The Hong Kong Competition Commission (Competition
Commission) has published its final guidelines on the Competition Ordinance which
will come into effect on 14 December 2015. The guidelines cover the First
Conduct Rule (on anticompetitive agreements), the Second Conduct Rule (on abuse
of market power) and the Merger Rule (which regulates mergers in the
telecommunications sector). The Competition
Commission also explains how it will handle complaints, conduct investigations
and consider applications for exemptions and exclusions.
The new competition law contains many borrowings from
established competition laws, notably the EU, US and Australian regimes. However, there are some noteworthy features
which indicate that the legislature and the Competition Commission have sought
to adopt a rather idiosyncratic approach in certain areas.
The Competition Commission has not set out any indicative
market share thresholds for either a finding of substantial market power or for
vertical agreements that might be caught by the First Conduct Rule. The absence of any ‘bright line’ safe
harbours is based on the view that such thresholds would be unworkable given
the structure of the local economy.
There are specific exemptions for SMEs whose conduct will
not infringe the First Conduct Rule where the businesses engaging in the
practices have a combined turnover in Hong Kong of less than HK$200
million. The Second Conduct Rule does
not apply to businesses with local turnover of less than HK$40 million. However, serious infringements including
price fixing, market sharing, output limitation and bid rigging will not
benefit from exemption.
Private actions can only be brought after the Competition
Tribunal has ruled that there has been a violation following an application by
the Competition Commission for the imposition of a fine or an order to stop the
infringing practices. However, the
Government is understood to be considering the need for a standalone action in
the years after implementation.
Hong Kong does not have general merger control at present
outside the telecommunications sector.
However, the need for industry-wide merger control is expected to be
revisited in a few years.
The Competition Commission has already been active in
developing its policies and procedures and in competition advocacy. It has launched a market study into oil
pricing and completed a study of the building management market using very
similar powers to those in the UK under the Enterprise Act 2002. It has also urged the Government to open up
the electricity market.
It seems that businesses are already taking note of the
changes. For example, the Travel Industry
Council has pledged to rescind its guidance on ticketing pricing before the
Ordinance comes into effect.
The Competition Commission has not yet published its
leniency policy or its statement of enforcement priorities, although these are
expected in the coming months. Consumer
facing industries such as healthcare and leisure are expected to be priorities. Many of the Competition Commission’s
officials have a background in consumer law enforcement.
The test of the new law will be how it is interpreted and
applied and against the specific features of Hong Kong’s market policy. Not surprisingly the shipping industry has
urged that a rigid application could have serious implications for its sustainability
by banning cooperative arrangements that have been acceptable up to now but
which would violate the First Conduct Rule unless exempted.
When the new rules come into effect Hong Kong will be the
last developed economy to adopt an industry wide competition law joining most
of its neighbours such as mainland China, Indonesia, Japan, Malaysia, South
Korea, Taiwan, and Thailand. Although
North Korea does not have one…
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