Most Read Contributor in Hong Kong, September 2016
REFUSAL TO DEAL
Businesses are generally free to decide with whom they will do
Refusal to deal may be problematic when a business with a
substantial degree of market power controls an essential input or
distribution channel, and, by withholding that input or preventing
access to the distribution channel, forecloses a business from the
relevant market or damages its ability to compete effectively in
WHEN CAN YOU SAY NO?
A business with substantial market power may legitimately refuse
to deal with a party if the party:
Is not reliable, e.g., is a bad
Lacks requisite capability, e.g., is
unable to provide sufficient customer or after-sales service.
Does not meet reasonable, objective
and fairly applied criteria, e.g., advertising and product display
WHEN MAY REFUSAL TO DEAL BECOME AN ISSUE?
Only in very rare cases will a refusal to deal contravene the
Second Conduct Rule. The Competition Commission may consider:
Whether or not it is technically and
economically feasible for the business to provide the input.
The history of dealing between the
parties – whether a business relationship was abruptly
terminated without justification.
The terms and conditions at which the
products are generally supplied, or are supplied in other
Exceptionally, a business may be under a duty to deal on
non-discriminatory terms with a competitor or potential competitor
if the input it controls is so important that without access to it
other businesses will be unable to compete.
This may arise in the intellectual property context, where a
business holding an essential intellectual property right (IPR)
agrees to allow the IPR to be incorporated into an industry
standard and license the IPR on fair, reasonable and
non-discriminatory terms, but subsequently reneges on its promise
or seeks to restrain use of the IPR by a willing licensee.
Next week we will consider margin squeeze, a form of
exclusionary abuse where a business with substantial market power
in an upstream market seeks to leverage its market power into a
related downstream 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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