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