Photographer: Justin Chin/Bloomberg

Hong Kong's Cartel Cop Sees Staff Exit Amid Fight for Change

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  • Many senior executives have left the Competition Commission
  • CEO highlights successes, says a dozen probes are under way

It took 10 years of talks for Hong Kong to pass an antitrust law. But about 18 months after it took effect, the city’s Competition Commission has seen multiple senior departures as it battles to change a culture of price controls and quasi-legal cartels.

Since it started hiring in 2014, the regulator is on its third chief economist, seen its executive director for operations and its general counsel leave, and in September will welcome its third chief executive. Rank and file employees have also departed, a former staffer said.

While agency officials say staff turnover is common at a new regulator and point to actions they’ve taken to enforce the new rules, the exits add to the demands facing incoming head Brent Snyder. The former U.S. Justice Department prosecutor will not only be expected to tackle antitrust issues in a city that operated for 150 years without any cross-sector competition rules, but also ensure there’s stability at the commission.

“Bringing together the right blend of competition law and Hong Kong legal expertise in one team was always going to be challenging,” said Adam Ferguson, a competition lawyer with Eversheds LLP in Hong Kong. “I expect this will continue to be one of the key challenges.”

Companies in Hong Kong have long engaged in price agreements and sharing information. The agency has said such conduct hurts consumers: it found in May that gas stations in the city operated a “complex and opaque” discount system that made it difficult to compare prices. Such practices are so ingrained that before the antitrust law came into effect industry officials would meet with the commission’s current CEO Rose Webb and openly describe their price-fixing and cartel deals. The ability to set prices was essential to their business needs, they said, according to Webb.

It will take time for the commission’s education and investigation efforts to affect such business practices, said lawmaker Lam Cheuk-ting, who also lobbies against bid-rigging in the construction sector.

The employee exits haven’t deterred the commission from trying to change how companies operate, Webb said in an interview in her office. She highlighted successes such as complaints from firms that rivals were now discounting, and said her international counterparts have noted the speed with which the regulator has acted. The commission sued five information technology firms in March for rigging a contract bid for a charity, its first court case.

Rose Webb

Source: Competition Commission

Some successes have come without the need for litigation. In November the regulator directed the Hong Kong Institute of Architects and Hong Kong Institute of Planners to amend their codes of conduct, which restricted members from setting their own fees, while the Hong Kong Newspaper Hawker Association withdrew guidance it issued on cigarette pricing after meeting with commission officials.

The agency is assessing 130 complaints and actively investigating about a dozen cases in sectors including retail, construction and financial services, said Webb, without providing details.

Concentrated Holdings

Hong Kong’s grocery market is an example of the concentrated nature of some of the city’s industries. Dairy Farm International Holdings Ltd., majority-owned by Jardine Matheson Holdings Ltd., and Li Ka-shing’s AS Watson Group each control about 17 percent of the market, according to Euromonitor International. Japan’s Seven & i Holdings Co., which operates 7-Eleven stores, is a distant third with a 6 percent share.

AS Watson’s grocery chain ParknShop said the retail market in Hong Kong is “very competitive and diverse” and it believes the new law will help ensure a level playing field in the city. An official at Dairy Farm said supermarkets and personal care stores are highly competitive businesses, and that retailers are subject to stringent regulatory oversight and media scrutiny. (The agency hasn’t said it’s looking at grocery stores.)

Limited Resources

Taking on such entrenched positions will be tougher for the commission because of staff departures, said Carter Chim, a former legal counsel at the agency. It wasn’t just senior managers -- some departments saw nearly all their original employees leave, he said, and probes stalled when case officers exited. Chim, a barrister and law lecturer at The Chinese University of Hong Kong, said he felt investigations were not pursued because of limited resources.

One of Chim’s suggestions: better prioritize investigations. “This is really the most important thing to be done, otherwise people don’t feel the purpose of being here,” he said.

The commission disputed the idea that employees were leaving because of unhappiness or inefficient practices.

“Having some staff turnover in the early days of an agency such as ours is not surprising, but overall the teams have been quite steady and many people have renewed their contracts,” a spokesman said in an email. “A number of those that have left have moved to private practice, which reflects well on the commission.”

Timothy Lear, the agency’s first executive director for operations who left in March 2017 after three years, said in an interview that he had planned to leave once the body was up and running. Former General Counsel Philip Monaghan, who left in June, did not respond to messages sent via LinkedIn.

Snyder, who will take over at the commission in September, was previously head of criminal enforcement at the Justice Department’s antitrust division. He was in charge of several high-profile investigations, including alleged price-fixing by generic drug makers. His division charged 52 executives and 19 companies with price fixing, bid rigging, fraud, and obstruction of justice in 2016, according to a statement from Snyder in March.

“He is very well regarded among the U.S. antitrust community,” said Eversheds lawyer Ferguson. “His appointment, together with that of the new General Counsel Steven Parker, reflects a desire to focus more on prosecutions, as both have litigation backgrounds.”

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