On the level
In 2013 Anna Wu Hung-yuk was appointed Chairperson of the Competition Commission which will oversee the implementation of the Competition Ordinance next year. In an interview with CSj, she talks about her aspirations for the Competition Commission and looks back over her career in public policy law making in Hong Kong.
Thanks very much for giving us this interview. Before we discuss your current work with the Competition Commission, could we start with your early career in Hong Kong?
‘Certainly, I was born and grew up here in Hong Kong. I practised as a lawyer until I got into the Legislative Council in 1992. As you may know, I was the last appointment to LegCo made by the British administration in Hong Kong. That was a very odd situation for me because I have never accepted that the government should be an appointed government. The legislature and the government itself should be representative of the community, but of course I had to accept that we had a long history of colonialism in Hong Kong which meant that the vast majority of Hong Kong people didn’t have their own representative.
Once I had accepted the appointment to LegCo, I had to consider how useful I could be in that position. The first thing I decided was that I would go for the most representative form of government I could vote for. The second thing I decided was to use my skills as a lawyer to create laws which would touch on social policy concerns. That was interesting because it was the creativity of the law that induced me to continue in public affairs and public policy.’
Creativity in the sense…?
‘Creativity in the sense that I was not using laws to resolve the problems of clients, I was making new laws to resolve social issues. The law-making process is a very creative process. You have to define your policy objectives and then you have to work out a way of capturing that through law making.
I felt that I could push for a new kind of law. At that time it was possible to push for a private member’s bill as long as the bill had no money considerations. A private member’s bill had never been attempted before to change social policy. My interest in human rights and my interest in political development in Hong Kong led me to initiate the Equal Opportunities Bill and that was done with very specific reasons in mind.
Firstly, we had the Bill of Rights enacted in 1992 but that was only applicable to the public sector. It was originally going to cover discrimination in the private sector, but due to the controversy surrounding the bill the government decided to make it applicable only to government and public bodies and not to private sector employers and employees.
Secondly, there was a very strong economic mandate behind the Bill – it was not just a matter of rights. There was a recognition that we should have a fair entry point for everybody because we needed to capture the best talents for Hong Kong. After all, we don’t have minerals in Hong Kong; it is the human capital that has been significant for Hong Kong throughout history and certainly now.’
What reception did your Equal Opportunities Bill receive?
‘It was difficult, partly because it had never been attempted before so the government wasn’t expecting it and went into defensive mode. But the government was pressured into devising its own laws – that was why we got the sex discrimination, the disability discrimination, and the family status and race discrimination laws.
It was a very interesting and challenging time and I learned a lot through the process. I turned the appointment system into an advantage because, as an appointee, I didn’t have to run my office for constituents. I also made it clear that I would not be seeking to return to LegCo; this was a window I would not use as an election platform. That meant I didn’t have to worry about votes for the future and it helped me in terms of good faith and credibility.’
You subsequently became the Chairperson of the Equal Opportunities Commission.
‘Yes, things go away but they also come back – you think that they are concluded, but then years later they come back.’
You have also been closely involved in the work of the Independent Commission Against Corruption (ICAC), the Hong Kong Consumer Council and now the Competition Commission – what impact do you think these institutions have had, and in the case of the Competition Commission will have, on Hong Kong’s culture and economy?
‘The ICAC certainly changed our culture. Corruption was endemic in Hong Kong; anywhere you turned you would have people paying one another big and small and this was corrupting not just the government but our economy too. The fact that the ICAC was set up and succeeded in changing the mindset and the culture in Hong Kong was a huge breakthrough. This is an institution I support wholeheartedly and I would like to keep it independent and strong. Fortunately for us, we do have a lot of recognition worldwide for the ICAC.
The Consumer Council is the institution that I have been involved with for the longest time. I was involved in Consumer Council work in the 1990s and this work has a lot of relevance for the Competition Commission today. In the early 1990s, the Consumer Council worked on a number of studies on competition issues relating to fuel, telecommunications, broadcasting, real estate and later supermarkets. Following these studies the Consumer Council position was very simple – it would dent consumer interest if there were no competition framework that would allow new entrants to come in and compete upwards in terms of quality and downwards in terms of price.
At that time we also witnessed the liberalisation of the telecommunications industry. The monopoly for telephone was creating a number of problems in Hong Kong – for example it was holding back the introduction of new technology into the telecoms market. So in 1992 the government took back the telephonic monopoly and introduced new players into the field. But the fact that we had new players would not have meant a thing if the telephone grid continued to be monopolised, so that led to the policy of interconnectivity. This meant that the grid had to be available to other operators’ needs and there was a format for how much you had to pay for using someone else’s grid.
That was followed in 1999 by number portability. Because the numbers belonged to the operator, customers wouldn’t be able to take the numbers with them if they wanted to change operator. This was clearly an obstacle to change and competition so number portability was given to consumers as a right.
Those two measures liberalised the market and enabled consumers to make a choice. I use this story today because it illustrates why competition is necessary in Hong Kong. The barriers such as the lack of connectivity and number portability were very much like the barriers the competition law seeks to remove today. Once they have been removed the market can move up on services and down on prices.’
Many of the public policy areas you have been involved with attempt to create a level playing field for Hong Kong – do you think these initiatives will create a fairer and more just society?
‘I am optimistic that changes will be made and that cultural norms will change. I can’t say it will lead us to a fair and just society, but I can say that it will make society less unfair and less unjust, and it will create a little more opportunity for everyone, whether you are a small business or an individual.
You have to set a benchmark for behaviour before you can change things – that was a very valuable lesson I learned. When you are trying to change deep-seated cultural practices that go back a long way, you have to start with the law as a tool for change. People often feel that existing practices are part of their life and they are reluctant to change. At the time of my Equal Opportunities Bill, there was no concept of people having rights to education, or getting a job, or improving their livelihood – these concepts were completely alien to the community. Some in the business community argued that the law would distort the free economy.
It took quite a while to explain what the international covenants say, to explain the economic mandate behind the law and why, as a community, allowing people to develop was far better than creating a welfare economy. After all, if you can encourage people to be self sufficient, the money you have to fork out for welfare should reduce.
We had an even tougher time with gender equality. I had a lot of vested interests coming against me, in particular people who benefited from the old Qing dynasty laws which gave women almost no rights at all. We came up against a lot of stereotypical assumptions that girls shouldn’t go into the sciences, engineering or medicine; that women should stay at home to take care of the kids while the problem solvers should be the men.
There were textbook pictures, to my distress, that depicted mothers and homemakers as people who eat obsessively and who cry whenever a problem surfaces. Given that kind of perception you really have to come up with a law as a tool to state clearly that this is not desirable behaviour. Generally people want to obey the law and be a law-abiding citizen but unless you have a law to say that such behaviour is now illegal things won’t change.’
Can we turn to your current work at the Competition Commission – what’s the main message you’d like to get across about the new competition law?
‘My overall message is – act fairly and compete on a level playing field. The law is about allowing business entities, particularly SMEs, to get into the market and it is also about cutting costs. In Japan, when bid rigging was successfully attacked, they had a 20% drop in tender prices. So the message is clear, when you create a competitive environment costs should come down.
We do have to manage expectations, though, since the competition law may not necessarily drive down cost or price. In some cases, such as the break-up of Bell Telephone in the US, you actually have an increase in price temporarily. There was an increase in the rates for local calls when the subsidy from the long-distance calls was removed. Choice was to be made on the efficiency of operators based on proper reflection of cost. In the long run the entrance of new players makes the market a healthier environment for consumers.
Of course, in terms of the competition law, we are just at the beginning of the process. The law was wrestled out of the legislature and government after a lot of lobbying. I expect the differences of views to still be there, but what has changed is that the law is now there and, as I said, people don’t generally want to be in violation of the law.
Apart from anything else, there is a cost to non-compliance. You could have the stock exchange coming after you, you could have the banks coming after you for non-compliance with loan documents, and you would certainly have risks with your suppliers and business partners. If you are found to be non- compliant with the competition law that may mean some of your contracts fail; counterparties may not honour contracts that are in violation of the law.’
How challenging do you think compliance with the new Competition Ordinance will be for businesses in
‘For SMEs, provided that they don’t fix prices, don’t allocate markets, don’t restrict output and don’t bid rig – these are serious anti-competitive practices under the First Conduct Rule – they should have a low risk of contravening the law.
For larger businesses who might have substantial market power they will have to ensure that they don’t abuse that power. Naturally they will also need to avoid seriously anti-competitive conduct under the First Conduct Rule. Many of the larger businesses will be active outside the territory and should therefore be familiar with the general principles of competition law. Our approach in Hong Kong will be consistent with international best practice. For some, compliance with the law will merely mean extending an existing culture of compliance to their Hong Kong operations.’
Do you think businesses are sufficiently aware that some common business practices could potentially breach the law?
‘Judging by the feedback we have received so far, yes, many businesses are aware of this. My message is very simple – we haven’t started the law yet so if there is anything you can do for risk reduction do it now while there is still time; you shouldn’t wait for the day the law starts. We will be providing more detailed guidance on business practices that could potentially breach the law both in our formal guidelines and in our educational material.’
Who will be liable in cases of breaches of the law?
‘The law places principal liability on undertakings for contraventions. However, if the offence is committed by a body corporate, there can be liability for directors, managers, company secretaries and other persons if they consent to the offence or the offence was attributable to their neglect. This is set out in section 175 (1) of the law.’
Do you have a message for company secretaries as they prepare for the new competition law?
‘I rely heavily on the intermediaries – such as lawyers, auditors and company secretaries – because they have no vested interest in the profit generally. They are professional people who are paid to spot problems and be objective and that’s where their value comes in. So it is crucially important to have those elements on the board and in the management of the company.
Company secretaries will have a role in advising directors about the purpose of the law and about the changes that will be needed in the company; that might involve looking at the company’s contracts and establishing a whistleblowing structure. This advice will be extremely valuable because it will reduce companies’ future problems.’
What will be the relevance of companies’ whistleblowing procedures?
‘Companies should be encouraging people to report malpractice rather than penalising them for it. It is better to have culture where wrongdoing can be reported, otherwise you’re back to a situation like before the ICAC where people couldn’t tell the police about the police asking them for money.
But you need a process that people have confidence in. I have a lot of sympathy for whistleblowers because they put their whole careers at stake. Companies need to have something in place for those who want to speak to a non-regular channel, that means not their boss a layer up, they may want to go straight to an independent body like the independent audit body. It is better for a company to have employees talking to a top in-house contact than for them to take it ex-house and come to us.’
Many thanks for speaking to us today, one final question – do you think there is widespread support in Hong Kong for legislation like the new Competition Ordinance?
‘Yes, overall I think the people of Hong Kong understand that the introduction of the Competition Ordinance is an important step to protect and nourish our shared value of competition. While there may be some initial concerns amongst the business sector about having to comply, I think that they can also understand the benefits the law will bring.’
Anna Wu was interviewed by Kieran Colvert, Editor, CSj, joined by Mohan Datwani FCIS FCS, Solicitor and Accredited Mediator, Director, Technical and Research, HKICS. She will be a speaker at the Institute’s upcoming corporate governance conference. For more details, see the conference website link on the HKICS homepage: www.hkics.org.hk.