Hong Kong Seeks Views On New Competition Law

by Mary Swire, for LawAndTax-News.com, Hong Kong

08 May 2008

A three-month consultation on a proposed new competition law for Hong Kong has been launched.

According to Secretary for Commerce and Economic Development Frederick Ma, such a law can help facilitate a better business environment for companies and protect consumers' rights, for the benefit of all sectors of society.

Mr Ma stated that the Government is looking forward to receiving the public's views on the proposed framework, before finalising the Competition Bill for introduction to the Legislative Council in the 2008-09 legislative session.

"Introduction of the new law will help us to more effectively implement our competition policy, which is aimed at enhancing economic efficiency and the benefit of consumers through promoting sustainable competition," Mr Ma stated.

"By setting out a clear and enforceable prohibition against anti-competitive conduct, a competition law can help facilitate a better business environment for companies and protect consumers' rights, for the benefit of all sectors of society," he added.

Mr Ma went on to explain that during the last public consultation exercise on the way forward for Hong Kong's competition policy, there was general support for the introduction of a cross-sector competition law.

"However, we recognise that some stakeholders, particularly business-sector representatives and small and medium-sized enterprises, had concerns that such a law should not create extra compliance costs or lead to excessive litigation."

"To this end, the public consultation paper has specifically set out a number of proposals to address their concerns," he added.

The consultation paper covers key elements that will form the basis of a competition law, including the proposed regulatory structure, types of conduct that will be prohibited, penalties that will apply for infringing the law, the right to take private action, and criteria and mechanisms for granting exemptions and exclusions from the law's application.

The new competition law has proposed:

• To set up a Competition Commission, which would operate independently from the Government, to investigate anti-competitive conduct, determine whether law infringements had occurred and impose remedies as appropriate;
• To set up a separate Investigation Committee within the commission to maximise checks and balances; and
• To set up an independent Competition Tribunal to review the commission's decisions.

The commission would require an annual budget of up to HKD80mn, and the initial cost of operating the tribunal would be about HKD6mn per year.

The law will set out general prohibitions against anti-competitive agreements between competing undertakings, and abusive conduct by undertakings with substantial market power. Three options for merger regulation have been proposed in the consultation paper for stakeholders' comments and discussions.

Under the new law the commission should have the authority to grant exemptions for agreements where it considers these would not cause any net economic harm.

The Chief Executive-in-Council should have the power to exclude the relevant activities from the law's application where broader public-policy considerations apply.

The new, cross-sector competition law would not apply to the government or statutory bodies. The penalties for infringement would be civil in nature, with fines of up to HKD10mn imposed by the commission.

The commission could apply to have the tribunal impose more serious penalties, including higher fines with a cap of 10% of total turnover during the period when the infringement occurred, and disqualification from holding a directorship or a management role in any company for up to five years.

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