24th June 2024 – (Hong Kong) In 2021, Hong Kong’s leading grocery stores, ParknShop and Wellcome, commanded an astounding 84% of the market share, according to a survey by Statista , with consumers heavily relying on these two chains for their daily necessities. However, a decade later, it is imperative to investigate the behaviour of these retail giants, as their practices may be anti-competitive and detrimental to both suppliers and consumers.

ParknShop, a member of the AS Watson Group under CK Hutchison Holdings Limited, boasts over 300 stores and 9,000 employees in Hong Kong. Meanwhile, Wellcome, owned by British conglomerate Jardine Matheson Holdings through its DFI Retail Group subsidiary, has more than 240 stores and serves over 14 million customers monthly. The extensive reach and market dominance of these two chains have raised concerns about their business practices and the potential abuse of their market power.

Allegations of anti-competitive behaviour are not new to ParknShop and Wellcome. In 2013, the Consumer Council suggested that the supermarket giants were keeping prices artificially high by pressuring suppliers not to sell to rivals who undercut them. The council called for the Competition Commission to investigate whether their behaviour was anti-competitive, citing exclusive agreements with suppliers and the facilitation of a “recommended retail price” system for products.

Suppliers have also voiced their concerns, with some claiming that ParknShop charges up to HK$300,000 to put a new product on shelves. Additionally, the council’s survey of 43 suppliers revealed that 37% of them experienced complaints from bigger clients about competitors selling products at lower prices, with some clients even asking suppliers to intervene.

These practices bear striking similarities to the recent findings of an inquiry into the behaviour of major retailers in Australia. The review of the Food and Grocery Code of Conduct in Australia exposed the troubling relationship between supermarkets and their suppliers, highlighting an imbalance of power that left many suppliers, including farmers, fearing retribution if they voiced concerns over code breaches.

In response to these findings, the Australian government has announced plans to make the code of conduct mandatory for chains with annual revenue exceeding 5 billion Australian dollars. The new laws will require supermarkets to deal with their suppliers in good faith and prevent them from penalising those who complain. Severe breaches of the code will be punished with fines of up to 10 million AUD or 10% of the chain’s turnover in the preceding 12 months.

Hong Kong must follow Australia’s lead and conduct a thorough investigation into the practices of ParknShop and Wellcome. The Hong Kong government should consider implementing similar measures to ensure fair competition and protect the interests of suppliers and consumers alike. This may include making a code of conduct mandatory for large supermarket chains, imposing heavy penalties for breaches, and establishing an anonymous supplier and whistle-blower complaints mechanism.

The consequences of anti-competitive behaviour extend beyond the direct impact on suppliers. Consumers ultimately bear the brunt of these practices through higher prices and limited product choices. By cracking down on anti-competitive behaviour and promoting fair competition, Hong Kong can foster a more diverse and dynamic retail landscape that benefits both businesses and consumers.

Source: Statista