Long standing industry practice not shielded from Hong Kong’s new competition law

Published On 15/08/2014 | By Donny Low | Cartels, Enforcement

Hong Kong’s new competition law, which is expected to start next year, is already having an impact on businesses in the city.  The new law prohibits price fixing and other forms of anti-competitive conduct.

Recommended service fees in Hong Kong’s tourism industry is a recent example of how long-standing business practices might contravene the new Competition Ordinance and also show what businesses will need to do to avoid breaching the new laws.

In July 2014, the Travel Industry Council of Hong Kong (TIC) issued a directive “recommending” an increase in service fees charged by travel agencies (for example, in ticketing services such as re-routing and visa applications).  The directive was issued in light of rising operating costs and workloads for travel agents over the past few years. The recommended increases ranged from 20% to 50%.  The TIC has also published in the past recommended maximum daily service fees for tourist operators.

Joseph Tung Yao-chung, TIC’s executive director, met with the Hong Kong Competition Commission last week and was told that the service charge recommendation could be seen as price-fixing. The TIC is contemplating withdrawing the practice of “recommending” fees.

It is not uncommon for business practices to have been developed to achieve a legitimate end.  The recommended maximum daily service fees were originally intended to stop operators from overcharging tourists.  But such arrangements can breach competition laws especially where they maintain or increase prices or prevent businesses from lowering prices or offering additional services or benefits.

Hong Kong businesses should consider whether there are any industry-wide or common business practices which might breach the new Competition Ordinance.  The Competition Commission will continue to look into business practices and will continue to consult with businesses and industry groups to address any concerns.  Businesses will, however, have to examine their own practices to make sure they will not breach the new laws and expose themselves to penalties and other consequences.

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About The Author

Donny is a Senior Associate in the Sydney office of King & Wood Mallesons. He's practised antitrust law in the US, still follows American politics and plays cricket on the weekends.

One Response to Long standing industry practice not shielded from Hong Kong’s new competition law

  1. Hi Donny

    Interesting that the TIC may choose to step away entirely from this practice of recommending fees. The Competition Commission presumably put a clear case of potential risk, and the TIC is now in a position to decide how close to the line it wishes to play this one.

    We suspect that like a lot of Hong Kong businesses, once they understand what they can and can’t do, compliance will be relatively straightforward.

    The big issue at present is the uncertainty that a new law like this creates. Fortunately the Commission is willing to speak with businesses (or at least business groups). But they can’t talk to everyone.

    That’s when the trusted adviser needs to step up and explain where the bright lines are and discuss the commerciality of various options with their clients. Hopefully that will become a bit easier when the Commission releases its draft enforcement guidelines next month.

    Well done on helping to raise awareness.

    Regards

    hkcompetitionlaw.com

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