Full implementation of Hong Kong’s competition law is scheduled for launch on December 14th. A new leniency policy is also under consideration. Nan-Hie In recently published a helpful article, A New Era for Hong Kong Competition Regime, which includes extensive comments from Anna Wu Hung-yuk, Chairperson of Hong Kong’s Competition Commission.
The Competition Ordinance, which was passed by the city’s legislature in 2012, will come into full force on December 14th. The article describes three key rules:
The First Conduct Rule bars anti-competitive agreements amongst competitors or parties at different levels of the supply chain. “The most serious of these are cartel agreements that seek to fix price, share market, limit output or rig bids; these are regarded as serious anti-competitive conduct and [this rule is] applicable to all businesses, big, small or medium,” explains Wu.
The Second Conduct Rule states that businesses with substantial degree of market power must not abuse that power. For example, exploiting that power to the detriment of consumers or restricting competition is prohibited. “It is only when an undertaking seeks to use that power, for example, to exclude the competitor from the market, that concerns may arise,” she says.
Thirdly there is the Merger Rule, which only applies to the telecommunications industry. “This prohibits mergers that may substantially lessen competition in Hong Kong.”
Chairperson Wu Hung-yuk said: “It is a very curious anomaly for this place of free enterprise to not have one [a competition law] but we have it today which makes it a bit easier to tell everyone around the world that we have a competition regime that uses the same principles in America, the UK, the EU and Singapore.” The Chairperson also credited the America Chamber of Commerce–Hong Kong for making valuable suggestions. Hong Kong’s competition law is referred to as the Competition Ordinance.
In preparation for the full implementation of the Competition Ordinance, the Hong Kong Competition Commission announced a Draft Leniency Policy for Cartels in a September 23, 2015 press release. Under the Draft Cartel Leniency Policy, the Commission will agree not to bring proceedings in the Tribunal for a fine against the first cartel member who reports the cartel conduct to the Commission and meets all the policy requirements for receiving leniency, including full cooperation with the Commission’s investigation. The Competition Commission Chairperson noted, “Similar policies have proven to be an important tool to help competition authorities around the world combat cartels.” It is important to note the Hong Kong competition regime and the draft leniency policy are similar to those in the US, EU and there jurisdictions. But “similar” is not identical and differences may prove to be important under the facts of each matter.
The primary features of the draft leniency policy are:
- The policy only applies to cartels: arrangements between competitors to fix prices, restrict output, share markets and rig bids.
- Leniency will only be offered to the “first-in” cartel member that also meets the other requirements.
- The Commission will operate a “marker” system to establish a queue in order of the date and time that companies apply for leniency. Cartel members must call a “leniency hotline” to obtain a place in the marker queue. If the first marker fails or is terminated, the second marker may be offered leniency.
- Under the draft leniency policy, the leniency applicant must sign a statement of agreed facts admitting the leniency applicant’s participation in the cartel.
- While there is only one leniency per investigation, the Commission may agree to provide favourable treatment in the form of a lower recommended fine to other cartel members that terminate their involvement in the cartel and co-operate with the Commission’s investigation.
- Leniency does not provide immunity from follow-on actions or other orders.
The Commission solicited comments on its draft leniency proposal. The period for comment is now closed. Some of the comments questioned the requirement that a leniency applicant sign a statement of facts about its involvement in the violation, noting that this may discourage leniency applicants from coming forward. The comments the Commission received are published here.
I’ll follow up when the final leniency policy is published.
Thanks for reading.