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Hong Kong will Legislate against Anti-competition Trade Practices

In March 2007, the Commerce and Economic Development Bureau published the Report on Public Consultation on the Way Forward for Hong Kong's Competition Policy. The Report utters that the results of its public consultation in 2006 revealed that competition legislation iss broadly welcomed by the community. On 6th May 2008, the Bureau released a public consultation paper setting out detailed proposals for developing a anti-competition statute universally applicable to all trade and service sector. A summary of the major proposals for such an anti-competition law are set out below.

Summary of Recommendations

The main recommendations are summarised as follows:-

New Legislation - General

  1. New legislation should be introduced to guard against anti-competitive conduct that would have an adverse effect on economic efficiency and free trade in Hong Kong.
  2. Rather than target individual sectors of the economy, the legislation should apply to all.
  3. Provision should be included in the legislation to allow the Government to grant exemptions to the application of the law in defined circumstances on public policy or economic grounds.
  4. The regulatory authority should have the discretion to disregard inappropriate complaints, so as to guard against the new law being used to stifle legitimate competitive business activities.
  5. The new law would not target market structures, nor seek to regulate “natural” monopolies or mergers and acquisitions.

New Legislation – Broad Provisions

  1. The new legislation should cover the following types of anti-competitive conduct :
    • Price-fixing
    • Bid-rigging
    • Market allocation
    • Sales and production quotas
    • Joint boycotts
    • Unfair or discriminatory standards
    • Abuse of a dominant market position.
  2. Such conduct should not be an offence per se, but rather, the particular conduct must be proven :
    a) to have been carried out with the intent to distort the market; or
    b) to have the effect of distorting normal market operation.
  3. There should not be lengthy and detailed descriptions of these types of conduct in the law as such. Appropriate guidelines should be drawn up by the regulatory authority in consultation with relevant stakeholders that would include :
    • detailed descriptions and examples of the types of anti-competitive conduct listed in the law;
    • an indication as to how intent and effect in relation to market distortion might be assessed; and
    • reference to cases dealt with under existing local sector-specific laws and related overseas legislation.

Regulatory Framework

  1. A regulatory authority, to be known as the Competition Commission should be established under the new law. The Commission should have a “two-tier” structure, comprising a governing board underpinned by an executive arm that would include staff with relevant expertise.
  2. The Competition Commission should have an advocacy role, and should be tasked with keeping the scope and application of the new law under review.
  3. The Competition Commission should have sufficient powers to allow it to investigate thoroughly any suspected anti-competitive conduct prohibited by the new legislation.
  4. The Government should seriously consider the merits of establishing a Competition Tribunal to hear cases brought by the Competition Commission and to hand down sanctions.
  5. With regard to sanctions, civil penalties should apply in cases where anti-competitive conduct is found to have occurred.
  6. The Competition Commission should be able to apply for an order from the Competition Tribunal (if established) to require an offender to cease and desist from anti-competitive conduct, pending a decision on the case.