Businesses seeking to control their salary and other employee-related costs through discussions with other businesses are at risk of committing a serious infringement of the Competition Ordinance (CO), according to guidelines issued recently by Hong Kong’s Competition Commission.
The Commission’s rationale is that businesses compete in the market for labour, even if they supply different products and services. The CO prohibits competitors in the supply chain from discussing commercially sensitive information such as prices and discounts, or agreeing them. Conversely, the Commission believes that competitors for employees should not discuss commercially sensitive information such as salary costs and benefits, or agree on them. No-poach agreements- whereby businesses agree not to hire each other’s employees- fall into the same category.
Moreover, the Commission goes as far as to suggest that such discussions or agreements will be treated as “serious anticompetitive conduct” under the CO, meaning that:
Does this mean that industry benchmarking of salary costs is also prohibited? Not necessarily. The nearest the guidelines come to giving a safe harbour in this respect is to say that:
“If the [industry] association and its members decide to proceed with a survey to benchmark compensation and benefits, it should be designed to minimise the risk of contravening the Ordinance. For example, this could be achieved through the appointment of an independent third party that will collect historical data from the members of the association, collate them and distribute or publicise them in an aggregate and anonymised form.”
So what should businesses do to protect themselves against the risk of breaching the Ordinance through such discussions or agreements? If you have not done so already, it would be wise to review with your HR colleagues the extent of any discussions or agreements with other organizations on these matters, and take legal advice on whether they are permissible under the CO.
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