28 July, 2015
The Hong Kong Competition Commission (Commission) has released the long-awaited finalised guidelines to the Competition Ordinance, in preparation for the commencement of the Ordinance on 14 December 2015.
Guidelines finalised
The six guidelines underwent two rounds of consultation before being placed before the Legislative Council. The guidelines cover the first conduct rule, the second conduct rule and the merger rule ('three rules'), which regulate anticompetitive agreements, abuse of market power and mergers. They also cover the Commission's procedures for handling complaints, conducting investigations and how the Commission will consider applications for exclusions and exemptions under the Ordinance.
The Commission has yet to issue a draft leniency policy to induce cartelists to self-report or a statement of enforcement priorities, but has indicated it will do so in the second half of 2015.
Ordinance commences on 14 December 2015
The Ordinance will come into full effect on 14 December 2015. Companies may apply to the Commission for exclusion or exemption from the application of the first conduct rule or for a block exemption order, but only once the Ordinance has come into force. Fees of between HKD50,000 and HKD500,000 will apply. Shipping liners are expected to be first to the gate to submit a block exemption application.
The Commission is already actively identifying possible breaches
The Commission has already taken active steps to investigate a number of sectors. It has initiated a market study on oil pricing, provided the Government with formal advice following its market study into the building management market and urged the government to reform the electricity market. The Commission has also indicated to the Hong Kong Travel Industry Council that its sector-wide guidance on ticketing charges would likely breach the Ordinance, with the Travel Industry Council subsequently committing to rescinding the price guidance before the Ordinance comes into force.
Trade associations are of key concern
The Commission has recently released specific guidance for trade associations. It is advisable that industry associations in particular review their practices as they are likely to come under immediate scrutiny once the Ordinance comes into force. The HK Cosmetic & Perfumery Association has already announced it will abolish industry-wide resale price maintenance practices that are likely to contravene the Ordinance.
Interaction with other enforcement agencies
The Commission has yet to indicate how it will cooperate with other enforcement agencies that have overlapping or complementary areas of responsibility, such as the Hong Kong Monetary Authority (which commenced an investigation into the fixing of the Hong Kong Interbank Offered Rate (HIBOR) last year), the Consumer Council and other related enforcement agencies such as the Independent Commission Against Corruption and the police force.
It is definitely time to review your business practices in Hong Kong
Companies are advised to take immediate steps to prepare for full implementation of the Ordinance as significant penalties apply (up to 10% of revenues). The finalised guidelines indicate how the Commission expects to interpret and give effect to the three rules. Companies should identify any potential competition law risks and devise a plan on how to eliminate or manage such risks. This includes training staff to ensure that they are aware of their obligations under the Ordinance. Your participation in trade associations should also be carefully considered.
Over the next coming months in the lead up to the commencement of the Ordinance, we will publish a series or fact-sheets and alerts that will provide guidance to companies on how to comply with Hong Kong's new competition regime.
