Groundbreaking Hong Kong Competition Ordinance Will Take Effect Next Year
Historically, Hong Kong has lacked a legal framework for regulating mergers or otherwise deterring conduct that is harmful to competition. The country’s traditional laissez‑faire landscape was substantially altered in June 2012, when Hong Kong’s Legislative Council passed a sweeping new Competition Ordinance (“Ordinance”) to prohibit anti‑competitive conduct and business combinations. The Ordinance also called for the establishment of a Competition Commission (“Commission”) and Competition Tribunal. The Ordinance is slated to take effect in 2015.
The Ordinance contains three main substantive prohibitions. One, it precludes agreements or concerted activity that has the purpose or effect of preventing, restricting, or distorting competition in Hong Kong. Two, it bars those with a substantial degree of market power from abusing that power by engaging in conduct with the purpose or effect of preventing, restricting, or distorting competition in Hong Kong, such as by engaging in predatory behavior towards competitors or limiting production, markets, or technical development to consumers’ detriment. (The Hong Kong Competition Ordinance is available here.) Three, it prohibits mergers that substantially lessen competition in Hong Kong, but it limits such regulation to mergers of telecommunications entities. Potential remedies for wrongdoing will include warning notices for less serious conduct and fines for more egregious violations.
The Commission has been tasked with promulgating guidelines on the scope of the Ordinance’s substantive provisions and procedural issues relating to their enforcement. Those guidelines are expected to be finalized in the coming year. Moreover, the Commission will play a crucial ongoing rule in policing anti‑competitive conduct, such as by investigating potential violations. In July 2014, it appointed its first chief executive, Stanley Wong, who will steer the fledgling Commission, develop its enforcement agenda, and oversee implementation of the Ordinance. Wong’s considerable international antitrust experience – for example, he has worked both with Ireland’s Competition Authority and the European Commission– demonstrates that Hong Kong takes seriously its entrance into the world of antitrust enforcement.
The Ordinance has been criticized for not going far enough. For example, its merger rule implicates only the country’s telecommunications sector, while leaving business combinations in other industries untouched. Despite any perceived limitations, however, the Ordinance reflects Hong Kong’s emerging view of anti-competitive conduct as a threat to economic well‑being and growth in a globalized marketplace. Those with business activities in or affecting Hong Kong would be wise to monitor the Ordinance’s impact and the Commission’s continued development into 2015 and beyond.