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Writer: Special writer
2021-02-05 13:21
Last update date: 2021-02-05 13:21
A few days ago, world-renowned technology giants such as Twitter, Facebook, Google, Amazon, and YouTube collectively blocked the account of former US President Trump. European politicians headed by German Chancellor Merkel clearly expressed their opposition. This once again aroused the discussion of monopolistic behavior of giant companies in various circles in the West.
The regulatory authorities in Mainland China suspended Ant Financial’s listing application and stopped the community group buying in the e-commerce plan to prevent the disorderly expansion of capital. This has also become an important part of the global antitrust trend.
Hong Kong public opinion is more concerned about the anti-monopoly disputes between the United States and the Mainland, but it is strange that it almost ignores the serious monopoly in the local market.
In fact, monopoly is the most fundamental structural problem in the Hong Kong economy, which has led to the slow economic development of Hong Kong in the past 20 years, the intensification of social and ethnic conflicts, and the almost out of control of political conflicts.
Economic monopoly and social turmoil strengthen each other, making Hong Kong currently in a dilemma.
If this deep-seated contradiction is not resolved, Hong Kong cannot effectively promote and implement various reform measures in the social and political fields.
Monopoly reduces the overall economic efficiency of society and causes political and social problems
Monopoly means that one or a very small number of companies dominate the market. Western economic theories generally believe that there are many shortcomings in the monopoly of the market by giant companies.
Firstly, market barriers are high, small and medium-sized enterprises have difficulty entering the market to participate in competition, and market vitality is stifled; secondly, since a monopoly position can ensure stable profits, mature giant enterprises lack motivation for innovative technologies, and consumers cannot enjoy innovative technologies. Products; third, the number of market suppliers is extremely small, consumers have limited choices, and their rights are impaired; fourth, due to insufficient market competition, consumers often have to pay higher prices to purchase products and services; fifth, because there are only extreme A small number of producers are likely to collude with each other because of interest temptation or human relations, forcing consumers to pay prices far higher than the production cost; sixth, because only a few producers participate in market activities, the industry lacks sufficient creativity, resulting in products or Services are severely homogenized.
Monopoly is a fundamental structural problem of Hong Kong's economy.
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The core of these negative effects is that if the market is monopolized by a small number of consortia, it will be difficult to achieve sufficient competition and the overall economic efficiency of the society will suffer.
In fact, the core of European and American competition law is to ensure the optimization of business efficiency including production, transaction and management efficiency.
Although monopoly has more or less benefits, most monopolies, especially monopolies by giant companies, are not conducive to improving the overall economic efficiency of society.
There are already a large number of mature documents in the research of western economics circles, whether it is theoretical construction or empirical research.
Research by well-known scholars such as David j. Ravenscraft, FM Scherer, Melissa Schilling and John Kwoka found that most of the mergers of giant enterprises did not bring about an increase in production efficiency.
The famous American jurist Richard Posner once said, “I wish someone would give me some examples of mergers that have improved efficiency!” (I wish someone would give me some examples of mergers that have improved efficiency .) Historical research on the wave of mergers in the United States in the 1960s and 1970s also shows that mergers and acquisitions did not improve the efficiency of business operations.
It is against this background that the anti-monopoly Dazirism and Regenism prevailed in the United Kingdom and the United States in the 1980s, including ITT, Gulf & Western, Texaco, Mobil, British Leyland and other giant companies that were stripped of assets or split. .
Of course, in the Western market environment, monopoly is not useless.
For companies, especially emerging high-tech companies, because monopoly brings high profits, companies are able to use part of the funds to improve and enhance existing products or services, accumulate more R&D funds, and reduce the risk of R&D failure; monopoly reduces The risk of business failure is conducive to the long-term survival and development of the company; for consumers, the market supply structure is simple, and they do not have to make complex comparisons among dozens of choices to choose products or services that suit their needs.
In addition to causing economic side effects, monopoly can also cause some political and social problems.
The anti-monopoly law represented by the Clayton Act of the United States does not specifically address the relevant political issues brought about by monopoly, and mainly supervises its negative economic impact.
Since the beginning of the 21st century, as Internet giants have mastered the personal data of citizens, the political influence of monopoly has aroused great concern and concern from all walks of life.
Personal privacy, huge wealth, and the political control and influence it brings are concentrated in the hands of a very small number of people who are not supervised. The public interest can only rely on the goodwill of these people, rather than the government's system that can check and balance these people. The public interest of society is at risk at any time.
Giant companies occupy huge social resources, so they can invest more money to intervene in political elections, use donations to lobby politicians, manipulate political power, and safeguard the personal values and interests of company owners.
A large company can control more social resources and easily convert resources into political power.
Through continuous mergers and acquisitions, even if the operating efficiency declines, as the scale of the enterprise becomes larger and larger, the turnover and total profit become higher and higher, which can put more pressure on political operations, and thus pressure the legislature and government officials. Protect the long-term interests of enterprises.
If companies control the media, think tanks, and universities, buy or persuade a large number of journalists and scholars, influence public opinion and academic focus, and safeguard the interests of corporate executives, then public interest will become a victim.
Duopoly is a special form of consortium monopoly, which is quite popular in Hong Kong.
In this market structure, the market is dominated by two, three to four or five companies to produce and sell specific products or services, and there are no good substitutes.
In extreme cases, this means that there are only two companies in the entire market, and the more actual situation is that two large companies have a decisive influence on the market, and their respective behaviors and relationships govern the development of the industry. , Although there are other SMEs coexisting with these two large companies.
Well-known western duopoly cases include Coca-Cola and Pepsi in the soft drink market, Boeing and Airbus in the production market of large commercial airliners, MasterCard and VISA in the credit card market, and Apple and Andriod in the mobile operating system market.
One of the shortcomings of Western monopoly theory is that it lacks sufficient explanatory power for non-Western market environments.
The current relevant theories and models are mainly based on Western market behavior, but there are some major variables that have been overlooked in non-Western markets, which are enough to change or even overturn the conclusions of existing market competition theories.
Duopoly and mixed mergers that are reasonable in the West often lead to market failures in non-Western societies.
If we formulate public policies in Eastern societies, including Hong Kong, based entirely on the existing Western economic theories, especially in deciding under what circumstances the government should intervene, then government decisions will likely lack sufficient accuracy and reliability.
As Internet giants control the personal data of citizens, the political influence of monopoly has aroused great concern and concern from all walks of life.
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Three forms of mergers and acquisitions that produce monopoly and government supervision
Monopoly mainly stems from various forms of M&A transactions.
Corporate mergers and acquisitions generally include horizontal mergers, vertical mergers and hybrid mergers.
Horizontal mergers and acquisitions occur between direct competitors, which refer to the merger of two or more legally and economically independent entities into a new entity; vertical mergers and acquisitions occur in the same product market in different links but actually have a sales relationship Among the companies, it represents the merger of two or more companies in the same value chain; hybrid mergers and acquisitions are special, which refers to the mergers between companies that have neither direct competition nor sales relationship.
Mixed mergers and acquisitions can help increase the diversification of the owner's operations, achieve financial integration and reduce operating risks.
These three forms of corporate mergers and acquisitions may cause damage to the market to varying degrees, produce an over-concentrated market, hinder fair competition, reduce the overall economic benefits of society, and cause serious harm to social welfare.
Hybrid mergers and acquisitions will not directly lead to a decrease in the number of competitors, nor will it cause the market to close to new starters. Therefore, the antitrust laws of various countries generally open up hybrid mergers and acquisitions. However, giant hybrid mergers can easily reduce the overall economic efficiency of the society and damage consumption. The interests of the people, significantly reduce social welfare, and enable enterprises to have political power they should not have, so Europe and the United States will also use anti-monopoly laws to regulate.
Mixed mergers and acquisitions will form special interest groups under certain circumstances, which will adversely affect market competition, small and medium-sized companies and consumer rights.
First of all, giant companies occupy the heads of multiple industries and can simultaneously exert pressure on legislative and administrative institutions on behalf of different industries, thereby realizing the social and political power of special interest groups.
Second, giant companies increase market concentration through bundling.
Giant companies tie-in products of different categories and bundle products that have achieved monopoly status with products that have market competition, thereby increasing the latter's market share. This is obviously an unfair competition that disrupts market order.
Third, the innovation motivation of giant enterprises formed by hybrid mergers and acquisitions is insufficient.
Companies that are committed to mixed mergers and acquisitions generally have a strong sense of integrity, with the goal of putting eggs in different baskets, reducing risks through diversified operations, and maintaining the ability to continue to increase the owner's wealth.
In the choice of target industries, companies and products, mergers and acquisitions companies often choose industries with clear development prospects, obvious product markets, and stable demand, making the merger companies a big but evergreen tree, but innovation and economic efficiency are ruined.
Facebook puts Instagram, WhatsApp and other companies under its umbrella to gain more user information.
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Favorable Distortion of Hong Kong Market
Hong Kong is actually a tribal society that values dialects and birthplaces. It has not completed the modernization process. It is actually the society of acquaintances that Fei Xiaotong talks about.
The society of acquaintances builds a society of "one's own people" through human relations, and promotes the formation of a mutual aid community that unites and assists internally and is unanimous and exclusive externally.
People's behavior revolves around the norms of human sentiment, and even market behaviors from the West are subject to the order of the East.
The Western rule-based market competition mechanism has undergone a great change in Hong Kong.
Members of Hong Kong society establish the order of ritual and custom exchanges centered on themselves and their tribes, and form different circles of close relations based on distance.
Merchants treat acquaintances and strangers differently according to etiquette.
Dealing with acquaintances, businessmen act in accordance with the principle of affection, and purely in accordance with market transactions are often regarded as the performance of their birth; treating strangers, exclusive is reasonable, and preventing strangers from entering the market is reasonable; ignoring the interests of strangers and favoring acquaintances It is just as reasonable as the locals.
Local businessmen formed ethical commonality and commercial mutual assistance, and treated outsiders under the dominance of the principle of discrimination.
What foreign businessmen face is not a single individual, but a powerful close group of mutual assistance.
Of course, this different etiquette and custom order applies not only to strangers, but also to new immigrants with non-local births and non-local accents in the society of acquaintances.
Hong Kong has not experienced drastic social changes such as the 1911 Revolution, the May Fourth Movement, the New Culture Movement, and the Cultural Revolution in the Mainland. The society as a whole has shown traditional lifestyles, interpersonal relationships, tribalization of social connections, and continuation of family power. feature.
While accepting the modernization brought by Britain, the core content of traditional Chinese society has been retained in Hong Kong.
During the colonial period, British culture was the mainstream official culture, which caused the heterogeneity of Hong Kong relative to the mainland, leading to major changes in private and public lifestyles.
On the one hand, the space of public life that can be freely advanced and retreated is gradually expanded and institutionalized; on the other hand, private life in the society of acquaintances is becoming more and more closed and hidden. Therefore, we can say that the privacy culture of the United Kingdom has actually strengthened the society of acquaintances in Hong Kong. .
The clothing industry in Hong Kong used to be very prosperous, with 400,000 employees, but it began to decline in the 1990s.
The picture shows a garment factory in Vietnam.
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Hong Kong Monopoly Market Structure and Impact
Hong Kong's economic success today has benefited from the full market competition among local enterprises in the last century.
In the last century, Hong Kong’s textile industry, clothing industry, toy industry, plastics industry, watch industry, printing industry and other industries have flourished. There are thousands of manufacturers, some even more than 10,000, which has promoted Hong Kong to become the Asia-Pacific region and even The global industry center.
In 1957, the number of textile factories in Hong Kong reached 3,300, employing about 150,000 workers; in 1967, the number of textile factories increased to 11,000, employing about 430,000 workers.
In 1975, the number of garment factories in Hong Kong reached 8,047, employing 257,595 workers; in 1987, the number of garment factories increased to 10,556, employing nearly 300,000 workers.
There were 557 plastic flower factories in Hong Kong in 1960 and 3,359 in 1972.
There were 1,187 Hong Kong watch factories in the early 1980s, and 1,436 in 1985.
In the 1960s, there were more than 600 printing factories in Hong Kong, and this number increased to more than 1,500 in the 1970s.
According to data from the Hong Kong Trade Development Council in 2001, there were about 6,000 toy manufacturers in the Mainland at that time, of which about 4,000 toy factories were opened in Guangdong Province, and most of them were Hong Kong-owned enterprises.
However, since the reunification, the Hong Kong economy has gradually been monopolized by consortia. Except for the financial industry, the number of companies that can compete with each other in other major industries has dropped sharply.
The most common is a duopoly that can avoid anti-monopoly public opinion, and the main market share is occupied by two or three to five large businesses.
The Hong Kong retail market is mainly divided by Jardine and Hutchison Whampoa.
The Hong Kong retail market is full of various brands and shops. It seems that there are many choices, but they are actually businesses controlled by Jardine Matheson and Hutchison Whampoa.
"It is either Mannings or Watsons, or Wellcome or Pokka." This is the basic perception of Hong Kong citizens.
In 2013, Wellcome and Baijia accounted for approximately 62.5% of the market, and by 2017 their market share has risen to 70%.
The current high management fees charged by managers in the MPF market is also due to the monopoly of leading companies.
Although there are 15 approved fund trust institutions, the five largest managed funds account for nearly 70% of the overall market. As long as a few leading companies do not reduce prices, other trustees have no incentive to reduce prices.
Hong Kong’s power supply market has only two suppliers, the Hong Kong Electric and CLP Power, and the public has no choice. Those who live in Kowloon can only choose CLP Power, and those who live on Hong Kong Island can only choose Hong Kong Electric.
The fuel industry in Hong Kong is dominated by five major companies. Their retail prices are almost the same, and the time and speed of price increase and price reduction are almost the same.
As for the criticized real estate market, it is mainly controlled by leading companies such as Sun Hung Kai Properties, Cheung Kong Properties, New World Development, Henderson Land Development, and Wheelock.
Beginning in the 1980s, established real estate developers continued to purchase land exchange rights and land from New Territories owners at low prices, hoarding a large amount of cheap land, and then pushed the government to implement a high land price policy, which greatly increased the cost of entering the market for new developers , Small and medium-sized real estate enterprises gradually lose their ability to acquire land, and the market concentration continues to concentrate on the leader, forming the current land monopoly situation.
The rental level of Hong Kong's retail industry has long ranked first in the world.
On the one hand, this is due to the high land price; on the other hand, this is due to the monopoly of the leasing market by real estate developers due to mixed mergers and acquisitions, and lack of due free competition.
Real estate developers conspire to bid prices to obtain high rents, and small businesses can only let the real estate developers set prices, and even pay rent linked to their turnover.
Hong Kong's criticized real estate market is mainly controlled by leading companies such as Sun Hung Kai Properties, Cheung Kong Properties, New World Development, Henderson Land Development, and Wheelock.
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Mixed mergers and acquisitions further solidified the social monopoly structure of the consortium.
Taking real estate developers as an example, leading companies have achieved diversified development through hybrid mergers and acquisitions, and controlled public utilities that are closely related to people's livelihood.
For example, Sun Hung Kai owns KMB, Wharf owns Star Ferry, Cheung Kong owns Hong Kong Electric, Henderson owns China Gas and Yau Ma Tei Ferry.
They can convert public utility land into more profitable real estate projects and get more profits.
Real estate developers also control a large number of media. For example, Metro Broadcast Corporation, NOW News TV and "Hong Kong Economic Journal" are owned by the same family, and the cable network is owned by New World, Far East Development and Wharf Group.
The economic structure under the command of real estate has caused misallocation of various social resources, leading to low efficiency, economic decline, people's livelihood dying, conflicts intensified, and a neglected problem, which is the lack of motivation and resources to promote science and technology.
According to the "Report on China's Urban Competitiveness" by the Chinese Academy of Social Sciences, Hong Kong's scientific research expenditure and talents continue to be insufficient. Shenzhen's scientific research expenditure accounts for 4.7 times more than Hong Kong's GDP.
According to the Hong Kong Legislative Council's "Information Insight", among the cities in the Greater Bay Area, Shenzhen has the highest proportion of R&D personnel in the Greater Bay Area, and Hong Kong ranks second from the bottom; Shenzhen has the highest proportion of research expenditure in GDP, and Hong Kong has only 0.86%. It is much lower than the cities in the Greater Bay Area.
All in all, the economic monopoly in Hong Kong and the society of acquaintances offset the possible benefits of monopoly. In addition to not conducive to improving social and economic efficiency, it also has serious political consequences, leading to collusion between businessmen and government and business, and inducing government regulatory capture (regulatory capture). .
Businessmen and politicians form small circles, forming a political and economic relationship that conforms to human sentiments and is in compliance with the law. This leads to government officials lazy and indolent. They cannot balance the interests of the super-rich and the disadvantaged as defenders of public interests, and cannot use technology research and development. Establish new economic growth points.
Hong Kong is a society under the rule of law. It is difficult for incumbent officials to seek rent. However, in order to take up high-paying positions in the consortium after their retirement, senior officials have promised to the consortium and become captives captured by the consortium. They dare not protect the public through strict supervision interest.
The Hong Kong government has for many years suspended the construction of affordable housing for basic-level citizens such as HOS and public housing. The citizens lack choice and bargaining power and are forced to pay expensive housing prices. This is directly related to government officials' deliberate inaction based on personal interests.
Hong Kong capitalism is a capitalism with Chinese characteristics under the leadership of the Chinese central government. It needs to advance with the times and carry out drastic reforms. Only by this way can Hong Kong become a truly free, fair and globalized capitalist society.
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policy suggestion
First, re-understand and define the capitalist system of Hong Kong, starting from this to reshape the policy formulation and implementation process of the Hong Kong SAR government.
Hong Kong capitalism is a capitalism with Chinese characteristics under the leadership of the Chinese central government. It needs to advance with the times and carry out drastic reforms. Only by this way can Hong Kong become a truly free, fair and globalized capitalist society.
Second, based on the existing "Competition Regulations," optimize litigation mechanisms, formulate anti-monopoly laws, supervise mergers and acquisitions, improve the overall economic efficiency of society, and weaken the political control and influence capabilities of consortia.
The Competition Ordinance stipulates that any person can sue for losses or damages incurred by other persons in violation of the Code of Conduct, but such acts shall be investigated by the Competition Commission, and the Competition Commission will then proceed to the Competition Tribunal. Started legal procedures and was found to be a violation of the code of conduct by the Tribunal.
This kind of complicated programming favors monopolistic enterprises and cannot effectively protect the rights and interests of small and medium-sized enterprises and consumers. The government should legislate to allow and assist independent private litigation and class actions to effectively protect the power of society and citizens to supervise illegal activities of consortia.
In addition, the current Hong Kong competition law deals with mergers and acquisitions only for the telecommunications market, and other industries are not restricted. This is an unreasonable and even absurd arrangement.
Third, do a good job of communication with the consortium, emphasizing that the purpose of government reform is to establish a system rather than to promote class struggle.
Just as the government in the Sui and Tang Dynasties disrupted the gentry’s challenge to the central authority through institutional reforms such as the imperial examination and the equalized land system, today Hong Kong can neither rely on the goodwill of capital nor resort to force to divest the assets of the consortium or split the consortium.
The business community must realize that the various privileges and limited responsibilities that society confers on entrepreneurs and modern enterprises are derived from a rational social contract, which is by no means natural and eternal.
Based on this legal principle, the government that reflects the public interest of society has the right to supervise it.
Fourth, in addition to regulating the market order by controlling the market share of giant companies, for hybrid mergers and acquisitions, we can learn from the reform plan proposed by the late US Senator Edward Kennedy in 1979, which is to set a maximum for giant corporate mergers and acquisitions. Regardless of the type of merger, as long as the amount exceeds this standard, it is deemed to be an obstacle to market competition and the government must exercise its veto power.
The free market is an essential element of modern society and a product of social contracts. If mergers and acquisitions of giant companies damage the order of fair competition, society may be dominated by a few people.
If the government does not act and does not assume the role of supervising the consortium, then the consortium may become a country within a country, extending its power to the political circles, and controlling society in the form of a shadow government. This is a social law that has been confirmed by historical experience.
(The original text of this article was published in Tianda Newspaper. The author Wu Junfei is the deputy dean and researcher of the Hong Kong Tianda Research Institute and a PhD from the London School of Economics and Political Science)
Monopoly technology network oligopoly monopoly Hong Kong economy deep-seated structural contradictions