Sai Kung supermarkets priced the same, despite anti-competitive laws

An independent survey of prices at the AS Watson supermarkets in town (ParknShop and Fusion) and the Dairy Farm one (Wellcome) found approximately 48 per cent of goods had exactly the same price tags. The survey conducted  in July was random with SAI KUNG BUZZ staff selecting everyday brands of foods, detergents, cosmetics,  alcohol, soft drinks and so on that could be found in both chains of supermarkets for comparison purposes. SAI KUNG BUZZ sought answers to its questions from the Consumer Council and Competition Commission. First, here is the background:

The Competition Bill was passed by the Legislative Council in June 14, 2012. Businesses and professions were given three and a half years to take steps to comply. The Competition Ordinance came into full force on December 14, 2015 with the Competition Commission up and running with about 50 staff.

The Commission’s former Chief Executive wrote,

“The conduct that will cause the most concern can be distilled down to one word: Cartel. Businesses must never agree to fix prices and share markets.Savings will result from enforcement of the law. It will also have a deterrent effect stopping others from price-fixing.

The CC Chief Executive’s message finished with this statement:

“The Competition Commission is committed to using enforcement and advocacy to achieve the goals of the Competition Ordinance.”

REPLY FROM A COMPETITION COMMISSION SPOKESPERSON (EDITED FOR BREVITY)
The existence of the same or similar prices for a product is not necessarily evidence of a price fixing cartel. In markets where the product sold is the same or very similar, competitors’ prices may be the same or very similar even in the absence of an anti-competitive agreement.

For example if you know pricing a little higher than your competitor is likely to mean you lose a lot of customers and pricing below your competitor means your competitor will quickly match your price, prices naturally tend to gravitate towards the same price. This is sometimes known as “parallel pricing” and does not require any arrangement between competitors to occur.

Without due investigations, the Commission cannot jump to conclusions on whether there is anti-competitive behaviour in the market. As mentioned in its guideline on investigations, to support the Commission’s ability to conduct effective investigations and to protect the interests of all persons involved, the Commission will generally not comment on what matters it is considering or investigating.

SAI KUNG BUZZ CONTRIBUTOR LOOKS AT MINI-SUPERMARKETS
A contributor given a preview of this story decided to study the mini-supermarkets that compete with the big chains. She visited Butcher King, 7-11, Asia Foods and Circle K and wrote:  “It proved impossible to do an objective comparison as there is little common stock. However, it seems Butcher King is slightly more expensive on comparable products as are Circle K and 7-11. Asia Foods is slightly cheaper. Asia Foods is significantly cheaper on non-branded equivalents in many cases when compared to supermarkets own-branded products.”

STATEMENT BY PR REPRESENTATIVE FOR WELLCOME (PARENT COMPANY DAIRY FARM)
Wellcome is committed to operating in full compliance with all relevant local laws and regulations, including the Competition Ordinance. We operate in competitive markets and support free and fair competition. Wellcome does not fix any prices with competitors.
Wellcome strives to offer the best possible value to customers. Product retail pricing and promotions are determined based on prices at which products are supplied and market conditions.

COMMENTS FROM THE CONSUMER COUNCIL
Consumer Council published a study in 2009 about pricing similarity between Wellcome and ParknShop among 375 goods. Bread and cakes were the most common goods which had identical prices, five out of 10 were the same in the period, October 2008 and February 2009. However, there were no such findings in 17 household products/toilet papers. Generally speaking 14.7 or 55 pieces of goods had the same price during the period.

Residents were referred to the Consumer Council’s Online Price Watch: www3.consumer.org.hk/pricewatch/supermarket/

AS WATSON, PARENT COMPANY of PARKnSHOP/FUSION
The company did not reply to SAI KUNG BUZZ’s questions.

SAMPLING OF PRODUCTS WITH PRECISELY THE SAME PRICES AT SAI KUNG’S COMPETING SUPERMARKET CHAINS, AS WATSON AND DAIRY FARM
HP Sauce $20.90, Smedleys baked beans 9.9, B & F tuna 18.5, Lea & Perrins 17.5, Bonne Maman strawberry jam 36.90, Maggi seasoning 15.9, Magiclean glass trigger 500ml 18.90, Virjoy toilet rolls 32.90, Tulip port luncheon meat 33.90,
Libby’s corned beef 34.90, Campbell chicken a la King 11, Kjeldsen’s butter cookies 12.80, Nature Valley apple granola bars 32.90, Bailey original 193, Gordon’s Gin 750ml 170, Barilla fusili 16.90,
Taikoo cube sugar 10.60, Whiskas chicken and turkey 11, Oreos 17.90, Wolf Blass chardonnay 139, Smirnoff vodka 160, Red Bull 15.90, Macademia chocolate 17.90

NOTE: SAI KUNG BUZZ accuses no one of price fixing. We simply say our random, small-scale and unscientific survey comparing the prices of identical products,
conducted in the two competing supermarket chains, raises questions that need answering. It is a serious matter given the effect supermarket pricing has on the average family’s budget.
For simplicity, we ignored promotional prices, noting basic unit prices.