Hong Kong: Proposed changes to HK competition law aim to be more acceptable to the business community

Hong Kong Competition Law Update
Last Updated: 17 August 2012
Article by Jill Wong and Sharon Henrick

Yesterday the Hong Kong Government ("Government") briefed lawmakers on various proposals to address the concerns of businesses, especially those of small and medium-sized enterprises (SMEs), in a determined push to put the legislative schedule for Hong Kong's first competition law back on track.

Six changes are being proposed by Government to make the proposed competition law more acceptable to the business community, in particular, the SMEs who have been worried about the effect of a competition law on them. The Government has kept the core framework - outlawing anti-competitive (the first conduct rule) and market abuse (the second conduct rule) activities - but now plans to dilute a few key provisions.

It appears, from the mood and comments made after the proposals were issued, that the concessions have achieved this aim (although some lawmakers are still saying that the concessions have not gone far enough). Hong Kong should expect a competition law to be in place this time next year, although its final scope - but not its essential provisions and key features - may well change in the next few months.

In this Alert, we discuss the proposed changes and how they may affect you. For a refresher on the Competition Bill ("Bill"), please see our client alert from October 2010: Hong Kong's Competition Bill : The Beginning of the End.

Change #1: Specifying 4 types of activities for the first conduct rule

Hardcore anti-competitive conduct

Businesses have expressed concern about breaching the first conduct rule1 because of the lack of specificity about what may constitute prohibited anti-competitive behaviour. Hence, the Government proposes to specify 4 kinds of hardcore anti-competitive activities that will be caught:

  • price-fixing
  • market allocation
  • output control
  • bid-rigging

These are now termed "serious anti-competitive conduct". The first three activities have been defined2 to mean:

  1. fixing, maintaining, increasing or controlling the price for the supply of goods or services;
  2. allocating sales, territories, customers or markets for the production or supply of good or services; and
  3. fixing, maintaining, controlling, preventing, limiting or eliminating the production or supply of goods or services.

Bid-rigging has been given a more substantial definition, in summary being:

  1. an agreement between two or more undertakings3, whereby one or more of them agrees to submit, not submit or withdraw a bid or tender, unbeknownst to the caller of the bid or tender; or
  2. a submission arrived by agreement made between two or more undertakings in relation to a call or tender, unbeknownst to the caller of the bid or tender.

The Government believes that these activities are widely recognised and accepted as always having an adverse impact on competition and therefore the full range of enforcement powers will be available to the regulators to take action against these activities.

The Government believes that these activities are widely recognised and accepted as always having an adverse impact on competition and therefore the full range of enforcement powers will be available against these activities.

Non-hardcore anti-competitive conduct

The Government proposes that where an undertaking engages in so-called non-hardcore activities covered by the first conduct rule - in effect any other potential anti-competitive activity4 that does not fall into one of the four categories above - a "cease and desist" warning notice by the Competition Commission ("Commission") may be issued. If the conduct continues after the time period stipulated by the Commission or is repeated after the expiry of the time period, the Commission may institute proceedings in the Competition Tribunal.

The approach towards more certainty by further defining anti-competitive conduct should be welcomed by businesses; however it is not clear that the use of a warning notice5for non-hardcore anti-competitive behaviour will materially reduce compliance costs. It also remains to be seen whether this new structure will be supported by lawmakers and the Hong Kong community.

Change #2: Significant reduction in maximum penalty

The issue of the maximum penalty that can be imposed under the Bill has generated much debate, and the previous maximum penalty of 10% of worldwide turnover has been criticised as disproportionately severe. The Government now proposes that this be revised downwards to 10% of local turnover up to a maximum of three years. If the infringement lasts for more than three years, the three years of infringement with the highest turnover will be chosen. The Singapore6 competition regime has a similar maximum penalty based on local turnover, whereas other regimes, notably the European Union, base maximum penalties on global turnover.

Many businesses will welcome a reduction in the maximum penalty, especially in the early years of the new competition regime.

Change #3: Stand-alone right of private action removed

Previously, anyone who suffered loss as a result of a contravention of a conduct rule could bring a private action, as a follow-on to, or independent of, any action by the Commission. Tacitly accepting arguments that such rights could potentially allow large companies to pressure or harass SMEs, the Government proposes to make available only follow-on private actions, that is, a private action can be brought only after an act is found to be, or a person has admitted that its conduct is, in contravention of a conduct rule. This could potentially mean a long wait to bring private action if an undertaking is able to exercise all its rights of appeal, right up to the Court of Final Appeal for final adjudication, although the Tribunal has the discretion to allow private action to commence before final adjudication.

However, the substantial enforcement powers and penalties under the Bill may prove to be a sufficient deterrent, without the additional right of private action on a stand-alone basis being necessary.

Again, this proposal is in line with the Singaporean regime where third parties can only bring an action after a party is found to be in breach of competition law and after the expiry of any appeal period. Other jurisdictions, such as Australia, allow stand-alone private actions.

Change #4: A clear de minimis threshold

A threshold, below which enforcement action is not taken, with reference to market share or turnover, is common in other jurisdictions. The Government proposes specific de minimis thresholds (with reference to turnover in the preceding financial year) of HK$100 million in respect of the first conduct rule and HK$11 million in respect of the second conduct rule.

These threshold amounts were calculated with the SMEs in mind. According to the Government, statistics show that the average annual business turnover of SMEs have held steady at about HK$11 million between 2005 to 2009. Agreements and conduct below these thresholds are likely to involve a small number of SMEs, therefore having an insignificant impact on competition.

The threshold will not apply to the four kinds of hardcore anti-competitive conduct, that is, price-fixing, market allocation, output control or bid-rigging.

Debate has arisen about whether these thresholds are too low; and so it is possible that some upwards adjustment may be made.

Change #5: Undertaking to pay HK$10 million pursuant to an infringement notice removed

This change relates to the issuance of an infringement notice by the Commission, where it believes a conduct rule has been breached.The current proposed regime empowers the Commission in such notice to offer not to bring enforcement proceedings but requiring, amongst other things, a payment of up to HK$10 million.

Many SMEs have argued that this amount would be a burden on SMEs who may not have the resources to contest an infringement notice, whilst being an insufficient deterrent for big companies. The Government now proposes to remove this requirement entirely.

Change #6: Clarity in relation to the merger rule

The change will make it clear that only merger activities relating to carrier licences granted by the Telecommunications Authority will be covered. The Government has no intention to introduce a cross-sector merger rule and amendments will be introduced to make it clear that merger activities are excluded from the first and second conduct rules. This applies to the act of merging only and both the first and second conduct rules apply to the merged organisation in the usual way.


Companies operating in Hong Kong should be taking some preliminary steps to prepare; for example, reviewing existing practices to identify potential risk areas and making plans to establish a compliance strategy to comply with the new obligations. Companies should also continue to monitor developments.

Training and awareness, and a robust compliance structure, as well as understanding the fundamentals of anti-competitive behaviour, will be key to navigating the competition minefield, once the Bill is passed (most likely in 2012) and subsequently takes effect.

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.


1 The first conduct rule prohibits agreements or practices, the object or effect of which is to prevent, restrict or distort competition in Hong Kong.

2 In the current Bill, anti-competitive conduct is not as now specifically defined in the proposals; clause 6(2) of the Bill provides that such conduct includes agreements, concerted practices and decisions that:

  1. directly or indirectly fix purchase or selling prices or any other trading conditions;
  2. limit or control production, markets, technical development or investment; or
  3. share markets or sources of supply.

One cliould see the new definitions as adding more clarity. Please also note that, consequent to the government's proposed changes, new definitions of "price", "supply" and "goods" are also proposed.

3 Defined as any entity, including a natural person, engaged in economic activity. In this Alert, undertakings caught by the Bill are sometimes referred to as businesses or organisations for ease of reading.

4 The Government has mentioned the following examples: restrictions on advertising, collective refusal to supply and development of standardised agreements.

5 This should not be confused with an infringement notice, which will still be used for a contravention (a) of hardcore anti-competitive conduct under thefirst conduct rule; and(b) under the second conduct rule.

6 10% of local turnover for each year of infringement, up to a maximum of 3 years.

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.

Similar Articles
Relevancy Powered by MondaqAI
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
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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