HKCC primacy

Damages claim gets red light

Published On 23/05/2017 | By James Wilkinson | Enforcement, Litigation

Victims of anti-competitive conduct in Hong Kong cannot bring a stand-alone private enforcement action for breaches of the Competition Ordinance (Cap. 619), the High Court has confirmed.

The court ruled in Loyal Profit that it is for the Competition Commission, not private parties, to bring a complaint of infringement of the competition rules to the Competition Tribunal for adjudication.

Victims of anti-competitive conduct may however bring a follow-on action for damages against a company if the Tribunal has ruled that the company breached the competition rules. A right to damages will also arise if a company admits a breach as part of a leniency agreement.

This case

The court rejected an application by Loyal Profit, a travel agency, alleging that the Travel Industry Council’s rules on tour guides were anti-competitive and breached the Ordinance. The rules required tour guides to take tourists only to registered shops, and imposed restrictions aimed at stopping tour guides seeking shopping commissions.

In addition to discussing the application, the court also declined to refer the matter to the Competition Commission on the basis of insufficient evidence to form a view.

A unique system

The law on private enforcement actions in Hong Kong is more limited than many countries with similar competition laws. In the US, Europe and Australia, individuals can sue directly for breaches of the competition law, without having to wait for the competition regulator to bring an action. Ninety per cent of antitrust cases in the US are initiated by private litigants, says antitrust author Moritz Lorenz.

In Hong Kong, the Competition Commission has so far only taken one case to the Competition Tribunal, although more are likely to follow.  The current case alleges that five IT companies engaged in bid-rigging in relation to a tender for the supply and installation of an IT server system to the Hong Kong Young Women’s Christian Association.

The case of Loyal Profit highlights one of three important limitations of Hong Kong’s new competition law that distinguishes it from laws in other developed countries:

  • First, there is no private right of enforcement, as confirmed by Loyal Profit.
  • Second, there are no criminal sanctions for breaches of the competition rules – although substantial financial penalties can be imposed.
  • Third, the merger rule is limited to mergers involving companies in the telecommunications sector.

About The Author

James is a senior associate of King & Wood Mallesons based in Hong Kong, specialising in competition/antitrust law and dispute resolution.

Leave a Reply

Your email address will not be published. Required fields are marked *

two + ten =