Restraints of trade and dominance in Hong Kong: overview

A Q&A guide to restraints of trade and dominance in Hong Kong.

The Q&A gives a succinct overview of restraints of trade, monopolies and abuses of market power in Hong Kong. In particular, it covers the regulatory authorities and the regulatory framework, the scope of rules, exemptions, exclusions, statutes of limitation, notification, investigations, penalties and enforcement, third party damages claims, EU law, joint ventures and proposals for reform.

For information on merger control, regulatory framework and regulatory authorities, relevant triggering events and thresholds in Hong Kong, visit Merger control in Hong Kong: overview.

This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Restraints of Trade and Dominance Q&As visit www.practicallaw.com/restraintsoftrade-guide. For a full list of jurisdictional Merger Control Q&As visit www.practicallaw.com/mergercontrol-guide.

For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-guide.

Contents

Restraints of trade

Scope of rules

1. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?

Regulatory framework

The Competition Ordinance sets out a cross-sector anti-trust regime in Hong Kong and was fully implemented on 14 December 2015. Restrictive agreements and practices are regulated by section 6 of the Ordinance.

The key anti-trust rules contained in the Ordinance are the:

  • First Conduct Rule (FCR), which prohibits agreements, concerted practices or decisions of associations that have the object or effect of preventing, restricting or distorting competition in Hong Kong (section 6, Competition Ordinance). Certain conduct can also be deemed to be "serious anti-competitive conduct" (SACC). SACC is conduct that involves any of the following:

    • price fixing;

    • market allocation;

    • output control; and

    • bid-rigging.

  • Second Conduct Rule, which prohibits abuses of market power (section 21, Competition Ordinance).

Regulatory authority

The Competition Commission is responsible for investigating alleged or potential infringements and, if appropriate, initiating enforcement actions. The Competition Tribunal, comprising judges of the Hong Kong's Court of First Instance, will act as the adjudicative body for a number of applications and proceedings, including proceedings brought by the Commission alleging an infringement of either or both of the conduct rules. The Competition Tribunal has wide-ranging powers to impose administrative, financial and other penalties for infringements of the FCR (see Question 13).

The Competition Commission can apply to the Competition Tribunal to obtain injunctive relief while its investigation is pending. Other functions of the Commission include conducting market studies into matters affecting competition in Hong Kong and promoting public awareness of competition law.

The Communications Authority (CA) has concurrent jurisdiction with the Competition Commission in relation to potential competition law infringements in the telecommunications and broadcasting sectors and, in relation to these sectors, references to the Commission in the Ordinance and in this chapter must be read as including the CA.

See box, The regulatory authorities.

 
2. Do the regulations only apply to formal agreements or can they apply to informal practices?

The First Conduct Rule covers both formal and informal agreements, and concerted practices. The term agreement is widely defined in the Competition Ordinance and includes any agreement, arrangement, understanding, promise or undertaking, whether express or implied, written or oral, and whether or not enforceable or intended to be enforceable through legal proceedings.

 

Exemptions

3. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?

Bodies/persons exempted from the First Conduct Rule (FCR) include:

  • Statutory bodies other than those specified in a regulation by the Chief Executive in Council (CE) (section 3, Competition Ordinance).

  • Persons specified or persons engaged in activities specified in a regulation by the CE (section 4, Competition Ordinance).

The current scope of exempted statutory bodies will be reviewed three years after the coming into force of the major prohibitions set out in the Ordinance.

Arrangements exempted from the FCR include:

  • Agreements or categories of conduct that are exempted by an order published in the Gazette by the CE, either on public policy grounds or to avoid conflict with international obligations (sections 31 and 32, Competition Ordinance).

  • Categories of agreement that benefit from a block exemption order issued by the Competition Commission (section 15, Competition Ordinance).

The Competition Commission can issue a block exemption order if it is satisfied that a particular category of agreements enhances overall economic efficiency. These orders can be made either on the Commission's own initiative or on application by an undertaking or association of undertakings. The Commission's Guideline on the FCR provides that a sector-specific block exemption will be viewed as an exceptional measure. To date, no block exemptions have been issued by the Competition Commission.

 

Exclusions and statutes of limitation

4. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?

Exclusions

The following agreements are excluded from the scope of the First Conduct Rule (FCR) (Schedule 1, Competition Ordinance):

  • Agreements enhancing overall economic efficiency.

  • Agreements entered into for the purposes of compliance with legal requirements.

  • An undertaking entrusted by the government with the operation of services of general economic interest, if the FCR would obstruct the performance of any assigned tasks.

  • Agreements that result in a merger.

  • De minimis agreements (that is, agreements of lesser significance (ALS) that do not involve serious anti-competitive conduct).

ALS include:

  • Agreements between undertakings if the combined turnover of the undertakings in the relevant calendar year does not exceed HK$200 million.

  • Concerted practices engaged in by undertakings if the combined turnover of the undertakings in the relevant calendar year does not exceed HK$200 million.

  • Decisions of an association of undertakings if the combined turnover of the association for the relevant calendar year does not exceed HK$200 million.

Statutes of limitation

An application to the Competition Tribunal for the imposition of a pecuniary or other penalty on an undertaking for a contravention of the FCR must be made within five years after the day on which the contravention ceased or the Competition Commission became aware of the contravention (section 92, Competition Ordinance).

Where the Competition Commission has accepted a commitment to settle an investigation (see Question 12) and this acceptance is later withdrawn, the Commission must bring proceedings before the Tribunal within two years after the date specified in the notice of withdrawal (section 61, Competition Ordinance).

Follow-on actions (see Question 14) cannot be brought before the expiry of the relevant appeal period, unless permitted by the Court of First Instance or the Competition Tribunal, and in any event cannot be brought more than three years after the expiry of this period (section 111, Competition Ordinance).

Generally, actions that are not follow-on and are based on common law causes of action independent of the Competition Ordinance (for example, actions in tort), are subject to the general statutory limitation period of six years after the cause of action accrued, even if the facts of the claim can support a finding of a contravention of either or both of the conduct rules (Limitation Ordinance, Chapter 347, Laws of Hong Kong). However, this has not been tested yet.

 

Notification

5. What are the notification requirements for restrictive agreements and practices?

Notification

There is no requirement to make a notification/application to the Competition Commission to benefit from an exclusion/exemption from the First Conduct Rule (FCR). However, undertakings can apply to the Commission for a decision on whether an agreement is excluded/exempted from the FCR (section 9, Competition Ordinance). The Commission is only required to consider such an application if it meets the following requirements:

  • It poses novel or unresolved questions of wider importance or public interest in relation to the application of exclusions or exemptions.

  • It raises a question for which there is no clarification in existing case law or Commission decisions.

  • It is possible to make a decision on the basis of the information provided.

The Competition Commission has provided guidance on this process in its Guideline on Applications for a Decision under Sections 9 and 24 (Exclusions and Exemptions) and Section 15 Block Exemption Orders (Applications Guideline).

Informal guidance/opinion

Neither the Competition Ordinance nor the Commission's Guideline on the FCR refers to the availability of informal guidance/opinion. However, in its Applications Guideline, the Competition Commission encourages potential applicants to engage in an initial consultation before submitting an application for a decision or block exemption (paragraphs 6.12 and 11.10, Applications Guideline).

Responsibility for notification

See above, Notification.

Relevant authority

See above, Notification.

Form of notification

Applications for a decision must be made on Form AD, which is available on the Competition Commission's website (http://compcomm.hk/en ( www.practicallaw.com/9-617-3349) ). Applications for a block exemption must contain the information set out at paragraph 11.13 of the Applications Guideline.

Filing fee

An application for a decision excluding arrangements from the scope of the FCR on the ground of enhancing overall economic efficiency incurs a fee of HK$100,000. An application for a decision excluding arrangements from the FCR on any other available grounds incurs a fee of HK$50,000.

An application for a block exemption order incurs a fee of HK$500,000.

Any fee imposed will be returned if the Competition Commission declines to consider an application (Applications Guideline).

 

Investigations

6. Who can start an investigation into a restrictive agreement or practice?

Regulators

The Competition Commission can start an investigation into a potential contravention of the FCR on its own initiative or on an application by a third party (including a leniency applicant). In addition, the courts, the Competition Tribunal and the government can refer any conduct to the Commission for investigation.

Third parties

Any person can lodge a complaint in any form with the Competition Commission alleging that an undertaking contravened, is contravening or is about to contravene a competition rule. These complaints can be made either directly, through an intermediary such as a legal adviser, or anonymously. The Commission has discretion in choosing whether to investigate a complaint (section 37, Competition Ordinance). In particular, it can decline to investigate if it is satisfied that the complaint is either:

  • Trivial, frivolous or vexatious.

  • Misconceived or lacking in substance.

The Commission's Guideline on Complaints sets out further information relating to the complaints process.

 
7. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?

Representations

The Competition Ordinance is silent as to whether third parties can make representations, access documents or be heard during the course of an investigation. However, the Ordinance contains provisions for maintaining the confidentiality of certain information obtained from the investigation (see Question 9). Therefore, any third party's access to documents is likely to be limited by these provisions. Additionally, the Competition Commission's Guideline on Investigations states that the Commission will generally investigate in private and will not make disclosures, except where appropriate.

Where investigations are initiated following a complaint, the Commission's Guideline on Complaints indicates that the Commission will endeavour to keep the complainant generally informed as the matter progresses.

Document access

See above, Representations.

Be heard

See above, Representations.

 
8. What are the stages of the investigation and timetable?

In its Guideline on Investigations, the Competition Commission outlines the two stages of investigation:

  • Initial assessment phase.

  • Investigation phase.

The Commission's compulsory investigation powers (see Question 10) only apply during the investigation phase (that is, after the Commission has conducted its initial assessment and concluded that it has reasonable cause to suspect a violation of the conduct rules).

Except for the applicable limitation periods (see Question 4, Statutes of limitation), there is no set timetable for conducting an investigation. The time frame for any investigation will depend on the nature and complexity of each case, and on the co-operation of the relevant parties (paragraph 5.46, Guideline on Investigations).

 

Publicity and confidentiality

9. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?

Publicity

The Competition Commission conducts investigations in confidence and expects complainants to keep complaints confidential. This is predominantly to protect the interests of any involved parties, but also to ensure the effectiveness of the Commission's investigations.

The Commission will conduct consultations with the public or relevant parties (as appropriate) in relation to applications for a decision or block exemption, and commitments. Where the Commission decides to consider an application for a decision, it will publicise the application by posting a notice of the application together with a non-confidential version of the application on its website, and engage with persons likely to be affected. A similar process will be adopted in the case of block exemption applications. As regards commitments, the Commission must retain a register that can be inspected by any person. See also Question 12.

Automatic confidentiality

The Competition Commission has a duty to maintain adequate procedural safeguards to prevent the unauthorised disclosure of confidential information. Confidential information is defined under section 123 of the Competition Ordinance and includes, for example, information that relates to the private affairs of a natural person.

On 31 December 2015, the Competition Commission published its guidance on dealing with legal professional privilege (LPP) issues in the context of investigations (LPP Guidance). The LPP Guidance provides that, during the course of a search, the Commission should not copy or seize any document subject to LPP that can be readily separated from any non-privileged relevant material.

The Competition Commission can disclose confidential information if it does so "with lawful authority" (section 126, Competition Commission). This includes, for example, disclosure in accordance with a judicial order.

Confidentiality on request

A person that gives information to the Competition Commission can request confidentiality by identifying the information as confidential and providing a statement in writing setting out the reasons why, in that person's opinion, the information is confidential (section 123, Competition Commission).

Additionally, the LPP Guidance covers confidentiality issues in situations where disputes arise during a search as to whether a document is subject to LPP or where only part of a document is subject to LPP and cannot be readily separated from non-privileged material.

In these circumstances, the Commission will seal the documents in an opaque bag or container and remove it from the premises. Subject to a potential extension of time where voluminous materials are seized, the LPP claimant must substantiate its claims within seven days by:

  • Providing an index of documents in dispute, specifying the type of privilege claimed (that is, legal advice privilege and/or litigation privilege).

  • Providing a statement setting out the basis or bases and full factual context on which LPP is claimed in respect if each item on the index. If the claim is not substantiated within the seven-day time period, the LLP claim will be deemed waived and the Commission will proceed to inspect the documents.

 
10. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?

The Competition Commission has wide-ranging investigation powers, including the powers to:

  • Enter and search premises after obtaining a warrant from the Court of First Instance (section 48, Competition Ordinance).

  • Require any person to attend interviews (section 42, Competition Ordinance).

  • Require the production of documents and information (section 41, Competition Ordinance).

While the Commission cannot impose criminal sanctions for anti-competitive conduct, the Competition Tribunal (or other court) can find that an offence has been committed by a person or an undertaking during investigations by the Commission (for example, by failing to comply with a requirement or prohibition, destroying or falsifying documents, or obstructing a search (sections 52 to 55, Competition Ordinance)).

 

Settlements

11. Can the parties reach settlements with regulators to bring an early resolution to an investigation? If so, what are the circumstances for doing so and the applicable procedure?

Although not referred to as a settlement procedure, the Guideline on Investigations provide that the parties (including the Competition Commission) can make an application to the Competition Tribunal for a consent order following an investigation. A consent order can, subject to the determination of the Tribunal:

  • Declare that the consenting party has contravened competition law.

  • Provide for a pecuniary penalty, disqualification order or any other order that the Tribunal can make under the Competition Ordinance.

In addition, the Guideline also provides for the possibility to offer commitments to the Competition Commission (see Question 12).

 
12. Can the regulator accept remedies (commitments) from the parties to address competition concerns without reaching an infringement decision? If so, what are the circumstances for doing so and the applicable procedure?

The Competition Commission has discretion to accept a commitment to take, or refrain from taking, any action that the Commission considers appropriate to address its concern about a possible contravention of a competition rule.

If the Commission accepts a commitment, it cannot commence or continue an investigation, or bring or continue proceedings in the Competition Tribunal, in relation to any alleged contravention of a competition rule if that investigation or those proceedings relate to matters that are addressed by the commitment.

If the Competition Commission intends to accept a commitment, it must:

  • Give prior notice to the affected parties, who have an opportunity to make representations within a specified period (not fewer than 15 days from the date of notice).

  • Consider any representations made in response to the notice.

 

Penalties and enforcement

13. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?

Orders

The Competition Commission can issue two types of notice:

  • Warning notice (section 82, Competition Ordinance).

  • Infringement notice (section 67, Competition Ordinance).

If the Commission concludes that a contravention of the First Conduct Rule (FCR) has occurred, and if that contravention does not involve serious anti-competitive conduct (SACC) (see Question 1, Regulatory framework), the Commission must issue a warning notice to the relevant undertaking before bringing proceedings before the Competition Tribunal. This notice requires the undertaking to:

  • Cease the relevant conduct within a specified period (warning period).

  • Not repeat the conduct.

The Competition Commission can bring proceedings before the Competition Tribunal only if the contravening conduct continues or is repeated after the expiry of the warning period.

Where the contravention involves SACC, the Competition Commission can either:

  • Issue an infringement notice against the undertaking before bringing proceedings before the Competition Tribunal, requesting a commitment from the undertaking.

  • Bring proceedings before the Tribunal without issuing a warning notice.

If proceedings are brought before the Competition Tribunal and an infringement is found to have occurred, the Tribunal can impose fines (section 93, Competition Ordinance) (see below, Fines) or impose a range of other orders (section 94, Competition Ordinance). The orders that the Tribunal can make are set out in Schedule 3 to the Competition Ordinance and include, for example, an order prohibiting the withholding of goods or services.

Fines

On the application of the Competition Commission, the Competition Tribunal can impose a pecuniary penalty on an undertaking of up to 10% of its Hong Kong turnover for each year of the infringement. If an infringement spans more than three years, the fine will be capped at 10% of the Hong Kong turnover for the three years that generated the highest turnover.

Where the pecuniary penalty is not paid, the Competition Tribunal can enforce payment in the same manner as a judgment of the Court of First Instance.

If a pecuniary penalty is not paid in full, the Competition Tribunal can certify in writing to the Registrar of the Tribunal the sum payable, and the Registrar can enforce payment of that sum as a judgment debt due to the Registrar (section 155A, Competition Ordinance).

Personal liability

A director, manager, company secretary or other person concerned in the management of a body corporate is deemed to have committed the same offence as the body corporate if the offence either (section 175, Competition Ordinance):

  • Was committed with the consent or connivance of that person.

  • Is attributable to any neglect or omission on the part of that person.

Directors or persons involved in the management of infringing companies can be disqualified from (section 101, Competition Ordinance):

  • Serving (in Hong Kong) as a director, liquidator, receiver or manager of a company's property.

  • Being involved in the promotion, formation or management of a company for up to five years.

Part 6 of the Competition Ordinance appears to provide for the imposition of a pecuniary penalty on natural persons for a contravention of the competition rules, but the position is unclear and some academics and practitioners have argued that this would be unconstitutional.

However, an individual can be subject to imprisonment or a fine where they (sections 52 to 54, Competition Ordinance):

  • Intentionally or recklessly destroys or otherwise disposes of, falsifies or conceals documents and information.

  • Provide false or misleading documents or information.

  • Obstruct any person exercising a power under a warrant to search premises.

Immunity/leniency

The leniency regime only applies to cartel conduct. Absent exceptional circumstances, leniency is only available for the first undertaking that reports cartel conduct to the Competition Commission and meets all the requirements for leniency.

Through the leniency agreement, the Competition Commission will undertake not to commence proceedings for a pecuniary penalty against the successful applicant, or to bring any other proceedings before the Competition Tribunal, save for an order declaring that the successful applicant has contravened the FCR. Therefore, a leniency agreement does not preclude follow-on actions for damages.

In relation to subsequent leniency applicants, the Competition Commission has stated that it will exercise its "enforcement discretion" vis-a-vis co-operating undertakings.

The Commission's Leniency Policy for Undertakings Engaged in Cartel Conduct contains additional guidance.

Impact on agreements

The Competition Tribunal can make an order (Competition Ordinance):

  • Prohibiting a person from making or giving effect to an agreement.

  • Requiring parties to an infringing agreement to modify or terminate that agreement.

  • Declaring any agreement (making or giving effect to a contravention of the competition rules) to be void or voidable to the extent specified in the order.

 

Third party damages claims and appeals

14. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are collective/class actions possible?

Third party damages

Any person that has suffered loss or damage as a result of a contravention of a conduct rule can bring a follow-on action against the infringing party based on (section 110, Competition Ordinance):

  • A determination by the Competition Tribunal, the Court of First Instance (CFI) or the higher courts that a conduct rule has been contravened.

  • An admission of a contravention in a commitment.

Stand-alone private enforcement actions are not permitted. However, this does not prevent a party from arguing in a private legal action (such as a contract or tort claim) that a contravention of a conduct rule has occurred, provided that the alleged contravention, or involvement in the alleged contravention, is not used as a cause of action.

Special procedures/rules

Pure competition claims cannot be brought before the CFI, and can only be brought before the Competition Tribunal (section 109, Competition Ordinance). Composite claims (that is, claims comprising competition claims and other claims) can be brought before either the CFI or the Competition Tribunal. To prevent forum shopping, there is a transfer mechanism under which the decision as to whether a claim should be heard before the CFI or the Competition Tribunal will be made by the courts and not by the parties to the proceedings (sections 113 to 115, Competition Ordinance).

See Question 4, Statutes of limitation for the applicable limitation periods.

Collective/class actions

Currently, there is no class action procedure for competition claims. A 2012 report by the Hong Kong Law Reform Commission recommended the introduction of a new opt-out class action procedure with a view to expanding access to judicial relief. Later that year, the Hong Kong Department of Justice (DOJ) announced that it would set up a cross-sector working group to consider the report and make recommendations

In January 2015, the DOJ noted in its policy initiatives that the working group had held eight meetings to study the proposals on the class action regime. In June 2015, the Solicitor General of the DOJ stated that the working group intends to conduct a consultation exercise in late 2015 or early 2016 before finalising its recommendations to the government. There is currently no official announcement on the result of this consultation.

 
15. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?

Rights of appeal and procedure

Competition Commission. "Reviewable determinations" (RDs), as defined in section 83 of the Competition Ordinance, are reviewable by the Competition Tribunal. RDs include Commission decisions regarding an agreement, a block exemption or a commitment. Interested parties (generally, parties that are directly related to the RD) can apply to the Tribunal for leave to review the RD within 30 days after the day on which the determination was made This can be extended by the Tribunal to no more than three years after the day on which the determination was made (section 88, Competition Ordinance).

Competition Tribunal. Decisions, determinations or orders of the Competition Tribunal on issues such as the amount of the pecuniary penalty or compensatory sanction can be appealed as of right to the Court of Appeal (section 154, Competition Ordinance).

Appeals against an interlocutory decision, determination or order of the Competition Tribunal require leave of the Court of Appeal or Tribunal (section 155, Competition Ordinance). Applications for leave must be made to the Tribunal in the first instance within 14 days from the date of the decision, determination or order, unless the Court of Appeal allows the application for leave to be made directly to the Court of Appeal.

Third party rights of appeal

Third parties can apply for a review of a RD (other than a decision regarding a merger or proposed merger) if the Competition Tribunal is satisfied that the person has a sufficient interest in the RD. An application for review must be made within 30 days after the day on which the RD was made, which can be extended by the Tribunal to no more than three years after the day on which the determination was made.

 

Monopolies and abuses of market power

Scope of rules

16. Are monopolies and abuses of market power regulated under administrative and/or criminal law? If so, what are the substantive provisions and regulatory authority?

Regulatory framework

Monopolies and abuses of market power are regulated by section 21 of the Competition Ordinance, which sets out the Second Conduct Rule (SCR). The SCR is a cross-sector rule that prohibits undertakings with substantial market power from abusing that power by engaging in conduct that has the object or effect of preventing, restricting or distorting competition in Hong Kong.

Regulatory authority

As for the First Conduct Rule, the regulatory authorities responsible for implementing the SCR are the Competition Commission and the Competition Tribunal (see Question 1, Regulatory authority).

See box, The regulatory authorities.

 
17. How is dominance/market power determined?

Substantial market power (SMP) is not defined in the Competition Ordinance. When the Competition Bill was passed, the Secretary for Commerce and Economic Development indicated that an undertaking with a market share of 25% or below would be unlikely to possess SMP. However, this threshold has not been adopted or referred to in the Competition Commission's Guideline on the Second Conduct Rule (SCR) (SCR Guideline).

The Competition Ordinance provides a non-exhaustive list of factors that can be taken into account when determining whether an undertaking has SMP:

  • The market share of the undertaking.

  • The undertaking's power to make pricing and other decisions.

  • Any barriers to entry into the relevant market.

  • Any other relevant matters specified in guidelines issued under section 35 of the Ordinance.

In the SCR Guideline, the Competition Commission states that while market share is "useful as an initial screening device", an undertaking that has a high market share does not necessarily have SMP. Relevant constraints on the ability to exercise market power include:

  • Existing competitors.

  • Potential competitors.

  • Other factors such as the existence of powerful buyers.

 
18. Are there any broad categories of behaviour that may constitute abusive conduct?

The following two categories of conduct may in particular constitute an abuse of market power (section 21, Competition Ordinance):

  • Predatory behaviour towards competitors.

  • Limiting production, markets or technical development to the prejudice of consumers.

The Guideline on the Second Conduct Rule confirms that the category of potentially abusive conduct is open, and includes additional examples of abusive conduct, such as:

  • Predatory pricing.

  • Tying and bundling.

  • Margin squeeze.

  • Refusals to supply and to grant access to essential facilities.

 

Exemptions and exclusions

19. Are there any exemptions or exclusions?

Bodies and persons exempted from the First Conduct Rule (FCR) (see Question 3) are also exempted from the Second Conduct Rule (SCR) (sections 3 and 4, Competition Ordinance).

Specific conduct can be exempted from the SCR on the grounds of public policy or international obligations. Such an exemption must be published by the Chief Executive in Council in the Gazette (sections 31 and 32, Competition Ordinance).

Exclusions from the SCR are similar to those regarding the FCR (see Question 4, Exclusions), with the following key differences:

  • There is no exclusion for conduct enhancing overall economic efficiency.

  • A de minimis exclusion is available for conduct of an undertaking with a turnover not exceeding HK$40 million.

 

Notification

20. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?

There is no requirement to make a notification/application to the Competition Commission to benefit from an exemption from the Second Conduct Rule (SCR). However, undertakings can apply to the Commission for a decision as to whether certain conduct is excluded or exempted from the SCR (section 24, Competition Ordinance). The application procedure is similar as for decisions in relation to the First Conduct Rule (see Question 5).

 

Investigations

21. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?

There are no procedural differences between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices (see Questions 6 to 9 and 11 to 12). However, the warning notice mechanism (see Question 13) does not apply to the Second Conduct Rule.

 
22. What are the regulator's powers of investigation?
 

Penalties and enforcement

23. What are the penalties for abuse of market power and what orders can the regulator make?
 

Third party damages claims

24. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are collective/class actions possible?

Third party damages

See Question 14.

Special procedures/rules

See Question 14.

Collective/class actions

See Question 14.

 

EU law

25. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law?

Not applicable.

 

Joint ventures

26. How are joint ventures analysed under competition law?

The creation of a joint venture to perform, on a lasting basis, all the functions of an autonomous economic entity, constitutes a merger (Schedule 7, section 3(4), Competition Ordinance). Currently, the merger control regime in Hong Kong is limited to the telecommunications sector. Joint ventures that constitute a merger will benefit from an exemption from the second conduct rule (Schedule 1, section 4, Competition Ordinance), although how this exemption will be applied in the context of non-telecommunications joint ventures remains to be seen.

All other types of joint ventures that do not result in a merger can fall within the scope of the conduct rules (see Question 1). The Commission's Guideline on the First Conduct Rule provides guidance on various joint venture arrangements, including joint production, joint tendering and joint marketing arrangements.

 

Inter-agency co-operation

27. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?

The Competition Ordinance does not contain express provisions on co-operation with regulatory authorities in other jurisdictions. The Chairperson of the Commission commented in a conference in December 2013 that greater collaboration among regional competition authorities is necessary as international conglomerates are present in multiple jurisdictions and the Competition Commission may, for example, need to address how regional export cartels affect the territory. The Competition Commission is a member of the International Competition Network.

 

Recent cases

28. What are the recent developments, trends or notable recent cases concerning abuse of market power?

To date, no cases have been brought under the Competition Ordinance.

 

Proposals for reform

29. Are there any proposals for reform concerning restrictive agreements and market dominance?

Latest developments

In July 2015, the Competition Commission published the finalised guidelines covering the six following areas:

  • First Conduct Rule.

  • Second Conduct Rule.

  • Merger Rule

  • Complaints.

  • Investigations.

  • Applications for exemptions and block exemption orders.

On 19 November 2015, the Commission published its Leniency Policy and its Enforcement Policy. On 14 December 2015, the Competition Ordinance entered into force, and the memorandum of understanding between the Commission and the Communications Authority was executed on the same day. On 31 December 2015, the Commission published its guidance concerning the application of legal professional privilege in the context of investigations.

Potential areas of reform

According to the 2012 Bills Committee report on the Competition Bill, the government will conduct a review of the operational experience and effectiveness of the Competition Ordinance within a few years of implementation. The exact timing of the review is currently unknown.

The possibility to bring stand-alone private enforcement actions was removed (see Question 14) to alleviate concerns that larger companies with more resources could resort to or threaten litigation in order to drive out or affect the business of smaller competitors. The government has noted that, as this has not been the case in other jurisdictions (large companies are usually the defendants in privately instigated competition litigation), a stand-alone right of action may be introduced in due course, as the business community acquires more experience of the new competition regime.

 

Online resources

Department of Justice Bilingual Laws Information System

W www.legislation.gov.hk

Description. This is an electronic database containing English and Chinese versions of all current ordinances, subsidiary legislation, constitutional documents, treaties and agreements in force in Hong Kong. Legislation is up-to-date unless otherwise indicated, and the English and Chinese versions of legislation have equal force. Historical versions of ordinances from 30 June 1997 onwards are also available.

Legislative Council of Hong Kong

W www.legco.gov.hk

Description. The website of the Legislative Council (Hong Kong legislative body) contains current and past meeting records, official minutes of meetings of the Legislative Council as a whole and committees within the Council (from the 1995-1996 session onwards), and bills that were introduced and read.



The regulatory authorities

Competition Commission

Head Ms Anna Wu Hung Yuk, GBS, JP (Chairperson)
Contact Details Room 3601, 3607-3610
36/F, Wu Chung House
197-213 Queen's Road East
Wanchai, Hong Kong
T +852 3462 2118
F +852 2522 4997
E enquiry@compcomm.hk
W http://compcomm.hk/en

Outline structure. The Competition Commission consists of the Chairperson, Commission members and the members of various committees, and various executive officers and directors. The Commission is an independent statutory body established under the Competition Ordinance.

Members of the Commission are appointed by the Chief Executive of Hong Kong. The current appointments were made on 1 May 2016 for a period of two years.

Responsibilities. The Commission's responsibilities are to enforce the provisions of the Competition Ordinance, promote the public understanding of the value of competition and how the Ordinance promotes competition, and advise the Hong Kong Government on competition matters.

The Commission will actively monitor the market for mergers falling under the merger rule and other anti-competitive conduct and will initiate investigations on its own initiative. The Commission will also accept complaints from the public.

Procedure for obtaining documents. Information on the Commission is available on its website.

Communications Authority (CA)

Head. Mr Ambrose Ho, SC, JP (Chairman) Miss Susie HO Shuk-yee, JP (Vice-Chairperson)

Contact details. 20/F, Wu Chung House
213 Queen's Road East
Wan Chai
Hong Kong
(for broadcasting matters)
29/F, Wu Chung House
213 Queen's Road East
Wanchai
Hong Kong
(for telecommunications matters)
T +852 2961 6333
F +852 2507 2219 (for broadcasting matters)
+852 2803 5110 (for telecommunications matters)
E webmaster@ofca.gov.hk
W www.coms-auth.hk
www.ofca.gov.hk

Outline structure. The CA comprises the Chairman and the vice-Chairman, and the members of a number of committees.

The Office of the CA (OFCA) is the executive arm of the CA responsible for its regulation. It was established by a merger of the former telecommunications and broadcasting authorities on 1 April 2012. The OFCA is headed by a director-general and two deputy directors-general, one for broadcasting and one for telecommunications matters. The OFCA is divided into several branches, each led by an assistant director.

Responsibilities. The role of the CA, a statutory body, is to regulate the broadcasting and telecommunications industries.

The committees of the CA consider complaints, make disciplinary rulings, provide guidance, and issue codes of conduct in relation to broadcasting and telecommunications matters.

The OFCA is responsible for regulating the telecommunications and broadcasting industry, including issuing licences and investigating consumer complaints. It also provides secretarial support to the CA's committees. Matters relating to anti-competitive behaviour are investigated by the market and competition branch of the OFCA.

Procedure for obtaining documents. Information on the CA and OFCA is available on their websites. The OFCA's website also contains a policy on access to information (see www.ofca.gov.hk/en/access_to_info/index.html).



Contributor profiles

Mark Jephcott, Head of Competition – Asia

Herbert Smith Freehills

T +852 2101 4027
F +852 2845 9099
E mark.jephcott@hsf.com
W www.herbertsmithfreehills.com

Professional qualifications. Solicitor, England and Wales; Solicitor, Hong Kong

Areas of practice. Competition.

Non-professional qualifications. LLB, Cambridge University (Trinity College) (highest First Class in the European Community law paper); Masters Degree in European Community Law, Université Libre de Bruxelles; worked for both the UK Competition Appeal Tribunal (the dedicated appeal court for decisions taken by the UK's competition authorities) and the European Commission's Directorate-General for Competition; appointed in 2015 by the Competition Commission of Hong Kong to become one of its non-governmental advisers to the International Competition Network, the global body representing the world's competition authorities.

Recent transactions

  • Advising two multinational companies on cartel investigations before the Competition Commission of Singapore.
  • Advising a multinational company on an abuse of dominance investigation before the Competition Commission of Singapore.
  • Advising several Asian sovereign wealth funds on the EU and Asian merger control aspects of multiple transactions.
  • Advising a major global chemical company on a China MOFCOM filing.
  • Advising a leading Australian telecommunications company on transaction structure.
  • Advising a major international household name conglomerate in the hospitality industry on internal pan-Asia-Pacific competition law audits for identifying potential breach of anti-trust laws in multiple jurisdictions and preparing in-house practical guidance and training materials.
  • Advising Cable & Wireless Worldwide on the Singapore merger control aspects of its proposed merger with Vodafone.
  • Advising Nalco on obtaining EU merger clearance of its US$5.4 billion acquisition by Ecolab.

Languages. English (native), French (fluent), German (fluent), Mandarin (basic)

Publications

  • Hong Kong Chapter of Global Legal Insights on Cartels, 1st Edition (Hong Kong Chapter) 2012.
  • Law of Cartels, 2011 (2nd Edition) and 2003 (1st Edition).
  • Horizontal Agreements and EU Competition Law, 2004.
  • Asia-Pacific Multi-jurisdictional Competition Law Guide and several articles on the Asian competition regimes and Chinese merger control and anti-trust regimes, and the extra-territorial application of the EU Merger Regulation in relation to Chinese companies.
  • Practical Law Competition Law Global Guide: Hong Kong Competition and Cartel Leniency, 2013.

Adelaide Luke, Registered Foreign Lawyer (England and Wales)

Herbert Smith Freehills

T +852 2101 4135
F +852 2845 9099
E adelaide.luke@hsf.com
W www.herbertsmithfreehills.com

Professional qualifications. Solicitor, Australia; Solicitor, England and Wales

Areas of practice. Competition.

Non-professional qualifications. BSc/LLB, University of Queensland; Masters of Arts in Competition Law, King's College London

Recent transactions

  • Advising a Japanese conglomerate in relation to joint venture arrangements in the nuclear sector.
  • Representing a major Chinese state-owned oil and gas enterprise before the European Commission in relation to its acquisition of business and infrastructure in the North Sea, and providing subsequent advice regarding joint marketing.
  • Advising a confidential client in relation to a potential Article 102 TFEU complaint to the European Commission and a national competition authority of a member state alleging abuse of a dominant position.
  • Advising two multinational corporations in relation to the European Commission's cartel investigations into automotive parts (bearings) and power cables.
  • Advising an Asian sovereign wealth fund on the EU and Asian merger control aspects of various transactions.

Languages. English (native)


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