Guided Tour: Hong Kong’s New Competition Law
Hong Kong’s new competition law has come into force, making it the first cross-sector substantive competition regime in the country’s history.
Since 14 December 2015, the new competition law applies to all businesses in Hong Kong, with significant penalties available for companies and individuals involved in a breach. As penalties are substantial, it is vital that companies are aware of and comply with the law. To assist businesses to prepare for the new competition law, King & Wood Mallesons has prepared a Hong Kong Competition Law Guide.
The guide covers:
- key aspects of the competition law, including the conduct rules;
- practical tips, including “dos and don’ts”;
- specific aspects of the regime, such as information sharing, agreements and abuse of market power;
- consequences of breaching competition law;
- exclusions and exemptions within the regime;
- enforcement; and
- compliance tips for Hong Kong businesses.
Aspects of the regime
The Competition Ordinance prohibits cartel conduct, abuses of market power and other forms of anti-competitive conduct, subject to the availability of a number of exemptions (including exemptions based on efficiencies, block exemptions and minimum turnover).
Importantly, the regime is founded upon the three conduct rules:
- the first conduct rule – applies to competitors who enter into an agreement, or who engaged in a concerted practice, that has the object or effect of preventing, restricting or distorting competition in Hong Kong;
- the second conduct rule – prohibits businesses with substantial market power from abusing that power by engaging in conduct with the object or effect of restricting competition; and
- a separate merger control rule that applies to firms that hold a carrier licence (ie is currently restricted to certain telecommunications providers).
For further details of the Competition Ordinance, please see our previous alert here.
Penalties and remedies
The maximum pecuniary penalty that the Tribunal may impose is 10% of the total gross revenues of the entity obtained in Hong Kong.
Individuals involved in breaches may be disqualified from acting as directors or being involved in the affairs of the company for up to 5 years. In addition, persons who have suffered loss or damage from conduct that breaches any of the prohibitions in the Ordinance may bring follow-on actions for civil damages.
The Ordinance also establishes the Hong Kong Competition Commission as an independent statutory body to investigate conduct that may contravene provisions and enforce the provisions of the Ordinance. Matters are heard in the Hong Kong Competition Tribunal, which is a special court comprising judges of the High Court. Further details can be found in a prior alert here.
Since its implementation, no enforcement actions have been made public by the Commission, although the first application for a block exemption has been received and is under review (relating to certain liner shipping agreements).
Competition law guide
Read our complete Hong Kong Competition Law Guide.
Photo: Flickr / Mike Behnken