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Six Key Matters About the Hong Kong Competition Ordinance
1 January 2016

1. It is in force now

The Competition Ordinance (Cap 619 of the laws of Hong Kong) took effect on 14 December 2015. Importantly, business should not expect a ‘soft landing’ as the Ordinance has been on the statute books for some time and there has already been a long period of public awareness, campaigns and promotion.

The Ordinance establishes the Hong Kong Competition Commission and the Competition Tribunal, which are active now and generally it is expected that the Commission will be investigating complaints from an early stage.

All businesses operating in Hong Kong are required to comply with the Ordinance, subject to certain limited exemptions.

2. It introduces Competition Rules

Broadly, the Ordinance introduces the following competition rules :-

(a) the first conduct rule that applies to market participants (whether they are competitors or not) who enter into an agreement, or who engage in a concerted practice, that has the object or effect of preventing, restricting or distorting competition in Hong Kong;

(b) the second conduct rule that prohibits businesses with substantial market power from abusing that power by engaging in conduct with the object or effect of restricting competition; and

(c) a separate merger control rule that applies to firms that hold a carrier license.

3. It establishes the Hong Kong Competition Commission

The Commission is an independent statutory body established under the Ordinance. The objective of the Ordinance is to prohibit conduct that prevents, restricts or distorts competition, and to prohibit mergers that substantially lessen competition in Hong Kong. It has broad research and public relations functions.

It is essential to note that the Commission may investigate conduct that may contravene the competition rules of the Ordinance and enforce the provisions of the Ordinance. SMEs that are concerned that they are being disadvantaged by parties that may have breached the Ordinance may make a complaint direct to the Commission.

4. The Infringement Notice System

The Ordinance adopts an infringement notice system. If the Commission reasonably believe that an undertaking has contravened the first and/or second conduct rules, it may issue an infringement notice (“Notice”) to that undertaking. In the Notice, the Commission will offer not to bring proceedings against the recipient, if they commit to comply with the Notice within a specified period.

The Commission can bring proceedings in the Tribunal if there is no compliance. However, without issuing a Notice, the Commission can still apply to the Tribunal for penalties to be imposed if the Commission reasonably believe that an undertaking has contravened a competition rule.

5. It establishes the Competition Tribunal

This is a discrete court comprising High Court judges with jurisdiction to determine matters under the Ordinance. It should be less formal than court, but time will tell. The Tribunal is not bound by the rules of evidence except in proceedings where the Commission applies for a pecuniary or financial penalty.

Of interest is that the Tribunal can hear and determine :-

(a) proceedings brought by the Competition Commission and Communication Authority about alleged breaches of the competition rules;

(b) applications to review certain decisions made by the Commission (e.g. decisions regarding mergers);

(c) private civil actions for damages against entities that have breached the competition rules; and

(d) an application to enforce a commitment that was made by a person under the Ordinance.

6. The penalties can be significant

Penalties may be 10% of the Hong Kong total gross revenue of the entity.

Other issues are that individuals involved in breaches may be disqualified from acting as director of a company for up to 5 years. Further, civil claims may follow, as persons who have suffered loss from conduct that breaches any of the prohibitions in the Ordinance may bring actions for civil damages.

These are very general points, and if you are concerned about whether your business or perhaps another with whom you may trade are fully complying with the Competition Ordinance, or have any related queries, experienced lawyers in our Commercial and Litigation and Dispute Resolution departments will be happy to assist you.

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