Hong Kong: International: Hong Kong enacts Competition Law

Insurance Update
Last Updated: 15 September 2012
Article by Marc Waha and Marie Kwok


The Competition Ordinance was enacted in June 2012; however, it is not expected to come into force until 2014. This will allow time for the Competition Commission and the Commission Tribunal to be established and implementing guidelines issued.

The Competition Ordinance introduces two broad prohibitions for companies conducting business in Hong Kong. The first conduct rule prohibits anti-competitive agreements and concerted practices among two or more businesses. Examples of serious infringements cited in the new rule include price fixing, market sharing, output limitation and bid-rigging practices.

The second conduct rule prohibits anti-competitive conduct by a single business with market power. It is not clear what market power means in terms of market share, but businesses with a significant market position should not abuse their position by, for example, pricing below cost or bundling products to exclude a competitor. Competition authorities elsewhere have traditionally adopted a narrow view on market definition in the insurance sector, leading them to consider that each separate risk constitutes a separate market.

The new rules will apply to any pre-existing agreements, arrangements and conduct that continue to have effect after the Competition Ordinance comes into force. As a result, entities active in Hong Kong will not only have to ensure that new agreements and practices are compliant, but also that existing agreements and practices are consistent with the new law. Commercial practices that must cease before the law becomes effective would include any ongoing coordination and exchange of information among competitors in respect of pricing, market allocation, production or sales capacity, and bid-rigging. Similarly, trade association activities involving these practices must also come to an end.

Entities found to be infringing these rules could face a fine up to 10 per cent of their group Hong Kong turnover for the duration of the infringement (with a three-year cap). Holding companies and ultimate controllers will most likely be held jointly and severally liable for the behaviour of their subsidiaries. Infringing entities may also be ordered to refund illegal profits to the Government and pay damages to any third parties that suffered loss due to the infringement.

Enforcement trends in the insurance industry in Asia

In the absence of implementing guidelines, it is too early to tell how the new competition law will affect the insurance industry in Hong Kong. However, enforcement trends in the industry elsewhere in Asia may provide some guidance.

Asian competition authorities have so far focused on relationships between competing insurance companies rather than on their relationships with distributors, agents or customers. This focus on competitor-to-competitor (or "horizontal") relationships can also be expected in Hong Kong. The Administration explained during the legislative process that supplier-to-reseller (or "vertical" relationships) would be less likely to raise concern - the only exceptions being when competitors enter into a supply relationship, or when the supplier has a substantial degree of market power.

Given the nature of the industry, there is significant interaction among competing insurers in Asia for many legitimate purposes, for example, re-insurance, mutualisation of risks, common industry standards, statistics and actuarial studies. These activities, however, should not give rise to agreements or common practices in terms of pricing or to market allocation among insurers, as the following situations demonstrate.

In Korea, the competition authority has repeatedly sanctioned insurance companies for price-fixing practices. Last year, it imposed fines in excess of US$300 million on life insurers for conspiring to fix interest rates applied to client deposits – a key factor in determining insurance premiums. The investigations took place between 2001 and 2006 through regular communication and exchange of information. In 2008, twenty five insurance companies were fined collectively more than US$23 million for allegedly fixing the price of certain types of insurance, an activity the defendants said came at the request of the government.

Similar conduct was also challenged under competition laws in Vietnam and China. In 2011, Vietnamese competition authorities fined nineteen insurers, which together account for 99 per cent of the country's motor vehicle insurance sector, for premiums fixing arrangements. In China, a trade association representing local insurers was sued in the civil courts for price fixing in 2009. The association had adopted a decision requiring members to follow its guidance on the level of premiums that should be charged for automobile insurance. Ultimately, the case was settled following the association's decision to stop requiring adherence to its pricing guidance.

The introduction of competition laws has also informed the way insurance regulators exercise their prudential powers. In 2008, for example, eighteen local insurers entered an agreement requiring clients to purchase insurance exclusively through a "New Vehicle Insurance Service Centre", which then allocated the clients among the insurers within Hong Kong. The practice was prohibited by China's Insurance Regulatory Commission as it amounted to an illegal market allocation and a boycott of non-participating insurers.

What steps need to be taken in order to ensure compliance?

There is no one-size-fits-all compliance scheme, therefore, it is always advisable to implement a programme that is suitable for the business and resources of the company concerned.

In general, a four-step compliance approach should be adopted:

  1. Awareness: spread understanding of the basic features of the Competition Ordinance and its relevance to your business through introductory face-to-face or online workshops.
  2. Assessment: conduct internal business audit and risk assessment to identify high-risk areas.
  3. Competence: based on priorities identified during the risk assessment process, and under the leadership of senior management, implement a corporate compliance programme consisting of staff training, internal guidelines and circulars on sensitive topics, with a view to communicating to staff what is expected from them.
  4. Commitment: implement appropriate disciplinary and reporting procedures, and obtain staff commitment to compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions