New Competition Law in Hong Kong
For the first time, cross-sector competition law has been implemented in Hong Kong, under the Competition Ordinance.
The Competition Ordinance (Ordinance) came into force on 14 December 2015, prohibiting any anti-competitive conduct which has the object or effect of preventing, restricting or distorting competition in Hong Kong.
The Ordinance will be enforced by two entities: (a) the Competition Commission (Commission), which will investigate cases and bring enforcement actions, and (b) the Competition Tribunal, which will adjudicate competition cases.
The Ordinance introduces three key conduct rules:
- The “First Conduct Rule” - Anti-competitive Agreements/Practices
This rule prohibits any agreements, concerted practices or decisions that have the ‘object or effect of preventing, restricting or distorting competition’ in Hong Kong. The Commission has indicated that anticompetitive arrangements between competitors on price-fixing, market or customer allocation, bid-rigging or output restrictions, will be dealt with most seriously.
- The “Second Conduct Rule” - Abuse of Market Power
This rule prohibits abuse of a substantial degree of market power by a business which, again, has the ‘object or effect of preventing, restricting or distorting competition’ in Hong Kong. This will include market behaviour such as predatory pricing, refusals to deal and exclusive dealing.
- The “Merger Rule”
The Ordinance also introduces a merger control rule, prohibiting mergers which have, or are likely to have, the effect of ‘substantially lessening competition’ in Hong Kong. At this stage however, the merger rule only applies to the telecommunications industry.
The above rules will also apply to any arrangements/conduct with a non-Hong Kong element, if it has the object or effect of restricting competition in Hong Kong.
The Ordinance provides for certain exclusions and exemptions which, if applicable, will mean a certain rule will not apply. A full list of general exclusions can be found under Schedule 1 of the Ordinance (from page 63 onwards). By way of example, a business may be exempt from the First Conduct Rule if the conduct enhances economic efficiency, or is made in compliance with a legal requirement. Any questions on whether it is necessary to obtain an exemption from the Ordinance should be directed to the Lloyd’s Hong Kong office
Hong Kong coverholders should ensure familiarity with these new rules to ensure compliance, especially given the novel nature of these requirements in the Hong Kong market, and the range of sanctions, remedies and orders that may be imposed for a breach.