Most Read Contributor in Hong Kong, September 2016
Keywords: competition, Hong Kong, Collective
Don't Gang Up!
A collective boycott, or a collective refusal to deal, occurs
where two or more businesses collectively refuse to deal with a
third party. While businesses are free to choose their business
partners, ganging up to exclude an actual or potential competitor
can be considered anti-competitive.
A boycott is an effective way of inflicting targeted harm on
other players in a relevant market. There can be various reasons
for effecting a boycott, including (1) to prevent market entry or
to drive a player out of the market, (2) to enforce the terms of a
cartel against a 'rogue' member (e.g., to punish
discounting in violation of a price fixing arrangement), or (3) to
prevent or delay innovation or new business models.
WHO IS USUALLY INVOLVED?
Collective boycotts may have a horizontal or vertical aspect, or
both, or it may be driven by a trade association or consortium of
businesses. Examples of the different forms a collective boycott
can take include: (1) refusal of a trade or industry association to
admit a new member; (2) an agreement among suppliers that impact
customers; (3) an agreement among customers that impact a supplier;
or (4) an agreement between competitor and a common supplier, or
suppliers, to deny you access to an important resource or
HOW DOES A BOYCOTT WORK?
Any form of conduct that involves ganging up to exclude an
actual or potential competitor from the market without objective
business justification may amount to a boycott, for example:
Terminating business relationships with a third party in a
Setting exclusionary membership requirements to prevent a
competitor from joining as a member; or
Refusing to supply an important resource or
facility1, or only supplying it on unreasonable
IS A BOYCOTT EVER JUSTIFIABLE?
A collective boycott may, depending on the
circumstances, be justifiable on the following grounds:
Efficiency considerations such as establishing more efficient
distribution channels, reducing costly supply arrangements or
lowering product costs;
Protecting the safety and security of a system or network;
Protecting incentives to invest and innovate.
Next week we will look at Resale Price Maintenance (RPM), a type
of agreement commonly entered into between businesses operating at
different levels of a relevant market.
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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
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As mentioned in our previous alert in this series, the Hong Kong Competition Commission's investigative process begins with an Initial Assessment to screen suitable cases for further investigation or other action.
The investigative process begins by the Hong Kong Competition Commission (the "Commission") identifying a potential contravention of a competition rule.
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