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.
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 provide some practical tips to assist you with
ensuring compliance with the Competition Ordinance.
Companies must first conduct a thorough review of its existing
operations, business practices, business arrangements and contracts
to identify aspects of the Competition Ordinance that are of
particular relevance. Such a review will assist with the
determination of an appropriate compliance strategy and the
priority of compliance measures to be undertaken.
As a starting point, companies should be wary of and avoid
"high risk" conduct as set out below:
Agreements or concerted practices with competitors with the aim
of fixing, maintaining, increasing or otherwise controlling
For example, direct agreements on matters of price or any
element of price (e.g. discount, rebate or concession), or
agreements between undertakings who are competitors not to quote a
price without consulting each other.
Agreements or concerted practices with competitors that seek to
allocate sales territories, customers or markets for the production
or supply of particular products.
For example, even a mere understanding that parties will not
supply a competitor's existing customers, and/or will encourage
such customers to stay with their existing supplier if the customer
seeks to switch suppliers can be considered as market sharing.
Agreements or concerted practices with competitors which fix,
maintain, control, prevent, limit or eliminate the production or
supply of products.
For example, production or sales quota arrangements limiting
the volume or type of products available in the market.
Agreements or concerted practices with competitors not to
compete for particular projects.
For example, any agreement not to submit or to withdraw
previously submitted bids (bid suppression), or any agreement to
take turns at being the winning bidder (bid rotation).
A joint buying arrangement may be considered by the Competition
Commission as having the object of harming competition if it is a
disguised buyers' cartel.
An example of a buyers' cartel would be where buyers
collude in secret on the prices they will pay for purchases made
Concerns may rise arise where competitors exchange information
and in particular, competitively sensitive information.
Generally, information relating to price and quantities
(e.g. information concerning sales, market shares, sales
to particular customer groups or territories) is most competitively
An agreement or concerted practice amongst competitors not to
do business with targeted individuals or undertakings may be
considered an anti-competitive group boycott.
Resale Price Maintenance
Vertical agreements where suppliers control or attempt to
control the price at which buyers may resell goods will be
considered as having the object of harming competition if there is
evidence that such arrangements were implemented by a supplier:
in response to pressure from a distributor seeking to limit
competition with other distributors at the same level; or
to foreclose competing suppliers.
If a company has a substantial degree of market power, it should
also be wary of and avoid further "high risk" conduct as
Imposing prices below cost with an aim to eliminate a
competitor from the market, or to make it difficult for new
competitors to enter the market.
For example, pricing below average variable cost, pricing below
long run average incremental cost, pricing below average avoidable
cost or pricing below average total cost.
Making the purchase of a product in respect of which it has
substantial market power (the tying product) conditional on the
purchase of other products (tied products).
Reducing or "squeezing" the margin between (i) the
price it charges for the input to its competitors on the downstream
market and (ii) the price its downstream operations charge to their
own customers, such that the downstream competitor is unable to
Refusal to Deal
Refusing to supply an input to another undertaking, or
supplying that input only on objectively unreasonable terms thereby
preventing that undertaking from operating or competing effectively
in the market.
For example, unduly delaying or degrading supply of, or
imposing excessive prices for certain input.
Arrangements requiring a customer to purchase, directly or
indirectly, all or a substantial proportion of its requirements of
a particular product from a particular undertaking.
For example, the imposition of exclusive purchasing
obligations, or provision of conditional or loyalty rebates.
For companies that are holders of carrier licenses under the
Telecommunications Ordinance (Chapter 106 of the Laws of Hong
Kong), they should be alert whenever they are in a
"dominant position"1 and/or considering a merger
Given the difference in nature and size of each business,
companies will need to consider the actual impact of the
Competition Ordinance on its practices and formulate a compliance
strategy suitable to the size and risk profile of its business.
For reference purposes, we set out below a list of
non-exhaustive measures that companies can adopt in order to
mitigate and manage potential or identified risks:
Cease or modify business
Existing business practices that are likely in breach of the
Competition Ordinance should be ceased or modified.
Keep records of how identified risks have been dealt with.
Organise training seminars or workshops to educate officers and
employees about business practices or conduct that may constitute
unlawful anti-competitive activity.
Targeted training may be necessary for "higher risk"
staff (e.g. front line sales staff. staff that often participate in
events where competitors will be present, senior management
involved in making pricing decisions etc.).
Prepare a compliance
Prepare a compliance manual to remind employees of the key
restrictions and requirements under the Competition Ordinance, the
company's compliance policy and key do's and don'ts
that are particularly relevant to the company's business.
Consider issuing specific guidelines on matters such as dealing
with competitors and trade associations, resellers and customers,
handling competition investigations etc.
Appoint a compliance
Designate a member of staff as a compliance officer responsible
for overseeing the implementation of the company's compliance
In the event that a member of staff has queries about the
company's compliance policy and compliance manual, the
compliance officer may serve as the first point of contact.
Seek legal advice
For issues that are unclear or complex, consider seeking legal
Competition compliance is an on-going process. Companies should
regularly review its policies and practices (which, in light of
changing market conditions or new legal developments, may change
from time to time) and where necessary, update and refine its
compliance measures to ensure continuing compliance with the
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
Understanding and complying with competition law principles is
therefore more important than ever.
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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