Circulars

2011/04/18

Competition Bill: What Next?

Dear Members,

Since the Competition Bill was introduced to the Legislative Council last year, members will have noted that there has been a lot of discussion in the community on this important subject, which will have far reaching ramifications on business environment in Hong Kong. As you will recall, the Chamber has long been supporting a good competition law,one which is basedon the premise that the approach is minimalist, and that the regime will ensure fairness, transparency and certainty.  Unfortunately, the Bill now placed before LegCo, is not one which we can subscribe to.

So far the Chamberhas been working with our like-mindedallies(including other chambers and legislators) in drawing the community’s attention to improve on the following key deficiencies in the Bill:

Lack of clarity and huge uncertainties: The general prohibition approach modelling after the EU gives rise to huge uncertainties as to what specific conduct will be prohibited, and concerns about compliance and legal costs;

Impact on SMEs: The concerns about the potential impact on SMEs, arising mainly out of the lack of certainty of the Bill’s key provisions cannotbe ignored or dismissed lightly;

Penalty: The maximum penalty of 10% of a company’s global turnover for each year of infringement is a major issue;

Private actions: The possibility of private actions against companies has caused deep concerns.  The worry is that private actions, in particular stand-alone actions, may open up a floodgate for claims and other legal actions.

We believe that through our lobbying work, some traction has been gained on the above areas of concerns.  However, we are still deeply concerned about insufficient progress, in particular in respect of the following aspects.  

Providing clarity to the Conduct Rules: The Government has yet to give any satisfactory response tothe real issueat stake, which is not whether Hong Kong should have a competition law, but what kind of competition law Hong Kong should have. The Government has not addressed at all the various constructive proposals for improvement of the Bill which numerous stakeholders, including this Chamber, have put forward to the Bills Committee.Despite the serious concerns about the lack of clarity and huge uncertainty, the Government’s position remains that the details about interpretation and enforcement of the competition law will be left to the future Competition Commission.  The Chamber and some experts have clearly and repeatedly pointed out the significant problems the EU has experienced in adopting a similar model.  We need to be particularly vigilant of the notion of relying on “future guidelines“, especially in view of what we have seen on how the Government have recently approached the development of reference guidelines for the implementation of the Minimum Wage Ordinance.

Addressing concerns of SMEs:Officials are still dragging their feet in coming up with concrete proposals for addressing SMEs’ concerns, though officials have mentioned that they have been considering a de minimis approach, but without detail.  SMEs’ worries cannot be dismissed as unfounded.

Amending the penalty provisions:Officials continue to insist that the year-on-year 10% global turnover penalty clauseis needed to maintainsufficient deterrent so as to prevent major multinationals from abusing their market power in Hong Kong. The case on why Hong Kong would need the most stringent penalty in the world for our competition law has yet to be made.

The Chamber will keep pressing and advocating for amendments to the Bill as we continue todirectly engage officials and legislatorsduring the Bills Committee stage of the legislative exercise.  Apart from such direct lobbying, we will continue to make our views known through the media. Over the coming months, we will focus on the following approaches in pressing for amendments to the Bill:

Press for changesto clarify and remove uncertainties regarding the fundamental issues: The Chamber will continue todraw the community’s attention to our positions by providing inputsto the Government, legislators and stakeholders, in particular in respect of the basic regulatory model that Hong Kong should adopt for its competition regime.  Your Chamber has made a specific proposal which, with minimal amendment to the Bill’s text, would significantly alleviate the unnecessary burden that the current draft would impose on all businesses, including the SMEs, whilst at the same time meeting the Government’s objective of stopping genuinely harmful conduct.  We strongly believe that our proposal, taking reference from Canada’s competition law, represents an effective solution to most of the main issues raised by stakeholders, including but not limited to the certainty issue and SME concerns.  We will continue to focus on this fundamental issue in our advocacy and engagement work, while at the same time maintaining our efforts on the penalty clause and other specific issues.

Enhancing dialogue on specific recommendations: We will enhance our efforts on engaging different stakeholders with a view to working on the actual solutions to the key issues and, more importantly, detailed amendments to the Bill.   We will do so through open forums, continuous discussions at all levels and media advocacy. 

Work withour allies: We believe that SME concerns are real and are shared by many stakeholders and members of the public.  We will work with our allies to build common positions and present proposals to the Government and legislators.

We hope this letter will give you a better idea of the approach the Chamber is taking to deal with the issues about the current Bill.  The Chamber shall look to you for your continuous support andinputsas we press for the amendments we wish to see to the Bill.

Yours sincerely,

Anthony Wu
Chairman

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