一、鞏固你所學 - hkep€¦ · web viewthe objectives of hong kong’s competition policy...

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2.1 What are anti-competitive practices?

A. Foundation Training

I. Fill in the Blanks: Fill in each blank with a suitable word. (1 mark each)1. A monopolist that has a has the ability and the

to abuse its dominance. It may engage in practices to increase its

profits. Thus, monopoly often suggests anti-competition and harm to economic

efficiency.

2. Most countries define ‘anti-competition’ according to whether the company uses

or ways to reduce or restrict .

II. Matching: On each line given, write the letter that matches the term most. Each letter may be used more than once. (1 mark each)

1. Horizontal mergers

A. Mergers

B. Horizontal agreements among competitors

C. Vertical agreement between buyers and sellers

2. Sales and production quotas

3. Potential competition mergers

4. Sole distributor

5. Price-fixing

6. Customer allocation

7. Tie-in sales

8. Resale price maintenance

9. Unfair or discriminatory standards

Chapter 2 Anti-competitive Behavioursand Competition Policy

©Hong Kong Educational Publishing Co.1


III. True / False Questions: The following statements are about anti-competitive practices. For each one of them, if it is correct, put a in the box; if it is wrong, put a in the box and explain why it is wrong on the lines provided. (2 marks each)

1. Monopoly means anti-competitive. It must be harmful to society.

2. Competition law in most countries define ‘anti-competition’ according to the company’smarket share.

3. Anti-competitive practices refer to all behaviours that distort or restrict marketcompetition.

4. Joint boycott is an example of an horizontal agreement.

5. By practising bid rigging, bidders can increase profits. So, most countries do not ban thepractice.




B. Reinforcement Training

I. Multiple Choice Questions (1 mark each)

1. Which of the following practices is not an anti-competitive practice?A. Bid riggingB. Retail price maintenanceC. Providing after-sales servicesD. Exclusive dealing

2. The rail merger of the MTR Corporation and the KCR Corporation on 2 December 2007 was a(1) horizontal merger(2) potential competition merger(3) vertical mergerA. (1) onlyB. (1) and (3) onlyC. (2) and (3) onlyD. (1), (2) and (3)




II. Short Questions

1. What is anti-competition? List three major forms of anti-competitive practice. (5 marks)

2. State the difference between horizontal merger and potential competition merger. Explain why these two types of mergers may have anti-competitive effects. (4 marks)




III. Structured Questions

Level 21. Suppose a major press group greatly reduces the price of its newspaper when a new

newspaper is published.(a) What is predatory pricing? (3 marks)(b) Is the major press group mentioned above practising predatory pricing? Explain.

(3 marks)(c) Explain why it is usually difficult for the firm that practises predatory pricing to

increase profits. (4 marks)




2.2 Impacts of anti-competitive practices and competition policy


I. Fill in the Blanks: Fill in each blank with a suitable word. (1 mark each)

1. The Competition Policy Review Committee pointed out that anti-competitive practices are illegal if they are carried out with the intent to or have the effect of lessening .

2. To protect public interests and to avoid conflict with international obligations, the Hong Kong Competition Policy Review Committee recommended that the new legislation should include a to allow the government to exempt certain specified situations from the application of the law.

II. True / False Questions: The following statements are about impacts of anti-competitive practices and competition policy. For each one of them, if it is correct, put a in the box; if it is wrong, put a in the box and explain why it is wrong on the lines provided. (2 marks each)

1. There is no final conclusion as to whether competition laws can enhance economicefficiency in practice.

2. Some people are worried that a competition policy will interfere with the marketstructure.






1. Which of the following practices is not covered by the competition policy of Hong Kong?A. Mergers and takeoversB. Joint boycottsC. Price-fixingD. Unfair or discriminatory standards

2. The objectives of Hong Kong’s competition policy are(1) to enhance economic efficiency.(2) to remove monopoly.(3) to facilitate free trade.A. (1) and (2) onlyB. (1) and (3) onlyC. (2) and (3) onlyD. (1), (2) and (3)

3. Which of the following statements about the competition policy of Hong Kong is incorrect?A. All sectors are regulated by the policy.B. There are exemptions to competition law.C. Violating competition law is a criminal offence.D. The competition law does not point against market structures.




II. Short Questions

1. Give three justifications for a competition policy. (6 marks)

2. Give three justifications for opposing a competition policy. (6 marks)





Level 11. Suppose a supermarket chain, which has a dominant market position, requires a supplier

to give its goods only to the chain’s supermarkets for sale. Otherwise, it will stop trading with the supplier.(a) Is the practice described above anti-competitive? Explain your answer. (2 marks)(b) What are the effects of such a practice on the business environment and consumers?

(4 marks)

2. In Hong Kong, many tuck shops in primary and secondary schools have agreements with their soft drink suppliers not to sell the soft drinks of other companies.(a) Is the arrangement described above anti-competitive? Explain your answer.

(2 marks)(b) Explain why this arrangement may be beneficial to the tuck shops and consumers.

(4 marks)




News Commentary Questions

1. Study the following report on health maintenance organizations and answer the questions.

A01 Local news Daily News 24 May 20 07

Lack of control on HMOs

There is nothing new about health maintenance organizations (HMOs) becoming commercialized, but in Hong Kong, they have never been regulated by the authority. The public is worried about how the quality of healthcare services may be affected with HMOs monopolizing clinic services.

In recent years, private HMOs have been taking over traditional one-man clinics. A few days ago, a report said that doctors of over 50% of private clinics were linked to HMOs. They were under the constraints of these organizations, which restrict their healthcare services and medications.

(a) Clinics operating in the form of a group may be beneficial to the public. Suggest two possible reasons. (4 marks)

(b) The taking over of traditional clinics by private HMOs may be anti-competitive and disadvantageous to the public. Explain why. (4 marks)




2. Study the following report on the opening of the market for importing live pigs and answer the questions.

A01 Local news Daily News 21 July 2007

Guangnan Hong introduced to open market for importing live pigs

The Secretary for Food and Health announced yesterday that the government had reached an agreement with the Central government to open the market for importing live pigs. After Ng Fung Hong, Guangnan Hong will become the second distributor of live pigs imported from the mainland. It was also agreed that a third distributor would be added. The Secretary believed that the recent live pig shortage had contributed to this market restructuring and the introduction of competition. He further commented that opening the market helped stabilize the supply and the quality of live pigs in the future.

(a) What is a sole distributor? (2 marks)(b) How do you think having a sole distributor for importing live pigs affects the interest of

local consumers? (3 marks)(c) Do you think introducing one more supplier can protect consumers’ interests effectively?

Explain. (4 marks)






92–97 68–91 49–67

24–48 0–23


2.1 What are anti-competitive practices?


I. Fill in the Blanks: Fill in each blank with a suitable word. (1 mark each)1. A monopolist that has a dominant market position has the ability and the

incentive to abuse its dominance. It may engage in anti-competitive practices to

increase its profits. Thus, monopoly often suggests anti-competition and harm to

economic efficiency.

2. Most countries define ‘anti-competition’ according to whether the company uses

unfair or inappropriate ways to reduce or restrict market competition .

II. Matching: On each line given, write the letter that matches the term most. Each letter may be used more than once. (1 mark each)

1. Horizontal mergers A

A. Mergers

B. Horizontal agreements among competitors

C. Vertical agreement between buyers and sellers

2. Sales and production quotas B

3. Potential competition mergers A

4. Sole distributor C

5. Price-fixing B

6. Customer allocation B

7. Tie-in sales C

8. Resale price maintenance C

9. Unfair or discriminatory standards B


©Hong Kong Educational Publishing Co.T1


III. True / False Questions: The following statements are about anti-competitive practices. For each one of them, if it is correct, put a in the box; if it is wrong, put a in the box and explain why it is wrong on the lines provided. (2 marks each)

1. Monopoly means anti-competitive. It must be harmful to society.

Monopoly may be a result of economies of scale and elimination of weaker competitors.

It is not necessarily anti-competitive and may even be beneficial to society.

2. Competition law in most countries define ‘anti-competition’ according to the company’smarket share.

Competition law in most countries define ‘anti-competition’ according to the company’s

practices and not its scale or market share.

3. Anti-competitive practices refer to all behaviours that distort or restrict marketcompetition.

4. Joint boycott is an example of an horizontal agreement.

5. By practising bid rigging, bidders can increase profits. So, most countries do not ban thepractice.

In most countries, bid rigging is illegal. It is because if there is bid rigging, the price for

the project or service will be much higher than the market price. This harms society.






1. Which of the following practices is not an anti-competitive practice?A. Bid riggingB. Retail price maintenanceC. Providing after-sales servicesD. Exclusive dealing

2. The rail merger of the MTR Corporation and the KCR Corporation on 2 December 2007 was a(1) horizontal merger(2) potential competition merger(3) vertical mergerA. (1) onlyB. (1) and (3) onlyC. (2) and (3) onlyD. (1), (2) and (3)



C

A

Elective Part 1, pp.73–74, Qs.2 and 4.


II. Short Questions

1. What is anti-competition? List three major forms of anti-competitive practice. (5 marks)

Anti-competition means that enterprises use unfair or inappropriate ways to reduce or restrict

market competition. (2)

Forms of anti-competitive practice include mergers, horizontal agreements and vertical

agreements. (3)

2. State the difference between horizontal merger and potential competition merger. Explain why these two types of mergers may have anti-competitive effects. (4 marks)

A horizontal merger refers to the merging of firms producing the same type of goods, whereas

potential competition merger refers to the merging of a firm and another firm that plans to

enter the market and compete with it. (2)

Both can eliminate competitors and reduce market competition, (1)

as well as increase the firm’s ability to control the price. (1)



Elective Part 1, p.74, Qs.1–2.



Level 21. Suppose a major press group greatly reduces the price of its newspaper when a new

newspaper is published.(a) What is predatory pricing? (3 marks)(b) Is the major press group mentioned above practising predatory pricing? Explain.

(3 marks)(c) Explain why it is usually difficult for the firm that practises predatory pricing to

increase profits. (4 marks)

(a) Predatory pricing is the practice that a firm with dominant market position sells below

the cost of production to drive competitors out of the market and prevent the entry of new

companies. It then monopolizes the market, raises the price and earns greater profits. (3)

(b) Not necessarily. It depends on whether the press group has dominant market position,

and whether the price after reduction is lower than the cost. (3)

(c) In the short run, selling below the cost of production leads to loss. (2)

In the long run, even if the firm can successfully drive all competitors out of the market,

once it raises the price to earn more profits as a monopolist, potential competitors will

enter the market again. (2)



Elective Part 1, p.74, Q.3.


2.2 Impacts of anti-competitive practices and competition policy


I. Fill in the Blanks: Fill in each blank with a suitable word. (1 mark each)

1. The Competition Policy Review Committee pointed out that anti-competitive practices are illegal if they are carried out with the intent to distort the market or have the effect of lessening competition .

2. To protect public interests and to avoid conflict with international obligations, the Hong Kong Competition Policy Review Committee recommended that the new legislation should include a general provision to allow the government to exempt certain specified situations from the application of the law.

II. True / False Questions: The following statements are about impacts of anti-competitive practices and competition policy. For each one of them, if it is correct, put a in the box; if it is wrong, put a in the box and explain why it is wrong on the lines provided. (2 marks each)

1. There is no final conclusion as to whether competition laws can enhance economicefficiency in practice.

2. Some people are worried that a competition policy will interfere with the marketstructure.






1. Which of the following practices is not covered by the competition policy of Hong Kong?A. Mergers and takeoversB. Joint boycottsC. Price-fixingD. Unfair or discriminatory standards

2. The objectives of Hong Kong’s competition policy are(1) to enhance economic efficiency.(2) to remove monopoly.(3) to facilitate free trade.A. (1) and (2) onlyB. (1) and (3) onlyC. (2) and (3) onlyD. (1), (2) and (3)

3. Which of the following statements about the competition policy of Hong Kong is incorrect?A. All sectors are regulated by the policy.B. There are exemptions to competition law.C. Violating competition law is a criminal offence.D. The competition law does not point against market structures.



A

C

B

Elective Part 1, pp.73–74, Qs.1, 3 and 5.


II. Short Questions

1. Give three justifications for a competition policy. (6 marks)

To provide a legal basis for the investigation and sanctioning of anti-competitive conduct. /

To strengthen the competition regulatory framework in order to promote market discipline. /

To improve the business environment and provide a level playing-field for business. / To

improve transparency through delineating what constitutes anti-competitive conduct so that

firms and the public are fully aware of them and can prevent their occurrence in society. /

Without such regulation through legislation, in the long run there might be an adverse effect

on the competitiveness of Hong Kong, especially in those sectors with high entry barriers.

(Any three, 2 + 2 + 2)

2. Give three justifications for opposing a competition policy. (6 marks)

It would increase the cost of doing business locally and affect Hong Kong’s regional

competitiveness. (2)

Hong Kong is a free and competitive market and this has worked very well. The government

needs not interfere. (2)

Enterprises are afraid of violating the law and may give up some economic activities that are

efficient. (2)






Level 11. Suppose a supermarket chain, which has a dominant market position, requires a supplier

to give its goods only to the chain’s supermarkets for sale. Otherwise, it will stop trading with the supplier.(a) Is the practice described above anti-competitive? Explain your answer. (2 marks)(b) What are the effects of such a practice on the business environment and consumers?

(4 marks)

(a) Yes. It is an abuse of dominance. (2)

(b) Business environment: it creates unfair competition and damages free trade. (2)

Consumers: it reduces consumers’ choices. The price of the goods may also rise, which

is not in the interest of consumers. (2)

2. In Hong Kong, many tuck shops in primary and secondary schools have agreements with their soft drink suppliers not to sell the soft drinks of other companies.(a) Is the arrangement described above anti-competitive? Explain your answer.

(2 marks)(b) Explain why this arrangement may be beneficial to the tuck shops and consumers.

(4 marks)

(a) Yes. It is exclusive dealing: restricting the competition of the other soft drink

companies. (2)

(b) The decrease in the number of suppliers can reduce the costs in procurement, storage,

accounting, etc., which is beneficial to the tuck shop. (3)

The prices may decrease as a result, which is beneficial to consumers. (1)





News Commentary Questions

1. Study the following report on health maintenance organizations and answer the questions.

(Supplementary information: Some reports pointed out that doctors joining health maintenance organizations have to follow the guidelines of their HMOs when giving medication. They usually use cheaper and less effective medication, and this is not in the interest of patients.)

A01 Local news Daily News 24 May 20 07

Lack of control on HMOs

There is nothing new about health maintenance organizations (HMOs) becoming commercialized, but in Hong Kong, they have never been regulated by the authority. The public is worried about how the quality of healthcare services may be affected with HMOs monopolizing clinic services.

In recent years, private HMOs have been taking over traditional one-man clinics. A few days ago, a report said that doctors of over 50% of private clinics were linked to HMOs. They were under the constraints of these organizations, which restrict their healthcare services and medications.

(a) Clinics operating in the form of a group may be beneficial to the public. Suggest two possible reasons. (4 marks)

(b) The taking over of traditional clinics by private HMOs may be anti-competitive and disadvantageous to the public. Explain why. (4 marks)

(a) Medical fees may fall because of the decrease in costs. (1)

Operating in the form of a group may achieve economies of scale, and the average cost

will fall. For example, the average cost of medicine procurement is lower with bulk

purchase. (1)



Elective Part 1, p.75.


They can provide one-stop service for general out-patient services, dental and

laboratory-analysis services, etc., which is convenient to the public. (2)




(b) The great decrease in the number of traditional clinics may reduce choices for

consumers. (2)

After large-scaled private HMOs get a big market share through mergers and takeovers,

they may abuse their dominance and the prices for healthcare services may be

higher. (2)




2. Study the following report on the opening of the market for importing live pigs and answer the questions.

A01 Local news Daily News 21 July 2007

Guangnan Hong introduced to open market for importing live pigs

The Secretary for Food and Health announced yesterday that the government had reached an agreement with the Central government to open the market for importing live pigs. After Ng Fung Hong, Guangnan Hong will become the second distributor of live pigs imported from the mainland. It was also agreed that a third distributor would be added. The Secretary believed that the recent live pig shortage had contributed to this market restructuring and the introduction of competition. He further commented that opening the market helped stabilize the supply and the quality of live pigs in the future.

(a) What is a sole distributor? (2 marks)(b) How do you think having a sole distributor for importing live pigs affects the interest of

local consumers? (3 marks)(c) Do you think introducing one more supplier can protect consumers’ interests effectively?

Explain. (4 marks)

(a) A sole distributor refers to the arrangement that the producer only assigns one

distributor for its products in a specified sales territory. (2)

(b) Since the sole distributor monopolizes the market, prices will be higher and the quantity

supplied will be lower. This is not favourable to consumers. (3)

(c) Not necessarily. The competition may cause the prices to fall, the quantity supplied and

the quality to rise. All these benefit the consumers. (2)

However, under oligopoly, the two firms may be tempted to cooperate and reduce supply

so as to raise the price. (2)






92–97 68–91 49–67

24–48 0–23

一、鞏固你所學 - hkep€¦ · web viewthe objectives of hong kong’s competition policy...

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