Hong Kong: Hong Kong’s Competition Bill - An Update

Last Updated: 22 December 2010
Article by John M. Hickin and Gerry P. O'Brien
Most Read Contributor in Hong Kong, November 2018

Originally published 21 December 2010

Keywords: Hong Kong, Competition Bill, Bills Committee

It is now almost six months since the Competition Bill was introduced into Hong Kong's Legislative Council. In this legal update, we summarise the key developments and progress relating to Legislative Council consideration of the Bill.

Status of the Competition Bill

The Competition Bill was gazetted on 2 July 2010, and received its first reading in Hong Kong's Legislative Council on 15 July 2010. The Bill is now under consideration by a Bills Committee that was formed on 8 October 2010. The Bills Committee is considering the principles and merits of the Bill as well as its detailed provisions, and may propose amendments relevant to the Bill in due course. After the Bills Committee has completed scrutiny of the Bill, it will notify the House Committee of the Legislative Council and advise the committee in writing of its deliberations, following which debate on the Second Reading may resume (following which, further steps towards passage of the Bill into law may proceed). This is not expected to occur before May 2012.

Composition and Work Plan of the Bills Committee - Hon Andrew LEUNG Kwan-yuen has been appointed Chairman of the Bills Committee, and Hon Ronny TONG Ka-wah has been appointed Deputy Chairman - notwithstanding that both have previously expressed strong concerns about aspects of the government's current or previous competition law proposals. The 40 member Bills Committee has published a 'work plan' which indicates that at least 37 meetings are planned - running until April 2012. Five meetings have been held to date.

Submissions Presented to the Bills Committee - A number of organisations were invited to attend a Bills Committee meeting on 29 November 2010 to provide comments on the Bill. In addition, a general invitation was issued to any party wishing to provide a written or oral submission regarding the Bill, following which at least 54 written submissions have been provided to the Bills Committee. Organisations who have made submissions include:

  • Chambers of Commerce (such as The Chinese General Chamber of Commerce);
  • private companies (such as Cathay Pacific Airways Limited, A.S. Watson Group, Hutchison Port Holdings Limited, MTR Corporation and Park'n'Shop);
  • trade associations (such as the Hong Kong Association of Banks and the Hong Kong Retail Management Association) and federations;
  • government bodies (such as the Consumer Council);
  • industry 'think tanks' and lobby groups (such as the Lion Rock Institute and Momentum 107); and
  • members of the public.

Development of 'Sample' Guidelines Relating to the Bill - The Undersecretary for Commerce and Economic Development, Mr. Greg So, has reportedly advised the Bills Committee that 'sample guidelines' will be provided for review in January 2011. It is understood that these sample guidelines are intended to be indicative or representative of the guidelines that the Bill contemplates would be developed in due course by the Competition Commission to explain matters such as how the broadly worded prohibitions in the Bill will be applied in practice. According to section 35 of the Bill, the Commission would be required to engage in a level of consultation when developing these guidelines. However that consultation need only occur with persons that the Commission "considers appropriate". Further, the sample guidelines that are presently being drafted by the government will not be binding on the Commission. Accordingly, the extent to which the business sector may have an opportunity to influence the shaping of the actual Commission guidelines may be limited.

Position of Statutory Bodies May Be Clarified Soon - It is understood that the government intends to brief the Bills Committee on the government's position regarding which statutory bodies (or which of their activities) will be brought under the purview of the Competition Law in early 2011. This is in the context of the fact that the Bill proposes statutory bodies will be exempt from the law except and until regulations are introduced to specify otherwise for one or more such bodies.

Funding of the Proposed Competition Commission - A briefing paper submitted to the Bills Committee by the Commerce and Economic Development Bureau in November 2010 has provided additional information regarding how the proposed Competition Commission will be funded. The paper notes that such funding will mainly come from the government (an initial annual budget of between HK$60 million and HK$80 million was previously suggested by the Bureau), but may also come from other sources such as fee payments by businesses and individuals when using Commission services. For example, the paper notes that the Commission will be empowered to hear applications from business operators for confirmation of whether an agreement or conduct benefits from a relevant exemption from the proposed law, and suggests that the Commission may charge a fee for such applications and retain the fee income for its own use. This mirrors existing arrangements in Singapore, where the city-state's Competition Commission has received almost HK$4 million in revenue from applications relating to Singapore's Competition Act in the previous two completed financial years.

Importantly, the paper states that pecuniary penalties received from issuance of infringement notices will not go to the Commission but will instead go directly into General Revenue - to ensure the Commission's impartiality in discharging its investigative powers.

Research Studies Conducted into Other Competition Law Regimes - Just prior to introduction of the Bill into the legislature, the Legislative Council's Research and Library Services Division (RLSD) was requested by the Panel on Economic Development to conduct research on various aspects of competition law enforcement in other jurisdictions, with Singapore a primary focus. Matters that the RLSD was requested to look into included several issues that are known to be of particular concern to members of the Bills Committee - including:

  • The extent of exemptions and exclusions provided under relevant foreign regimes;
  • The impact introduction of such a regime had on levels of foreign direct investment;
  • How the interests of SMEs were protected; and
  • How penalties for breaches of the regime were calculated.

The RLSD's report on these matters was published in October 2010 and has been made available to the Bills Committee.

Delicate Questions on the Bill Have Been Raised by the Bills Committee - On 26 October 2010, the legal advisor to the Bills Committee, Mr. Timothy Tso, submitted a number of questions to the Commerce and Economic Development Bureau about the Competition Bill, apparently reflecting issues and concerns identified by the Bills Committee and/or its legal advisors during their preliminary consideration of the Bill. These include:

  • a query as to why the Bill does not include a definition of the term "economic activity", in the context that the Bill applies only to relevant entities "engaged in economic activity";
  • a query regarding the types of situations in which the Chief Executive in Council may exercise the right he or she has under the Bill to exempt undertakings (or certain activities of undertakings) from application of key competition law prohibitions;
  • a query as to whether the Bill should more clearly set out the test that would be applied to determine if an undertaking has "substantial market power", in the context of the prohibition in the Bill (referred to as the "Second Conduct Rule") that would only be applicable to such undertakings, and a query as to why this threshold of market power is a focus in the Bill when many other jurisdictions apply equivalent prohibitions to the Second Conduct Rule only to entities who hold a "dominant" market position;
  • a query as to what criteria would need to be satisfied before the proposed Competition Commission could make an agreement to provide leniency to an undertaking that was co-operating in an investigation or proceedings under the Bill;
  • a query as to why the scope of the 'merger control' provisions in the Bill was intended to be confined to the telecommunications sector.

It is not clear if a response has been provided to the legal advisor or Bills Committee in relation to these queries to date.

A number of other important issues remain to be clarified - Although government representatives have made a number of speeches and comments to the media on the Bill since it was introduced to the Legislative Council, they are yet to clarify the key uncertainties relating to the scope of the Bill that were explained during our July presentation - such as:

  • The Scope of 'M&A' Deals That Can Be Challenged - The broad wording of the 'First Conduct Rule' (the prohibition of anti-competitive agreements, concerted practices and decisions) could conceivably be applied to challenge M&A deals in any sector. This appears inconsistent with the intended scope of the Bill, as the Explanatory Memorandum and previous statements by the government indicate that it is only M&A deals that may substantially lessen competition in a Hong Kong telecommunications market that are intended to be open to challenge.
  • Whether a Vertical Agreement Between Parties Without Market Power Can Be Challenged - The First Conduct Rule is worded broadly enough to apply to 'vertical agreements' (that is, agreements or arrangements between business operators at different levels of the supply chain, such as suppliers and customers or manufacturers and distributors). There is no wording in the Bill exempting these types of agreements from the First Conduct Rule. This appears contrary to previous government proposals, pursuant to which vertical agreements were only capable of being challenged if implemented by a business operator possessing substantial market power (under what is now the 'Second Conduct Rule' in the Bill). For example, in paragraph 26 of its May 2008 "Detailed Proposals for a Competition Law" consultation paper, the government stated in relation to the First Conduct Rule that - "The focus of the prohibition on agreements should be on horizontal agreements. Vertical agreements should only be addressed in the context of abuse of substantial market power."

Opportunities to Make Submissions to the Bills Committee and Government Remain

Although potential passage of the Bill is still some time away, and introduction of the competition law is expected to be followed by a 'grace period' before the key prohibitions take effect, it is clear that a failure to secure relevant exemptions or amendments to the Bill at the present stage could lead to very serious ramifications for business operators in the future.

Once the Bill is passed, its scope will be largely 'set in stone', and an independent Competition Commission will be free to interpret and apply the broadly worded prohibitions as it sees fit - unless appropriate safeguards and enforcement parameters are put in place now.

In this context, we are continuing to assist a broad range of organisations who are making submissions to the Bills Committee on matters such as those outlined directly above, or applying for exemptions from the proposed law. Please do not hesitate to let us know if your organisation is interested in taking similar steps.

Learn more about our Hong Kong office and Antitrust & Competition practice.

Visit us at www.mayerbrownjsm.com

Copyright 2010. JSM, Mayer Brown International LLP and/or Mayer Brown LLP. All rights reserved. Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: JSM, a Hong Kong partnership, and its associated entities in Asia; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and Mayer Brown LLP, a limited liability partnership established in the United States. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

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.

Authors
 
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
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must 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.

Disclaimer

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.

General

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