work in the department they currently negotiate with.

Monopoly and anticomptitive forces are at work and they are embodied in and enabled by the government. Conveniently exempted in antitrust legislation all around the world. And Hong Kong.

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