Name:
(
)
Class:
Date:
2.1 What are anti-competitive practices?
A. Foundation Training
I.
1.
Fill in the Blanks: Fill in each blank with a suitable word. (1 mark each)
A monopolist that has a
has the ability and the
to abuse its dominance. It may engage in
practices to increase its profits. Thus, monopoly often suggests anti-competition and
harm to economic efficiency.
2.
Most countries define ‘anti-competition’ according to whether the company uses
or
ways to reduce or restrict
.
II. Matching: On each line given, write the letter that matches the term most. Each letter
may be used more than once. (1 mark each)
1.
Horizontal mergers
2.
Sales and production quotas
3.
Potential competition mergers
4.
Sole distributor
5.
Price-fixing
6.
Customer allocation
7.
Tie-in sales
8.
Resale price maintenance
9.
Unfair or discriminatory standards
Chapter 2 Anti-competitive Behaviours
and Competition Policy
1
A.
Mergers
B.
Horizontal agreements among
competitors
C.
Vertical agreement between buyers
and sellers
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
III. True / False Questions: The following statements are about anti-competitive practices.
For each one of them, if it is correct, put a  in the box; if it is wrong, put a  in the box
and explain why it is wrong on the lines provided. (2 marks each)
1. Monopoly means anti-competitive. It must be harmful to society.
2. Competition law in most countries define ‘anti-competition’ according to the company’s
market share.
3. Anti-competitive practices refer to all behaviours that distort or restrict market
competition.
4. Joint boycott is an example of an horizontal agreement.
5. By practising bid rigging, bidders can increase profits. So, most countries do not ban the
practice.
Chapter 2 Anti-competitive Behaviours
and Competition Policy
2
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
B. Reinforcement Training
I.
Multiple Choice Questions (1 mark each)
1.
Which of the following practices is not an anti-competitive practice?
A. Bid rigging
B. Retail price maintenance
C. Providing after-sales services
D.
2.
Exclusive dealing
The rail merger of the MTR Corporation and the KCR Corporation on 2 December 2007
was a
(1) horizontal merger
(2) potential competition merger
(3) vertical merger
A. (1) only
B. (1) and (3) only
C. (2) and (3) only
D.
(1), (2) and (3)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
3
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
II.
Short Questions
1.
What is anti-competition? List three major forms of anti-competitive practice. (5 marks)
2.
State the difference between horizontal merger and potential competition merger. Explain
why these two types of mergers may have anti-competitive effects. (4 marks)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
4
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
III. Structured Questions
Level 2
1.
Suppose a major press group greatly reduces the price of its newspaper when a new
newspaper is published.
(a) What is predatory pricing? (3 marks)
(b) Is the major press group mentioned above practising predatory pricing? Explain.
(3 marks)
(c) Explain why it is usually difficult for the firm that practises predatory pricing to
increase profits. (4 marks)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
5
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
2.2 Impacts of anti-competitive practices and competition policy
A. Foundation Training
I.
1.
Fill in the Blanks: Fill in each blank with a suitable word. (1 mark each)
The Competition Policy Review Committee pointed out that anti-competitive practices
are illegal if they are carried out with the intent to
effect of lessening
2.
or have the
.
To protect public interests and to avoid conflict with international obligations, the Hong
Kong Competition Policy Review Committee recommended that the new legislation
should include a
to allow the government to
exempt certain specified situations from the application of the law.
II. True / False Questions: The following statements are about impacts of anti-competitive
practices and competition policy. For each one of them, if it is correct, put a  in the box;
if it is wrong, put a  in the box and explain why it is wrong on the lines provided. (2
marks each)
1. There is no final conclusion as to whether competition laws can enhance economic
efficiency in practice.
2. Some people are worried that a competition policy will interfere with the market
structure.
Chapter 2 Anti-competitive Behaviours
and Competition Policy
6
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
B. Reinforcement Training
I.
1.
Multiple Choice Questions (1 mark each)
Which of the following practices is not covered by the competition policy of Hong
Kong?
A. Mergers and takeovers
B. Joint boycotts
C.
D.
2.
The objectives of Hong Kong’s competition policy are
(1) to enhance economic efficiency.
(2) to remove monopoly.
(3) to facilitate free trade.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D.
3.
Price-fixing
Unfair or discriminatory standards
(1), (2) and (3)
Which of the following statements about the competition policy of Hong Kong is
incorrect?
A. All sectors are regulated by the policy.
B. There are exemptions to competition law.
C. Violating competition law is a criminal offence.
D. The competition law does not point against market structures.
Chapter 2 Anti-competitive Behaviours
and Competition Policy
7
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
II.
Short Questions
1.
Give three justifications for a competition policy. (6 marks)
2.
Give three justifications for opposing a competition policy. (6 marks)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
8
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
III. Structured Questions
Level 1
1.
Suppose a supermarket chain, which has a dominant market position, requires a supplier
to give its goods only to the chain’s supermarkets for sale. Otherwise, it will stop trading
with the supplier.
(a) Is the practice described above anti-competitive? Explain your answer. (2 marks)
(b) What are the effects of such a practice on the business environment and consumers?
(4 marks)
2.
In Hong Kong, many tuck shops in primary and secondary schools have agreements with
their soft drink suppliers not to sell the soft drinks of other companies.
(a) Is the arrangement described above anti-competitive? Explain your answer.
(2 marks)
(b) Explain why this arrangement may be beneficial to the tuck shops and consumers.
(4 marks)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
9
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
News Commentary Questions
1.
Study the following report on health maintenance organizations and answer the
questions.
A01 Local news
Daily News
24 May 2007
Lack of control on HMOs
There is nothing new about health maintenance organizations
(HMOs) becoming commercialized, but in Hong Kong, they have
never been regulated by the authority. The public is worried about
how the quality of healthcare services may be affected with HMOs
monopolizing clinic services.
In recent years, private HMOs have been taking over traditional
one-man clinics. A few days ago, a report said that doctors of over
50% of private clinics were linked to HMOs. They were under the
constraints of these organizations, which restrict their healthcare
services and medications.
(a) Clinics operating in the form of a group may be beneficial to the public. Suggest two
possible reasons. (4 marks)
(b) The taking over of traditional clinics by private HMOs may be anti-competitive and
disadvantageous to the public. Explain why. (4 marks)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
10
©Hong Kong Educational Publishing Co.
Name:
Chapter 2 Anti-competitive Behaviours
and Competition Policy
(
)
11
Class:
Date:
©Hong Kong Educational Publishing Co.
Name:
2.
(
)
Class:
Date:
Study the following report on the opening of the market for importing live pigs and
answer the questions.
A01 Local news
Daily News
21 July 2007
Guangnan Hong introduced to open market for importing live pigs
The Secretary for Food and Health announced yesterday that the government had reached an
agreement with the Central government to open the market for importing live pigs. After Ng Fung
Hong, Guangnan Hong will become the second distributor of live pigs imported from the
mainland. It was also agreed that a third distributor would be added. The Secretary believed that
the recent live pig shortage had contributed to this market restructuring and the introduction of
competition. He further commented that opening the market helped stabilize the supply and the
quality of live pigs in the future.
(a) What is a sole distributor? (2 marks)
(b) How do you think having a sole distributor for importing live pigs affects the interest of
local consumers? (3 marks)
(c) Do you think introducing one more supplier can protect consumers’ interests effectively?
Explain. (4 marks)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
12
©Hong Kong Educational Publishing Co.
Name:
(
92–97
)
68–91
24–48
Chapter 2 Anti-competitive Behaviours
and Competition Policy
Class:
Date:
49–67
0–23
13
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
2.1 What are anti-competitive practices?
A. Foundation Training
I.
1.
Fill in the Blanks: Fill in each blank with a suitable word. (1 mark each)
A monopolist that has a
incentive
dominant market position
has the ability and the
to abuse its dominance. It may engage in
anti-competitive
practices
to increase its profits. Thus, monopoly often suggests anti-competition and harm to
economic efficiency.
2.
Most countries define ‘anti-competition’ according to whether the company uses
unfair
or
inappropriate
ways to reduce or restrict
market competition
.
II. Matching: On each line given, write the letter that matches the term most. Each letter
may be used more than once. (1 mark each)
1.
Horizontal mergers
A
2.
Sales and production quotas
3.
Potential competition mergers
4.
Sole distributor C
5.
Price-fixing B
6.
Customer allocation
7.
Tie-in sales
8.
Resale price maintenance
9.
Unfair or discriminatory standards
B
A.
Mergers
B.
Horizontal agreements among
competitors
C.
Vertical agreement between buyers
and sellers
A
B
C
C
Chapter 2 Anti-competitive Behaviours
and Competition Policy
B
T1
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
III. True / False Questions: The following statements are about anti-competitive practices.
For each one of them, if it is correct, put a  in the box; if it is wrong, put a  in the box
and explain why it is wrong on the lines provided. (2 marks each)
1. Monopoly means anti-competitive. It must be harmful to society.

Monopoly may be a result of economies of scale and elimination of weaker competitors.
It is not necessarily anti-competitive and may even be beneficial to society.
2. Competition law in most countries define ‘anti-competition’ according to the company’s
market share.

Competition law in most countries define ‘anti-competition’ according to the company’s
practices and not its scale or market share.
3. Anti-competitive practices refer to all behaviours that distort or restrict market
competition.

4. Joint boycott is an example of an horizontal agreement.

5. By practising bid rigging, bidders can increase profits. So, most countries do not ban the
practice.

In most countries, bid rigging is illegal. It is because if there is bid rigging, the price for
the project or service will be much higher than the market price. This harms society.
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T2
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
B. Reinforcement Training
I.
Multiple Choice Questions (1 mark each)
Elective Part 1, pp.73–74, Qs.2 and
4.
1.
Which of the following practices is not an anti-competitive practice?
A. Bid rigging
B. Retail price maintenance
C. Providing after-sales services
D.
2.
C
Exclusive dealing
The rail merger of the MTR Corporation and the KCR Corporation on 2 December 2007
was a
(1) horizontal merger
(2) potential competition merger
(3) vertical merger
A. (1) only
B. (1) and (3) only
C. (2) and (3) only
A
D.
(1), (2) and (3)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T3
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
II.
Short Questions
1.
What is anti-competition? List three major forms of anti-competitive practice. (5 marks)
Elective Part 1, p.74, Qs.1–2.
Anti-competition means that enterprises use unfair or inappropriate ways to reduce or restrict
market competition. (2)
Forms of anti-competitive practice include mergers, horizontal agreements and vertical
agreements. (3)
2.
State the difference between horizontal merger and potential competition merger. Explain
why these two types of mergers may have anti-competitive effects. (4 marks)
A horizontal merger refers to the merging of firms producing the same type of goods, whereas
potential competition merger refers to the merging of a firm and another firm that plans to
enter the market and compete with it. (2)
Both can eliminate competitors and reduce market competition, (1)
as well as increase the firm’s ability to control the price. (1)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T4
©Hong Kong Educational Publishing Co.
Name:
(
)
III. Structured Questions
Class:
Date:
Elective Part 1, p.74, Q.3.
Level 2
1.
Suppose a major press group greatly reduces the price of its newspaper when a new
newspaper is published.
(a) What is predatory pricing? (3 marks)
(b) Is the major press group mentioned above practising predatory pricing? Explain.
(3 marks)
(c) Explain why it is usually difficult for the firm that practises predatory pricing to
increase profits. (4 marks)
(a) Predatory pricing is the practice that a firm with dominant market position sells below
the cost of production to drive competitors out of the market and prevent the entry of new
companies. It then monopolizes the market, raises the price and earns greater profits. (3)
(b) Not necessarily. It depends on whether the press group has dominant market position,
and whether the price after reduction is lower than the cost. (3)
(c) In the short run, selling below the cost of production leads to loss. (2)
In the long run, even if the firm can successfully drive all competitors out of the market,
once it raises the price to earn more profits as a monopolist, potential competitors will
enter the market again. (2)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T5
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
2.2 Impacts of anti-competitive practices and competition policy
A. Foundation Training
I.
1.
Fill in the Blanks: Fill in each blank with a suitable word. (1 mark each)
The Competition Policy Review Committee pointed out that anti-competitive practices
are illegal if they are carried out with the intent to
effect of lessening
2.
competition
distort the market
or have the
.
To protect public interests and to avoid conflict with international obligations, the Hong
Kong Competition Policy Review Committee recommended that the new legislation
should include a
general provision
to allow the government to exempt certain
specified situations from the application of the law.
II. True / False Questions: The following statements are about impacts of anti-competitive
practices and competition policy. For each one of them, if it is correct, put a  in the box;
if it is wrong, put a  in the box and explain why it is wrong on the lines provided. (2
marks each)
1. There is no final conclusion as to whether competition laws can enhance economic
efficiency in practice.

2. Some people are worried that a competition policy will interfere with the market
structure.

Chapter 2 Anti-competitive Behaviours
and Competition Policy
T6
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
B. Reinforcement Training
I.
1.
Multiple Choice Questions (1 mark each)
Which of the following practices is not covered by the competition policy of Hong
Kong?
A. Mergers and takeovers
B. Joint boycotts
C.
D.
2.
Price-fixing
Unfair or discriminatory standards
A
The objectives of Hong Kong’s competition policy are
(1) to enhance economic efficiency.
(2) to remove monopoly.
(3) to facilitate free trade.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D.
3.
Elective Part 1, pp.73–74, Qs.1, 3 and 5.
B
(1), (2) and (3)
Which of the following statements about the competition policy of Hong Kong is
incorrect?
A. All sectors are regulated by the policy.
B. There are exemptions to competition law.
C. Violating competition law is a criminal offence.
C
D. The competition law does not point against market structures.
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T7
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
II.
Short Questions
1.
Give three justifications for a competition policy. (6 marks)
Date:
Elective Part 1, p.74, Qs.3–4.
To provide a legal basis for the investigation and sanctioning of anti-competitive conduct. /
To strengthen the competition regulatory framework in order to promote market discipline. /
To improve the business environment and provide a level playing-field for business. / To
improve transparency through delineating what constitutes anti-competitive conduct so that
firms and the public are fully aware of them and can prevent their occurrence in society. /
Without such regulation through legislation, in the long run there might be an adverse effect
on the competitiveness of Hong Kong, especially in those sectors with high entry barriers.
(Any three, 2 + 2 + 2)
2.
Give three justifications for opposing a competition policy. (6 marks)
It would increase the cost of doing business locally and affect Hong Kong’s regional
competitiveness. (2)
Hong Kong is a free and competitive market and this has worked very well. The government
needs not interfere. (2)
Enterprises are afraid of violating the law and may give up some economic activities that are
efficient. (2)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T8
©Hong Kong Educational Publishing Co.
Name:
(
)
III. Structured Questions
Class:
Date:
Elective Part 1, p.74, Qs.1–2.
Level 1
1.
Suppose a supermarket chain, which has a dominant market position, requires a supplier
to give its goods only to the chain’s supermarkets for sale. Otherwise, it will stop trading
with the supplier.
(a) Is the practice described above anti-competitive? Explain your answer. (2 marks)
(b) What are the effects of such a practice on the business environment and consumers?
(4 marks)
(a) Yes. It is an abuse of dominance. (2)
(b) Business environment: it creates unfair competition and damages free trade. (2)
Consumers: it reduces consumers’ choices. The price of the goods may also rise, which
is not in the interest of consumers. (2)
2.
In Hong Kong, many tuck shops in primary and secondary schools have agreements with
their soft drink suppliers not to sell the soft drinks of other companies.
(a) Is the arrangement described above anti-competitive? Explain your answer.
(2 marks)
(b) Explain why this arrangement may be beneficial to the tuck shops and consumers.
(4 marks)
(a) Yes. It is exclusive dealing: restricting the competition of the other soft drink
companies. (2)
(b) The decrease in the number of suppliers can reduce the costs in procurement, storage,
accounting, etc., which is beneficial to the tuck shop. (3)
The prices may decrease as a result, which is beneficial to consumers. (1)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T9
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
News Commentary Questions
Elective Part 1,
p.75.
1.
Study the following report on health maintenance organizations and answer the
questions.
(Supplementary information: Some reports pointed out that doctors joining health
maintenance organizations have to follow the guidelines of their HMOs when giving
medication. They usually use cheaper and less effective medication, and this is not in the
interest of patients.)
A01 Local news
Daily News
24 May 2007
Lack of control on HMOs
There is nothing new about health maintenance organizations
(HMOs) becoming commercialized, but in Hong Kong, they have
never been regulated by the authority. The public is worried about
how the quality of healthcare services may be affected with HMOs
monopolizing clinic services.
In recent years, private HMOs have been taking over traditional
one-man clinics. A few days ago, a report said that doctors of over
50% of private clinics were linked to HMOs. They were under the
constraints of these organizations, which restrict their healthcare
services and medications.
(a) Clinics operating in the form of a group may be beneficial to the public. Suggest two
possible reasons. (4 marks)
(b) The taking over of traditional clinics by private HMOs may be anti-competitive and
disadvantageous to the public. Explain why. (4 marks)
(a) Medical fees may fall because of the decrease in costs. (1)
Operating in the form of a group may achieve economies of scale, and the average cost
will fall. For example, the average cost of medicine procurement is lower with bulk
purchase. (1)
They can provide one-stop service for general out-patient services, dental and
laboratory-analysis services, etc., which is convenient to the public. (2)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T10
©Hong Kong Educational Publishing Co.
Name:
(
)
Class:
Date:
(b) The great decrease in the number of traditional clinics may reduce choices for
consumers. (2)
After large-scaled private HMOs get a big market share through mergers and takeovers,
they may abuse their dominance and the prices for healthcare services may be
higher. (2)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T11
©Hong Kong Educational Publishing Co.
Name:
2.
(
)
Class:
Date:
Study the following report on the opening of the market for importing live pigs and
answer the questions.
A01 Local news
Daily News
21 July 2007
Guangnan Hong introduced to open market for importing live pigs
The Secretary for Food and Health announced yesterday that the government had reached an
agreement with the Central government to open the market for importing live pigs. After Ng Fung
Hong, Guangnan Hong will become the second distributor of live pigs imported from the
mainland. It was also agreed that a third distributor would be added. The Secretary believed that
the recent live pig shortage had contributed to this market restructuring and the introduction of
competition. He further commented that opening the market helped stabilize the supply and the
quality of live pigs in the future.
(a) What is a sole distributor? (2 marks)
(b) How do you think having a sole distributor for importing live pigs affects the interest of
local consumers? (3 marks)
(c) Do you think introducing one more supplier can protect consumers’ interests effectively?
Explain. (4 marks)
(a) A sole distributor refers to the arrangement that the producer only assigns one
distributor for its products in a specified sales territory. (2)
(b) Since the sole distributor monopolizes the market, prices will be higher and the quantity
supplied will be lower. This is not favourable to consumers. (3)
(c) Not necessarily. The competition may cause the prices to fall, the quantity supplied and
the quality to rise. All these benefit the consumers. (2)
However, under oligopoly, the two firms may be tempted to cooperate and reduce supply
so as to raise the price. (2)
Chapter 2 Anti-competitive Behaviours
and Competition Policy
T12
©Hong Kong Educational Publishing Co.
Name:
(
92–97
)
68–91
24–48
Chapter 2 Anti-competitive Behaviours
and Competition Policy
Class:
Date:
49–67
0–23
T13
©Hong Kong Educational Publishing Co.