19 July, 2015
Hong Kong's first cross-sector competition law – the Competition Ordinance – is finally set to come into full force, on 14 December 2015. The commencement notice was gazetted by the Hong Kong government today and will be tabled in the Legislative Council (LegCo) for negative vetting in October 2015. Under that procedure, LegCo will scrutinize the relevant subsidiary legislation and, though perhaps unlikely, could even theoretically amend the date of commencement.
Since the Competition Ordinance was enacted in June 2012, the regulatory framework for competition law in Hong Kong has been gradually put into place.
In particular, the institutional set-up – including the Competition Commission (which has cross-sector enforcement powers) and the Communications Authority (which is empowered to enforce the Competition Ordinance in the telecommunications and broadcasting sectors, alongside the Competition Commission) has been in place since early 2013. Appointments to the Competition Tribunal, a specialised superior court of record established under the Competition Ordinance, were made in late 2013. The Competition Tribunal Rules and other subsidiary legislation relating to the procedure and operation of the Competition Tribunal were gazetted on 5 June 2015. LegCo will start vetting the commencement notice and the related subsidiary legislation, due to come into force at the same time, in its next legislative session in October 2015.
Further, the two competition authorities released a set of six guidelines on enforcement of the Competition Ordinance in draft form on 9 October 2014. Following input from the public, revised drafts of these guidelines were published on 30 March 2015. The revised draft guidelines were placed before LegCo for consultation and the final guidelines are expected to be published soon.
Separately, the Competition Commission has yet to publish guidance on its leniency policy, enforcement priorities and its Memorandum of Understanding with the Communications Authority on how the two authorities will coordinate their concurrent enforcement powers.
As a recap, the Competition Ordinance prohibits three types of anti-competitive conduct:
- The First Conduct Rule prohibits anti-competitive agreements and concerted practices by businesses, including horizontal agreements between competitors (such as cartels) and vertical agreements (such as resale price maintenance in a distribution agreement).
- The Second Conduct Rule prohibits businesses with a "substantial degree of market power" from abusing that power by acting anti-competitively. Examples of potentially abusive conduct include predatory pricing, refusal to deal and exclusivity arrangements.
- The Merger Rule prohibits mergers which have or are likely to have the effect of substantially lessening competition in Hong Kong. Unlike merger control regimes in other jurisdictions, the Merger Rule applies only to mergers involving a telecommunications carrier license.
Unless amended by LegCo, all three rules will come into full force on 14 December 2015. As there will be no further grace period beyond that date, businesses should take this final "window of opportunity" before the Competition Ordinance comes into full effect to amend any agreements and change any practices which are at risk of being held to be anti-competitive.
For further information, please contact:
Patrick Sherrington, Partner, Hogan Lovells
patrick.sherrington@hoganlovells.com
Henry Wheare, Counsel, Hogan Lovells
henry.wheare@hoganlovells.com
Danny Leung, Counsel, Hogans Lovells
danny.leung@hoganlovells.com
Adrian Emch, Partner, Hogan Lovells
adrian.emch@hoganlovells.com
