The economic crisis of the past year has brought on issues and concerns that will have far-reaching implications to consumers into the next millenium.
It has greatly heightened consumer awareness for a better deal in the marketplace as businesses, notably in the public utilities and telecommunications sector, competed with price freeze and cuts.
1998 was a year of unrelenting endeavours by the Consumer Council in striving to respond to emerging issues of consumer interest significance and to deal with an unprecedented rise in consumer complaints against undesirable trade practices and business defaults.
At a year-ender press briefing today (January 11), the Council's Chairperson, Ms. Anna WU, recapped highlights of its work during the year under review, and outlined the areas of priority and the challenge ahead.
Price Surveillance and Competition
In a deflationary cycle, consumers become increasingly alert to pricing of products in the domestic market.
The Consumer Council has been vigilant in monitoring prices of petroleum products (automative petrol and diesel, and liquefied petroleum gas), supermarkets and school textbooks on a regular basis and, through market surveys, investigates a diverse range of goods and services such as bank charges, prices of compact discs and drugs (local and worldwide), chicken prices (in the wake of the bird flu), etc.
On the issue of petroleum product pricing, the Council has called on oil companies to compete on price instead of giving out free gifts of distilled water and tissue paper, etc. The Council has also drawn attention to the lack of any downward price adjustment to LPG despite falling import prices.
And the Secretary for Economic Services has called on oil companies to submit their cost data within two weeks for the scrutiny of his Bureau and the Council.
In this connection, the Council will look into the market structure for distribution of petroleum products in Hong Kong and will request the Government to examine its tendering procedures for petrol stations and licensing policy so as to enhance competition.
The current economic downturn has demonstrated the urgent need for fair and open competition in the marketplace that will help keep prices down and quality of goods up.
The Government's Statement on Competition Policy in May 1998 in response to the Council's report on Competition Policy: the Key to Hong Kong's Future Economic Success provides a benchmark for business operation.
There is growing public awareness and understanding of the benefits of competition in the marketplace - the IDD price cut being the most recent example.
During the year, the Council saw to fruition much of its efforts in advocating for competition. The liberalization of the telecommunications and broadcasting markets and the Hong Kong Monetary Authority commissioned consultancy report's recommendation to further liberalize the interest rates are shining examples.
On the recent acquisition of Star Internet by HKT IMS, the Consumer Council noted that the Telecommunications Authority has allowed the acquisition to proceed with the condition that the licence of HKT IMS must be modified to incorporate two new special conditions prohibiting abuse of dominant position and unfair cross-subsidies to the operation of HKT IMS.
However the Council is of the view that this fragmented approach to the application of competitive safeguards seems to accentuate the regulatory difficulties that the Council feels will arise in future as developments in Internet technology and marketing result in the convergence of markets.
It reveals the inadequacy of the Government's sector-specific approach to competition because of its inability to deal with problems outside the regulatory regime. It will be lagging behind rapid changes in the marketplace. As a result of the time lags inherent in this approach, there is the possibility that irreversible damage will occur in terms of economic efficiency.
The Council remains committed to its recommendation for a competition law and a competition authority with overall responsibilities in all matters of competition.
Trade Practices in a Recession
Economic downturn has also brought on a new record high number of consumer complaints: a total of 22,750 representing an increase of nearly 100% over the previous year's record of 11,535.
The number included the 7,878 consumer complaints related to video clubs (5,197) and cake coupons (2,681) with the overwhelming majority levelled against Maria Bakery and KPS which went into liquidation during a year of economic downturn.
The large volume of complaints is indicative of the general low level of consumer satisfaction in the marketplace. In a slow market, it is in their own interests that businesses should enhance the confidence of consumers by their determination to adhere to good business practice.
To this end, the Council has developed a draft benchmark code of practice and will embark on a programme of encouraging industry associations to consider the benchmark code, in drawing up or reviewing their own codes of practice.
The Council firmly believes that the objectives of open competition and fair trading practices in the marketplace can be greatly assisted through the use of such a benchmark. It will actively enlist support of the business community in adopting self-regulatory codes of practice beneficial to consumers in the year ahead.
On the long-standing issue of misleading advertisements, the Council is presently directing its efforts in a large scale survey on over 1,000 questionable advertisements in the media of newspapers, periodicals and television, with a view to identifying the problem areas and putting forward recommendations for appropriate measures to safeguard consumer interests.
The advertisements in the survey cover six categories of products and services: health food, beauty saloons and fitness clubs, beauty products and cosmetics, private tutorial and training centres, travel agents, and properties.
The Council will also be looking at potential problems related to trade practices in the field of electronic commerce and consumer concerns over the Y2K issue.
Copyright Issues and the Consumers
On the controversy over pirated video compact discs, the Council fully respects the rights of copyright owners but is concerned about the social implications of bringing criminal sanctions on the end-users. The Council believes other more effective measures should be vigorously pursued, for instance, enforcement action on infringement and education of end-users. The Council's concerns are:
First, there is no absolute certainty that consumers would be able to differentiate between the genuine and the pirated versions. The quality of counterfeits, in some cases, is ever getting better and the price gap ever smaller.
Second, the purchasers of VCDs are mostly young people. Criminalising them will have serious consequences to their future for the rest of their lives.
Third, it will set a dangerous precedent with all kinds of copyright issues creeping up on books, designs and the like.
The problem is one of complexity with many social issues at stake that could not be resolved satisfactorily with a single piece of criminal law alone.
Consumer Empowerment
Consumer empowerment strikes at the heart of consumer protection. The various aspects of work of the Consumer Council all contribute to this objective through a regular flow of information, advice and guidance to the consumer public.
The Consumer Council will continue to be constantly engaged in an extensive research programme that includes comparative product testing, in-depth studies, price and market surveys on a diverse range of consumer goods and services. In 1998, it completed a total of 102 research reports (37 product tests, 16 survey projects and 49 in-depth studies) to provide consumers with impartial information and, in some cases, to check compliance with the new legislation on consumer product safety.
With the formation of a new Consumer Education Division, a systematic programme will be launched to effectively reach various targets of audience to equip them with the skills and knowhow of wise rational consumption, and awareness of their rights and responsibilities as consumers.
The Council believes that empowering consumers is an effective means to enhancing consumer protection in moving towards 2000. It will stay vigilant in all its efforts to meet the rising expectation of consumers.