MSG maker in hot soup for setting resale price

The competition watchdog has taken legal action against a seasoning manufacturer for allegedly imposing a minimum resale price when supplying MSG powder to its two main local distributors.

It is the first time the Competition Commission is bringing such a case before the Competition Tribunal.

It said the product in question is Tien Chu (Hong Kong)'s MSG powder, named "Finger Citron Ve-Tsin Gourmet Powder."

Tien Chu is said to have continued to establish minimum resale prices to be charged by the two distributors between December 14, 2015, when the Competition Ordinance came into effect, until at least September 27, 2017.

Following one of the distributors complaints about the other's discounts, Tien Chu allegedly issued warnings, threats and penalties in 2016 and 2017 to ensure distributors did not sell for less than the minimum resale price.

The latter distributor complied, allowing the product to be sold with reduced competition to subdistributors, whose customers are mainly Chinese restaurants in Hong Kong.

"The commission has reasonable cause to believe Tien Chu contravened the first conduct rule and constituted serious anti-competitive conduct under the Competition Ordinance," the commission said, adding such arrangements may substantially reduce competition and result in diners paying higher prices.

The legal action was taken as the manufacturer is "ultimately responsible for coordinating the resale pricing by its distributors," with the watchdog declining to pursue the distributors.

"By bringing the city's first retail price maintenance case to the tribunal, the commission wishes to demonstrate its determination to tackle RPM arrangements that have the objective of undermining competition," said chief executive Rasul Butt.

The commission is seeking a declaration that Tien Chu has contravened the first conduct rule; pecuniary penalties; orders prohibiting it from engaging in further contravening conduct and requiring it to adopt an effective compliance program; and legal and investigative costs.