Hong Kong fears 3G collusion

The Hong Kong government plans to introduce extra measures to guard against possible collusion among the bidders for third-generation mobile services, according to a new consultation paper on rules for 3G auctions issued by Hong Kong telecoms regulator OFTA.

Under the proposed rules, the identities and bids of the bidders would not be disclosed publicly during the auction. The auction process would also be expedited, so as to conclude the proceedings as soon as possible after applications received.

"This design helps determines the fair market price for the spectrum, a scarce public resource," a spokesman for Information Technology and Broadcasting Bureau said. “There is a lot to be gained from the experiences of other auctions. Our design aims to promote entry, enhance competition, prevent collusion and achieve a fair market price.”

As a measure to further minimize chances of collusion, the rules also comprise a set of regulations on monitoring the “connected bidders”. Under the rules, bidders with common ownership of 15% or more would be disqualified. Also, bidders who are 2G operators would be allowed to co-operate in a bid only after receiving permission from OFTA.

"The objectives of stipulating the rules on connected bidders are to prevent collusion which would be against public interest and affect the integrity of the auction. We must preserve market competition. In drawing up our proposed set of rules, we have referred to rules of auctions in other countries and adapted them to meet the circumstances of Hong Kong," the ITB Bureau spokesman explained.

“Since the rules on connected bidders may have implications on complex corporate relationships amongst potential bidders, including 2G operators, OFTA finds it appropriate to conduct a quick consultation with the industry," the spokesman continued.

The OFTA is holding a two-week consultation period for the connected bidders rules and the auction is scheduled to be completed by mid-year.