26 February 2009 Mrs Rita Lau, JP Secretary for Commerce and Economic Development Commerce and Economic Development Bureau 3/F, Murray Building Garden Road Hong Kong Dear Rita,
The Government's consultation exercise on "Detailed Proposals for a Competition Law" conducted in August 2008 has concluded that its welcomes continued dialogue with the community on the way forward to develop the right competition law for Hong Kong. We would like to invite you to come to the Chamber to exchange views with members on a number of issues considered important to our members : Object and Coverage In line with Hong Kong's core "minimalist approach" philosophy, any competition law would not be considered well designed unless there is substantial certainty as to what is permitted and what is not, and as such we are especially keen to clearly identify and define conducts which are viewed to be anti-competitive. Further, as this is a new law that will be refined through case law, we strongly believe that a carefully considered gradual approach in the legislation would ensure a better chance of success. A law which does not spell out in detail exactly which previously accepted behaviours are now prohibited would not be in line with our transparent system of legal certainty. The growing concern in Europe as to possible human rights implications of a too-generic law illustrates well the basis of our concern. For example, the European Court of Justice has held that if general competition prohibitions are applied in a way which is unpredictable (in light of existing case-law), this can amount to a breach of the principle of non-retroactivity under Article 7 of the European Human Rights Convention. This is clearly relevant to Hong Kong, given that the same principle of non-retroactivity is enshrined in our own Bill of Rights and there will be no existing case-law since the Law will be new. We consider it imperative that the public needs to be consulted prior to drafting implementation guidelines, and that such consultation should be provided for in the legislation. The guidelines themselves should be issued by the Government (after consultation) and approved by LegCo, perhaps as an Annex to the Law itself. An appropriately defined market is crucial and it should be noted that markets may extend beyond the geographical borders of Hong Kong. There should be great clarity as to what constitutes anti-competitive activity in the guidelines. Only with proper guidance will market participants be able to assess the effects of their conduct on the market and thus know how to comply with the law. The business community would not expect anything less than a very high level of legal certainty as to where the line between acceptable conduct and illegal activity is to be drawn. Finally, we would like to know how the issue of whistle blowers would be addressed in the law and guidelines. The role of the Competition Commission should be clearly spelt out. We are of the view that its primary task should be as a regulator of anti-competitive behaviour, and not as a broad promoter of competition or consumer agendas. Otherwise, it will lose credibility as an independent body to enforce competition law. Enforcement Structure We understand that recent Hong Kong court judgments may make it necessary for some (if not all) competition cases to be decided by the courts themselves, rather than by the Commission (or Tribunal), as currently proposed. As this would be a fundamental change to the draft proposals, we suggest broader consultation should be carried out before Government finalizes its proposals to be included in the bill. We wish strongly to oppose any suggestion that anti-competitive conduct be criminalized from the outset. This would constitute a grave departure from the original proposal and deviate from international practice. As the law will be new, both businesses and enforcers need to have a reasonable period within which to come to terms with it. Criminalisation of certain conduct should only be considered after the expiry of such a period and in the light of experience with the new law. Exemptions As with any broad, new law, exemptions have to be justified. We believe that in situations where Government acts as a commercial entity, and particularly where it does so in competition with the private sector (as in the case of the Hong Kong Mortgage Corporation), the full law should apply. The principles for exemptions and exclusions should apply across the board, and not be tailored to the convenience of the government own entities. This is the essence of the spirit of rule of law. Our banking community has long urged the Government to clarify the role of the Commission vis-?vis other sectoral regulators, and this is a concept which we strongly endorse. In a case with issues relating to competition and at the same time under the regulation of the Hong Kong Monetary Authority, who would have the overriding power under the Banking Ordinance? There may well be similar cases in other sectors, such as the telecommunications sector, and so a thorough study of possible regulatory conflicts will be necessary before any broad law takes effect. Private Actions There is concern that the concept of representative action might not be workable in the Hong Kong judicial system. Other issues such as stand alone actions would also need to be looked at closely. Merger Control We do not believe there are compelling arguments in favour of a merger control regime in Hong Kong. The proposed law should focus on discouraging specific types of anti-competitive conduct that adversely, and unfairly, affect economic efficiency or free trade. We would like to seek your assurance that there will be no such provision in any draft bill under consultation. For a long time, the Chamber has been a champion of establishing a competition law that is right for Hong Kong. This is even more the case in the current very challenging economic environment. The Government consultation document presented to the Legco Panel on Economic Development indicates the willingness of the Government to conduct a two-way dialogue with the community. We would like to invite you and your colleagues to have a dialogue with Chamber members, to ensure we have a competition law which will not be flawed in a way that would undermine its usefulness and reduce its credibility. The above list is non-exhaustive, but they provide room for further discussion and debate. I hope you understand that we have the same objective as you: to try to arrive at a competition law which is in the best interest of Hong Kong. Sincerely, Andrew Brandler Chairman c.c. Mr Alex Fong, CEO, HKGCC Mr Gregory So, Under Secretary for Commerce and Economic Development Ms Yvonne Choi, Permanent Secretary for Commerce and Economic Development (Commerce, Industry & Tourism)
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