Hong Kong: What You Need To Know About Hong Kong Competition Law (Part 5) - Investigation And Enforcement

The implementation of the new Competition Ordinance (Chapter 619 of the Laws of Hong Kong) (the Competition Ordinance) on 14 December 2015 will mark the first time that Hong Kong has a general and cross-sector competition law.

Background

The Competition Ordinance was enacted on 14 June 2012 as a general and cross-sector competition law to curb anti-competitive conduct, and will come into full effect on 14 December 2015. In this issue, we will discuss the investigation and enforcement powers of the competition authorities in Hong Kong.

Who is in charge?

The Competition Ordinance provides for judicial enforcement through the Competition Commission and the Competition Tribunal. The Competition Commission and the Communications Authority1 are the investigation authorities responsible for and tasked with, inter alia, investigating competition-related complaints and bringing enforcement actions before the Competition Tribunal in respect of anti-competitive conduct, whereas the Competition Tribunal is responsible for adjudicating competition cases brought by the Competition Commission, private actions, as well as reviews of determinations of the Competition Commission. Any appeals in relation to decisions of the Competition Tribunal on competition matters will be referred to the Court of Appeal and/or the Court of Final Appeal.

Typical phases of investigation

The Competition Commission may launch an investigation on an alleged infringement of the Competition Rules (i.e., the First Conduct Rule, the Second Conduct Rule and/or the Merger Rule) either: (i) on its own initiative; or (ii) where information about a possible infringement is provided to the Competition Commission by another party. The sources of such information may include:

  1. complaints or queries made by the public;
  2. the Competition Commission's own research and market intelligence gathering;
  3. referrals by the Government, the courts or other statutory bodies or authorities; and
  4. whistle-blowing by a cartel member or a former employee.

The Competition Commission will generally carry out the investigation in two phases:

  1. initial assessment phase; and
  2. investigation phase.

Phase 1 – Initial Assessment Phase

During this phase, the Competition Commission does not start with a fixed view on whether a contravention of the Competition Rules has taken place. In determining whether there is reasonable cause to suspect an infringement and whether the matter warrants further investigation, it may seek information on a voluntary basis, for example by contacting parties by telephone or in writing, and meeting and interviewing persons who may have knowledge of the conduct.

The Competition Commission will then determine whether or not to further investigate the matter by taking into account the following factors2:

  • the specific facts of the relevant case
  • availability of evidence suggesting an infringement of the Competition Ordinance
  • the potential impact of the alleged conduct on competition and consumers
  • the Competition Commission's enforcement strategy, priorities and objectives, and other matters currently under its and the courts' consideration
  • the likelihood of a successful outcome resulting from further investigation
  • whether the resources that would be used for further investigation would be proportionate to the expected public benefit

Possible outcomes of the Initial Assessment Phase

There are four possible outcomes of the Initial Assessment Phase – the Competition Commission may:

  1. take no further action;
  2. commence an investigation (see Phase 2 – Investigation Phase below);
  3. address the issue through alternative means, such as:

    1. referring the matter to another agency; or
    2. conducting a market study;
  4. accept a voluntary resolution of the matter, i.e., a commitment under section 60 of the Competition Ordinance (see below).

Phase 2 – Investigation Phase

If the Competition Commission proceeds to the Investigation Phase, it will have formed a view that there is reasonable cause to suspect an infringement of the Competition Rules.

The table below summarises the Competition Commission's investigation powers.

Power to obtain documents and information
  • Written requests for documents and information (section 41 of the Competition Ordinance)
  • Requiring attendance before the Competition Commission to answer questions (i.e., interviews) (section 42 of the Competition Ordinance)
  • Requiring information to be verified by statutory declaration (section 43 of the Competition Ordinance)
Power to obtain search warrants (i.e. dawn raids)
  • Authorize entry into premises to execute searches
  • Require production, make copies and/or take possession of relevant documents including computers, electronic files and storage devices

Criminal consequences for non-compliance with the Competition Commission's investigation powers

The Hong Kong courts have powers to impose criminal sanctions on undertakings and individuals for non-compliance with the investigation powers of the Competition Commission:

  • Failure to comply with a requirement or prohibition imposed under the Competition Commission's investigation powers3- the maximum penalty for a conviction on indictment is a fine of HK$200,000 and imprisonment for up to 1 year.
  • Destruction/falsification/concealing of documents4, obstruction of search5, provision of false or misleading documents/information6 and disclosure of confidential information received from the Competition Commission7 – the maximum penalty for a conviction on indictment is a fine of HK$1 million and imprisonment for up to 2 years.

Possible outcomes of the Investigation Phase

Where the Competition Commission determines that contravention of a Competition Rule has occurred, it has a range of options at its disposal. These include:

  1. No further action – however, this does not prevent the Competition Commission from revisiting the matter at a later date;
  2. Voluntary resolution under section 60 of the Competition Ordinance (Section 60 Commitment) – the Competition Commission may accept a commitment from a person to take such action (or refrain from taking such action) as it considers appropriate to address its concerns about a possible contravention of a competition rule, and agree to terminate its investigation and not bring proceedings in the Competition Tribunal (or terminate such proceedings where already brought);
  3. Issue a warning notice – a warning notice will be issued where the Competition Commission has reasonable cause to believe that the First Conduct Rule has been breached, but the infringement does not involve "Serious Anti-Competitive Conduct"8. The warning notice will stipulate that contravening undertakings should cease the anti-competitive conduct within a specified period of time;
  4. Issue of infringement notice – an infringement notice will be issued when the Competition Commission has reasonable cause to believe that an infringement of (a) the First Conduct Rule involving "Serious Anti-Competitive Conduct"; and/or (b) the Second Conduct Rule9 has occurred. Whilst not bound to do so, the Competition Commission will generally offer the relevant undertaking an opportunity to comply with requirements of the notice within a specified period as a condition for not bringing proceedings in the Competition Tribunal; and
  5. Commencement of proceedings before the Competition Tribunal – the Competition Commission may initiate proceedings before the Competition Tribunal under sections 92, 94, 99 and/or 101 of the Competition Ordinance.

Other possible actions that may be taken by the Competition Commission include an application for a consent order from the Competition Tribunal, referral to a Government agency and further market studies.

Follow-on right of action

The Competition Ordinance allows a person who has suffered loss or damage as a result of any act that has been determined to be an infringement of a conduct rule to bring an action against (a) any person who has contravened or is contravening the rule; and (b) any person who is, or has been, involved in that contravention. In this regard, a "contravention of a conduct rule" includes an admission made in a section 60 Commitment that a person has contravened a conduct rule.

Currently, the Competition Ordinance does not provide for private "stand-alone" actions to be brought by persons for relief and remedies arising from particular conduct. The Hong Kong government will review the need for stand-alone rights of private action after the business community acquires more experience with the new competition regime.

Outlook

This imminent implementation of the Competition Ordinance marks a significant step in the evolution of Hong Kong's fledgling antitrust regime. Multinational enterprises doing business in Hong Kong can no longer afford to dismiss the Special Administrative Region as a jurisdiction that has no competition regime or antitrust enforcement.

Understanding and complying with competition law principles is therefore more important than ever.

Footnotes

1. Under the Competition Ordinance, competition matters can be transferred between regulators with concurrent jurisdictions. In this regard, pursuant to Part 11 of the Competition Ordinance, the Communications Authority has been given concurrent jurisdiction with the Competition Commission to enforce the Competition Ordinance in respect of the telecommunications and broadcasting sectors, including merger and acquisition activities involving carrier licensees.

2. See Guideline on Investigations, paragraph 3.6

3. Section 52 of the Competition Ordinance

4. Section 53 of the Competition Ordinance

5. Section 54 of the Competition Ordinance

6. Section 55 of the Competition Ordinance

7. Section 128(3) of the Competition Ordinance

8. See What you need to know about Hong Kong Competition Law (Part 2): The First Conduct Rule ( http://www.cadwalader.com/uploads/cfmemos/694850f9f651213e78fe0d6443bd3593.pdf)

9. See What you need to know about Hong Kong Competition Law (Part 3): The Second Conduct Rule ( http://www.cadwalader.com/uploads/cfmemos/beb7bfc2b4e997b39c94f711b62ebfbc.pdf)

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.

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
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
 
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
Cadwalader, Wickersham & Taft LLP
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