HK competition watchdog highlights harm of resale price maintenance with new campaign

The Competition Commission has launched a citywide educational campaign to raise public awareness and understanding of resale price maintenance (RPM) and its potential harm as well as to encourage compliance through a series of advocacy initiatives that uses storytelling through multiple mediums to reach out to different groups.

This comes as the Commission has received a number of enquiries and complaints relating to RPM, which occurs when a supplier establishes a fixed or minimum resale price to be observed by its distributors, including retailers, when they resell a product. Among the complaints received, food and groceries, beauty and personal care, and household goods and electrical appliances are the top three sectors involved. To achieve RPM, suppliers may provide incentives to or apply pressure on distributors, using threats, intimidation, warnings, penalties, delays in or the outright suspension of the supply of products.

The campaign aims to clarify the Commission's approach that RPM can have detrimental effects on competition in a number of ways, including competition on price between distributors being substantially reduced, and this would likely result in consumers paying higher prices. Furthermore, if resale prices are fixed by the supplier, new distributors or retailers seeking to enter the market by offering discounts will be unable to do so, said the Commission. It also aims at providing stakeholders with practical guidance on how to avoid engaging in harmful RPM arrangements.

Available from 14 June, the educational campaign kicked off with a new set of TV and radio announcements featuring veteran actor Philip Keung Ho Man, a micro movie starring Peter Chan Charm Man and YouTuber Miss Hunny which illustrate how RPM relates to people’s daily lives. The whole campaign will last around three months.

To further help industry players understand the topic, the Commission has published a brochure which outlines its approach to RPM and provides some practical tips for suppliers and distributors or retailers. A series of thematic seminars will also be conducted for businesses from different sectors. They run in tandem with online and social media promotions, MTR advertising as well as advertising at cinemas, which further extend the reach of the campaign. The TV and radio announcements, micro movie and brochure are now available on a thematic webpage on the Commission’s website. Details of the upcoming seminars will be announced on the website in due course.

Rasil Butt (pictured left), chief executive officer of Competition Commission, said: “While RPM agreements may sometimes lead to efficiencies that benefit consumers, in certain cases it would give rise to significant harm to competition and adversely affect consumers in the end. The Commission would not hesitate to tackle RPM cases which seriously undermine market competition in Hong Kong, as demonstrated by our filing of the first RPM case in the Competition Tribunal last year.”

"By launching an educational campaign today, we hope to reach out to stakeholders and provide them with practical guidance on how to avoid engaging in harmful RPM arrangements. Businesses are encouraged to review their practices and make changes where needed to ensure compliance with the Ordinance,” Butt added.

Back in September last year, the Commission filed Hong Kong’s first RPM case in the Competition Tribunal against a supplier for imposing minimum resale prices for its monosodium glutamate powder product to be charged by its two main local distributors. In this regard, the Commission considers such arrangements to be particularly problematic where the sole intention of the parties concerned is to restrict price competition; there is already a lack of competition between different brands of the product concerned.

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