USDA: Hong Kong Suppliers Say Supermarket's New Policy Violates Competition Law

A “major” Hong Kong retail chain is requiring local suppliers to notify the chain 12 weeks before they make price increases, prompting suppliers to allege a breach of competition law, according to a March 13 U.S. Department of Agriculture report. The 12-week advance notice would allow the retailer to obtain “sensitive commercial data” that would likely be beneficial, the report said, because the retailer also buys direct from overseas suppliers and carries its own branded products. “The information requested from suppliers is conducive to the pricing of the retailer’s own products,” USDA said. The report does not name the chain, but calls it a “major supermarket.”

Hong Kong importers have reportedly filed a complaint with the Hong Kong Competition Commission, USDA said, alleging the retail chain’s request forces them to provide “sensitive commercial information” that may “influence the pricing of the retailer’s branded products and those products sourced via consolidators.” However, USDA’s report notes that “academia specializing in the competition law” suggested the suppliers’ complaint many not be valid “as the retailer is simply asking for information to determine whether product prices should increase in its stores.”

The report said “one of the two major supermarket chains” in Hong Kong wrote to their suppliers and requested a “cost breakdown justification” for any “price increase request.” The cost justifications, USDA said, can only cover costs associated with “raw ingredients, transportation, packaging, and public utilities such as electricity, water, and gas bills.” The retailer said in the letter that it would not consider increased costs in “manpower, distribution, and management” as sufficient justification for driving retail prices up, the report said.

Suppliers need to agree to the retailer’s new conditions to continue to do business with the retailer, USDA said. The report also noted that if U.S. exporters to Hong Kong want to raise the retail prices of their goods that are sold by this supermarket chain, the chain “reserves the right to reject the price increase requests and to determine the effective date of any approved price increases because their suppliers need to submit the request to the retailer accordingly.”