Webb-site finds written evidence of price-fixing and other anti-competitive practices at the HK Institute of Architects, HK Institute of Landscape Architects and HK Institute of Surveyors. But they do have 1 legislator and 30 seats in the CE's Election Committee, so when will C Y Leung activate the Competition Ordinance?

The architect and surveyor cartels
25 January 2015

If and when the HK Chief Executive finally brings the Competition Ordinance (passed in 2012) into full effect, one of the first things the Competition Commission should look at is price-fixing by professional bodies, if it hasn't ended by then. Let's start with The Hong Kong Institute of Architects (HKIA), a statutory body with its own ordinance, which sets The Code of Professional Conduct (Code), and there in black and white you will find price-fixing:

"Rule 3.1: A Member shall uphold and apply the HKIA Agreement between Client and Architect and the Scale of Professional Charges contained therein (hereafter called "HKIA Agreement")."

The Scale of Professional Charges, on the HKIA site here, stipulates minimum percentages to be charged on supervising work on buildings based on the project value (negotiable only above $1,000m), minimum hourly rates for each grade of staff, minimum charges for various services (including $20,000 for the first day and $3,700 per hour thereafter for attending tribunals, court hearings and arbitrations), 20% of the contract value for demolitions (minimum HK$215,000), 10% of the contract value for supervising work on adjoining party-walls (minimum $17,500) and so on. The online version is dated September 1998.

But wait, there are more anti-competitive rules in the Code, including a prohibition on members competing on price, which prevents clients conducting a progressive tender to get the best deal they can:

"3.1.2: A Member who is offering professional services shall not revise a fee quotation to take account of the fee quoted by another architect for the same service."

Another rule prohibits free or discounted design work to win jobs unless everyone follows the HKIA rules:

"3.3 A Member shall not prepare designs for a client in competition with another Member without payment or for a reduced fee, except in a competition conducted under the HKIA and/or UIA Regulations for the Promotion and Conduct of Competitions, or in a competition otherwise approved by the HKIA and/or the UIA."

And there is more like this, but you get the gist. The HKIA is the hub of a cartel via its Code of Conduct. The Competition Ordinance exempts all statutory bodies except those specified by the Chief Executive, and so far, the HKIA is not one of those exceptions, but its members are not exempt and surely this practice must end. The HKIA should set the tone by amending its Code of Conduct and scrapping the Scale of Professional Charges right now.

The HKIA is not alone in price-fixing, by the way - if you wondered why construction costs in HK are so high, amongst other factors, there is also price-fixing over at The Hong Kong Institute of Landscape Architects, which is only a bit more subtle: it publishes what it calls Conditions of Engagement and Professional Charges "for the guidance of members" and on pages 11 to 13 you will find all the "guidance" you need, including a "Percentage Fee Table" ranging from 10.05% to 6.90% for cost of landscape works over HK$10m. Meanwhile The Hong Kong Institute of Surveyors publishes its "recommended" Scale of Professional Charges (August 2013 edition), stating that "all members practising in HK are encouraged to adopt this scale" which includes daily and hourly rates for each level of member.

If you are wondering why it is taking so long for HK's Chief Executive to push the button and bring the Competition Ordinance into effect, then remember that these vested interests have a seat in the Legislative Council (the Architectural, Surveying and Planning seat) and 30 seats on the 1200-member Election Committee which elects HK's Chief Executive. It's the sort of cartel about which C Y Leung famously said, in the video below, "I need to deal with them, in the fullness of time".

© Webb-site.com, 2015

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