Recent Developments in Competition Law in Hong Kong
Since the Competition Ordinance (Cap. 619 of the Laws of Hong Kong) (the "Ordinance") came into full effect on 14 December 2015, the Competition Commission (the "Commission") has been actively enforcing the Ordinance to safeguard competition in Hong Kong.
On 20 March 2020, the Commission commenced proceedings against three textbook publishers, namely, T.H. Lee Book Company Limited, Commercial Press (Hong Kong) Limited and Sino United Publishing (Holdings) Limited (the “Publishers”) for allegedly engaging in price-fixing, market-sharing, and bid-rigging in relation to the sale of textbooks to primary and secondary school students in Hong Kong. This is the second case taken to the Competition Tribunal (“Tribunal”) in 2020 in connection with an infringement of the First Conduct Rule (please read on below to find out what the First Conduct Rule is!).
Shortly afterwards, on 31 March 2020, the Commission published proposed commitments by Booking.com, Expedia.com and Trip.com (collectively, the "Travel Agents") in relation to an investigation carried out by the Commission concerning the anti-competitive object and effect of key terms of agreements between the Travel Agents and the accommodation providers (the "Providers"). The terms require the Providers to offer the Travel Agents the (i) same or better price; (ii) same or better room condition; and (iii) room availability as those offered by the Providers to their other sales channels. The Commission considered that the terms are in contravention of the First Conduct Rule.
The Commission has the investigative power to require any person to produce documents or supply information in relation to a matter that constitutes or may constitute a contravention of a competition rule. Further, it may apply to the Court for a warrant to enter and search premises and to take possession of documents.
After the investigation, the Commission has the option to (i) accept a Commitment from the concerned parties under investigation (as in the case of the Travel Agents); (ii) commence proceedings against the concerned parties (as in the case of the Publishers); or (iii) take no further action. Fix the price or price formula for the supply of goods or services between competitors. Even granting discount up to an agreed level may amount to price-fixing.
Restrict the production or supply of goods or services for the purpose of controlling the market supply.
Share markets with your competitors by agreeing not to enter or compete in each other’s market.
Share sensitive information with your competitors, i.e. planned price or planned pricing strategy, production cost, marketing plan, and/or other commercial secrets, with an intention to influence your competitor’s conduct in the market.
First Conduct Rule
Power of the Commission
Disqualify a director from serving as director of a company for a period of up to 5 years; and/or
Order the concerned parties to pay damages to any person who has suffered loss or damage as a result of the contravention.
The aforesaid liabilities can also be imposed on anyone who (i) aids, abets, counsels or procures any other person to contravene a competition rule; (ii) induces or attempts to induce any person to contravene a competition rule; (iii) is knowingly concerned in, or a party to, the contravention of a competition rule, or (iv) conspires with any other person to contravene the rule.
How can we help
Review the business model of the company to ensure compliance with the Ordinance.
Review and draft key terms of the agreement to make sure they can satisfy the business purpose of the company whilst complying with the Ordinance.
Provide training in respect of the latest developments in competition law in Hong Kong. Advise on possible action to minimise impact of an investigation carried out by the Commission, including but not limited to proposing commitment, applying for leniency and negotiating with the Commission on settlement terms.
Attend interview with the parties under investigation.
Prepare submissions of the parties under investigation and liaise with the Commission. Contact us
China Resources Building
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Wanchai, Hong Kong
(+852) 3468 7200 email@example.com
(+852) 3468 7202
(+852) 3468 7203
The First Conduct Rule prohibits companies and individuals from entering into an agreement or engaging in a concerted practice that has the object or effect of preventing, restricting or distorting competition in Hong Kong. In particular, the rule restricts coordination between competitors such as price-fixing, market allocation, output restriction and/or bid-rigging. Companies and individuals are reminded not to:
Fix the resale price or impose a minimum resale price on a customer.
Pursuant to the Ordinance, prior to bringing an action against the subject of an investigation in the Tribunal , the Commission may accept from the concerned parties a commitment to take any action or refrain from taking any action that would result in the prevention, restriction and distortion of competition in Hong Kong. If the Commission accepts the commitment, it may not commence or continue an investigation, or bring or continue proceedings in the Tribunal. The concerned parties offering commitments are not required to make any admission of their contravention of the competition rules. Further, prior to accepting a commitment, the Commission will give notice of the proposed commitment to those who will likely be affected by it and will take into account of any representations made by them. If a party fails to comply with a commitment, the Tribunal can, amongst others, order the party to compensate for any loss or damages suffered by another party owing to action or non-action of the party in breach of the commitment. Further, the Tribunal can also make any order it considers appropriate.
Bringing an Action
In bringing an action against a company or an individual in breach of competition rules, the Commission must demonstrate that the agreement has either an anti-competitive object or an anti-competitive effect.
As demonstrated in the Publishers case, as long as the cartel arrangements are still in effect after the commencement of the Ordinance, the Commission may commence proceedings against companies and individuals who are involved in such cartel arrangements even if the arrangements were already in place before the implementation of the Ordinance. Liability
“As at end of December 2019, the Commission had received around 4,000 complaints and enquiries and they are related to a wide variety of sectors….Nearly 30% of the complaints and enquires received were on alleged cartel conduct including price fixing and the exchange of competitively sensitive information”
"… the commission will investigate and take action against any such [cartel] agreements that began or continued after the ordinance came into full effect"
"… company will be liable for the actions of employees where there is a sufficient connection between the acts of the employee … so that the [company] can properly be regarded as part of the [employee] in the relevant context”
What you should do
Assess your current and potential business practices and arrangements involving exclusive distribution, exclusive customer allocation and joint ventures, in particular, those that have been established before the commencement of the Ordinance and consider whether the arrangements allow competitors to continue to compete against each other.
Evaluate the risk of collusion at the supplier and distributor level.
Review the terms of the agreements, i.e. non-compete clause and exclusivity clause, to determine whether they are justifiable and in compliance with the competition laws.
Provide training to directors and employees to raise their awareness of the competition laws.
Advise on the merits of the case and the appropriate steps to be taken.
Act for the company and/or individual to defend any possible prosecution or proceedings. Order the concerned parties to pay damages to any person who has suffered loss or damage as a result of the contravention.
When a company or an individual was found to be in breach of the Ordinance, the Tribunal can, amongst others: