Hong Kong To Have Competition Law

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

21 March 2007

After a 3-month public consultation, Hong Kong's government is going ahead with proposals for a competition law and a matching regulatory authority which will cover all sectors, although with certain exemptions.

A Competition Policy Advisory Group was set up in 1997, but has functioned as little more than a talking shop, leading the government to appointed a Competition Policy Review Committee in 2005. This Committee recommended that Hong Kong should introduce a cross-sector competition law targeting anti-competitive conduct and that such a law should be enforced by an independent Competition Commission. It also recommended that before beginning preparation of a new competition law, the Government should consult the public on the issues raised in the CPRC report.

A discussion document entitled “Promoting Competition – Maintaining our Economic Drive”, was issued in November, 2006, and elicited 114 written submissions. Almost all the submissions took the view that competition serves Hong Kong well and the Government should continue to enhance a pro-market environment. Most respondents commented that competition was crucial to the development of the economy and contributed to the enhancement of society.

However, the majority of the written submissions agreed that there was a need to enhance the framework for the implementation of competition policy and acknowledged that anti-competitive practices did occur in the market. Some respondents commented that the small number of companies in the market made Hong Kong vulnerable to anti-competitive conduct, and that there was a practical need for competition safeguards in a small economy like Hong Kong. The submissions were broadly supportive of an overall competition policy rather than one that applied to certain sectors only.

Stakeholders who commented on the setting up of a regulatory authority supported the establishment of a new authority independent of the Government to enforce the new legislation. They emphasised the need for appropriate checks and balances in the regulatory system, and considered that the regulatory authority should be transparent, simple and efficient. All respondents who expressed views on these issues agreed that the regulatory authority should have formal powers to conduct investigations. They were generally in favour of the authority having powers to enter business premises and to require the production of relevant information. A few respondents considered it too harsh to make failure to co-operate with formal investigations a criminal offence. However, others took the view that this was a serious matter and one that should be considered a crime.

The government says it will now start work on drafting a law, to be submitted to LegCo later this year. The law is likely to include price-fixing, bid-rigging and abuse of a dominant position, among other aspects of competition law, and will probably allow an exemption for companies with a market share of less than 20%.

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