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Hong Kong Competition Exchange 2018 - Summary of Discussions

Panel 2: Fostering Competition for the Benefit of All

Moderator:

Ms Anna WU Hung-yuk, Chairperson, Hong Kong Competition Commission

Panellists:

Mr Mark AU, Managing Director, Lalamove Hong Kong
Mr Kris DEKEYSER, Director of the Policy and Strategy Directorate, Directorate General for Competition, European Commission
Mr Juergen KEITEL, Chief Global Affairs and Development Officer, AirAsia
Mr Gary LIU, Chief Executive Officer, South China Morning Post
Mr Jon LEIBOWITZ, Partner, Davis Polk & Wardwell LLP

Summary of discussions:

The panel examined how fostering healthy competition can benefit different sectors, such as governments, businesses, and the consumers, in the context of a quickly-evolving global market. Speakers discussed the opportunities and innovations brought about by competition across different industries, and also weighed its potential challenges and developments in the future.

How competition benefits all

Ms Anna Wu began the discussion by asking the panellists how competition benefits all.

Mr Jon Leibowitz noted that competition ensures that market functions efficiently without distortions. Antitrust enforcements protect consumers and businesses from anti-competitive practices. Consumer protection enforcements ensure that markets are not distorted by unfair trade practices, such as false advertising.

Mr Juergen Keitel elaborated further from the perspective of the airline industry that airlines connect people, trades, countries, and cultures around the world. They compete with each other in a heavily regulated environment. AirAsia faces tight regulations and needs to maintain good communications with various governments in different regions.

Mr Mark Au added that competition forces individuals and corporations to always improve themselves. Competition also resonates with one of the values of Lalamove which is to impact lives. He emphasized that competition pushes Lalamove to strive for perfection. Competition is also a driving force that enables consumers to obtain better products at lower prices.

Mr Gary Liu expounded through the lens of the journalism industry. Despite its current state of distress brought forward by rapid changes in consumer behaviors and the dissemination of information due to technological advancement and globalization resulting in stiff competition, the journalism industry itself has reached never-before-seen summits in qualities. He explained that as the journalism industry serves rapidly changing masses, healthy competition has helped to maintain the ethics of news.

Mr Kris Dekeyser remarked that competition drives businesses to do better by providing products and services at lower prices, of high quality and greater innovation. From a macroeconomic perspective, empirical studies have shown how competition is related to growth in employment. Moreover, he stressed the importance of competition law and emphasized the necessity to step in to curtail unsavoury practices. Also, one of the underlying principles of competition is fairness. It is important that economic outcomes are determined by merits and companies are competing on a level playing field.

Competition: past and present

Ms Anna Wu then asked the panellists whether today’s world was better than how it was 50 years ago in the dimension of competition.

Mr Mark Au said that Lalamove has revolutionized the logistics industry and is a disruptor by utilizing an online platform as opposed to call center to match and assign orders. Lalamove does not only benefit consumers, but also drivers by minimizing their idle time.

Mr Gary Liu then described how competition in the news and media industry expanded channels of information and provided a wider range of viewpoints that consumers could not have access to 50 years ago. He explained that the development of Internet had greatly lowered the barrier to 3 entry and enable news agency to reach a greater spectrum of readers. People can now participate in conversations about local and global affairs from all around the world.

Mr Kris Dekeyser said that competition law in the European Union has created a much healthier and fairer market nowadays.

Mr Jon Leibowitz agreed by referring to the antitrust enforcement by the Federal Trade Commission (FTC) in the United States. He added that competition agencies love start-ups. It is important for competition agencies to protect competition by preventing incumbents from keeping the start-ups out of the market. For example, in the airline industry, incumbent airlines may lobby the Government to keep their potential rivals out by not providing slots to new entrants.

Mr Juergen Keitel said that AirAsia also faces barriers to entry such as slot constraints. AirAsia will persuade the local government that new entry of airlines can benefit local economies by providing greater connectivity with other cities, countries, and regions. Also, the emergence of low-cost carriers boosts competition and provides travel opportunities to those who could not afford air tickets in the past. They had as well brought prosperity to tourism in many countries and helped the local economies to grow. AirAsia expanded extensively in many ASEAN member states as they want to meet increasingly unmet market demand. He said that it is important for the Government to create a regulatory regime where competition works effectively.

Competition and the future world

Ms Anna Wu asked the panellists on their views regarding how the future will be shaped by competition, and how competition itself will evolve.

Mr Mark Au said that Lalamove seeks to create and sustain competitive advantage which is more difficult to be replicated by its competitors. Lalamove also attaches great importance to localization. For instance, in some Southeast Asian countries, motorcycle is a more common transport mode than private car. Despite its success in Southeast Asian countries, Lalamove is still the underdog in Hong Kong. It will continue to communicate its mission and vision to their partners and provide better experiences to its users.

Mr Gary Liu said that the main reason why the SCMP adopts digitalization is that SCMP is growing from a local newspaper to a global news organization in order to enable more readers to understand about China. The SCMP is competing against all the voices around the world who have an opinion on the rise of Asia.

He said that the media industry also needs to compete for advertisers. He believes that advertising is not disappearing but shifting with the changing consumers’ eyeballs. It is therefore important for news agencies to not only find audiences, but also work with advertisers to fund journalism. In the future, media industry needs to innovate rapidly to compete with social media platforms for readers’ attention. It is very important for the SCMP to uphold accountability and credibility.

Mr Juergen Keitel explained that the market landscape of the airline industry is evolving. There is now a growing middle-class demographic, creating new demand for competition. Low-cost carriers could meet the market demand by providing affordable travelling options.

Governments’ and authorities’ role in encouraging competition

The panel concluded with a discussion on the roles of government and competition authorities in encouraging competition.

Mr Kris Dekeyser said it is important for the Government to conduct competition impact assessment because regulation could increase cost for producers, resulting in higher prices for consumers. There are usually multiple ways to achieve public policy goals. Competition agencies should also comment on legislative proposals of the Government. For example, within the European Union, member states have different policy advocacy strategies and powers. In the European Commission, the Inter-Service Consultation is the procedure to be used for requesting formal opinion of other Director-Generals on a proposal. Also, even before the proposal is made, the Commission departments will conduct competition impact assessment to evaluate the impact of the proposal on competition.

When asked on data leak issues in light of recent news, Mr Jon Leibowitz stressed the importance of data security in the big data age, and that competition could not benefit anyone when consumers distrust companies. Therefore, companies should attempt to reduce the harshness of data intake by providing opt-in and opt-out options for data sharing, as well as putting premium on the best data security measures possible even though protecting data entails additional costs for companies. Also, it is in the long-term interest of the company to keep the data safe.

Mr Kris Dekeyser commented that while enforcement efforts in tackling antitrust behaviors and practices are vital, it is no less important to raise public awareness on the issue of antitrust behaviors and to create an atmosphere that values competition. He then commended the Hong Kong Competition Commission for its efforts in the promotion of competition, including this Conference which brings together competition law experts from around the world to exchange views and ideas. Reiterating the value of competition in driving innovation, Mr Dekeyser, as the last speaker of the panel, had this to say to businesses: “Fight as hard as you can, but don’t forget the rules”.