On October 9, 2014, the Hong Kong Competition Commission and
Communications Authority published draft guidelines under the Hong
Kong Competition Ordinance. The guidelines will not be the
law; instead, they represent the Commission's interpretation of
the Ordinance and its policies on how the Ordinance will be
enforced. The guidelines will, nevertheless, certainly be
influential as the Competition Ordinance takes effect and the
Commission tests the enforcement waters. According to a press
release that accompanied the guidelines, their publication
"marks a significant milestone in the Commission's
preparatory work towards the full implementation of the
Ordinance." This blog previously reported on the Hong
Kong Competition Ordinance, enacted in 2012,
As released, the draft guidelines are divided into two
categories: substantive guidelines on the Ordinance's two
conduct rules and its merger rule; and procedural guidelines on
complaints, investigations, and other related Commission
The Ordinance's first conduct rule bans agreements between
competitors that harm competition in Hong Kong. As the
guideline interprets this rule, vertical agreements pose less of an
anticompetitive concern than horizontal agreements, and are less
likely to actually cause harm (unless the parties involved have
considerable market power). One exception is resale price
maintenance arrangements, where a supplier fixes the price at which
a retailer may sell. This is a type of vertical agreement
that the Commission considers inherently harmful to consumers.
The second conduct rule concerns abuse of market power in a
manner that prevents, restricts, or distorts competition. In
its draft guideline, the Commission sets forth an approach to
assess potential abuses by defining the relevant market and
evaluating market power. The guideline proposes consideration
of factors like product markets and geographic boundaries.
Under this model, determination of relevant market will be a
fact-specific inquiry. Rather than setting thresholds that
define substantial market power under the Ordinance, the Commission
will base determinations on whether or not the allegedly abusive
entity is constrained by competition in its market.
The Ordinance merger rule proscribes mergers that have a
substantial negative impact on competition. The draft
guidelines present a road map of how the Commission will evaluate
mergers, permitting corporations to evaluate their own conduct and
anticipate whether or not their anticipated transactions will raise
The draft guidelines also explain how complaints concerning
competition should be provided to the Commission and describe its
procedure for investigating those complaints. The Commission,
for example, will be empowered to collect evidence to determine the
merits of a complaint and evaluate whether or not an activity has a
negative impact on competition. The Commission may also
receive evidence from in-person hearings or from a search of the
premises of the subject of the investigation. Also, according
to the draft guidelines, the Commission may make exceptions for
certain activities in limited circumstances where it determines
they do not pose an insurmountable threat to competition.
The Commission accepted comments on the guidelines from
interested parties; the period for comments closed on December
10. Submissions were posted on the Commission's website,
and where appropriate, the Commission will use public comments to
revise the guidelines. The end result will be a final set of
guidelines and implementation of the Ordinance, in 2015.
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.
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