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Examples of anti-competitive practices

Examples of anti-competitive practices

The Voice of TIC has once published the Government's guidelines on competition. The following is a non-exhaustive list of examples of anti-competitive practices:

  1. price-fixing intended to distort the normal operation of the market, increase the cost for purchasers, and have the effect of impairing economic efficiency or free trade;
  2. actions preventing or restricting the supply of goods or services to competitors, and have the effect of impairing economic efficiency or free trade;
  3. agreements to share any market sector between participants on agreed geographic or customer lines, and have the effect of impairing economic efficiency or free trade;
  4. unfair or discriminatory standards among members of a trade or professional body intended to deny newcomers a chance to enter or contest in the market, and have the effect of impairing economic efficiency or free trade;
  5. joint boycotts intended to distort the normal operation of the market, deprive supply or choice to the targets of the boycott, and have the effect of impairing economic efficiency or free trade;
  6. bid-rigging (Note 1), market allocation, sales and production quotas intended to distort the normal operation of the market, increase the cost for and reduce the choice and availability to purchasers, and have the effect of impairing economic efficiency or free trade; and
  7. abuse of dominant market position (see below).

Abuse of market position

Generally speaking, in considering whether a company is dominant , the relevant matters to be taken into account include but not limited to:

  1. the market share of the company;
  2. the company's power to make pricing and other decisions;
  3. any barriers to entry to competitors into the relevant market; and
  4. the degree of product differentiation and sales promotion.

A company who is in a dominant position would be deemed to have abused its position if it has engaged in a conduct which has the purpose or effect of preventing or substantially restricting competition in a market. As illustrative examples, the conducts to be taken into account in considering an abuse of dominant market position include:

  1. predatory pricing - a deliberate strategy, usually by a dominant firm, to drive competitors out of the market by setting very low prices or selling below the firm's incremental costs of producing the output. Once the predator has successfully driven out existing competitors and deterred entry of new firms, it can raise prices and earn higher profits;
  2. setting retail price minimums for products or services where there are no ready substitutes;
  3. price discrimination, except to the extent that the discrimination only makes reasonable allowance for differences in the costs or likely costs of supplying the goods or services;
  4. conditioning the supply of specified products or services to the purchase of other specified products or services or to the acceptance of certain restrictions other than to achieve assurance of quality, safety, adequate service or other justified purposes; and
  5. making conclusion of contracts subject to acceptance by other parties of terms or conditions which are harsh or unrelated to the subject of the contract.

Note 1:
Certain bid rigging activities, as far as public bodies are concerned, are criminal offences under the Prevention of Bribery Ordinance.

Note 2:
It is necessary to take into account the commercial practice of "cross-selling", particularly when in the form of bundled products/services which are typically offered to increase the attractiveness of the individual products/services. Very often these service/product packages address customers' preferences as well as lower the cost of servicing to the benefit of the customers.

( 2004-12-14 )