1.
CONFIDENTIAL
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16.
There is no evidence to suggest that the Hong has any causes for altering its policy of stable prices and regular supply.
Would a Scheme of Control be viable?
17.
In the slaughtering trade, it seems difficult, if not impossible, for a Scheme of Control on Prices to operate. It would be possible to put controls on the slaughtering fee charged but (as noted in para. 5 above), this currently represents only 12% of the consumer's costs. There would appear to be little justification to impose new controls on wholesale prices since no complaints have been raised by the consumer over the past 25 years against the Hong's monopoly of supply and overall control of meat prices. A Scheme of Control covering only the slaughtering fee would have no significant effect on meat prices.
Problems with Open Tender
12.
:
a
If all the abattoirs were put up to open tender on one-by-one basis, the results would not be the competition and 10w consumer costs which, at first glance, might be expected. Firstly, the tenderer would be paying a much higher price for the land and buildings than is likely through a closed tender, and this would have to be paid for by an increase in the price charged the eventual consumer. Secondly, competition between the abattoirs is impossible on health grounds Hong Kong island retailers' for instance cannot be supplied from abattoirs on the mainland - each open tendered abattoir would, in other words, have its own monopoly within its own area. Thirdly, no open tenderer would be able to get animals for slaughter unless the bulk сайе from China. Here the Hong will still have a monopoly - logistically, breaking that monopoly within China looks impossible at this stage. The Hong would merely refuse to supply, or to supply in full, any abattoir operator who refused to operate in close alliance with the Hong (the Hong already has such an alliance with the Tsuen Wan and Yuen Long Slaughterhouses, and would be able to put the squeeze very effectively on any outside bidder for the Cheung Sha Wan Abattoir, for instance). Open tender could lead to tension and disturbance, but would inevitably lead to the Hong's existing marketing and pricing control reappearing in some form or another eventually. Fourthly, no abattoir operator not in close relationship with the retailers is likely to be able
but the retailers have so much to gain from continuing their current intimate and amicable relationship with the Hong that only extreme pressure is likely to disturb this. Thus open tender is unlikely to lead to greater real competition, and is unlikely to alter the Hong's practical control in other than the very short term, but is very likely to set the abattoir operators on a collision course with the retailers, and saddle the operators with heavy investment costs which would have to be recovered from the consumer. A closed tender would allow these problems to be overcome, as well allowing Cheung Sha Wan Abattoir, the Homantin Livestock
survive
as
CONFIDENTIAL