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Competition Bill Needs to Reflect Characteristics of Our Economy

The Hong Kong General Chamber of Commerce supports the introduction of a competition law in Hong Kong, provided that it is tailored to meet Hong Kong’s unique circumstances, is sufficiently clear, and does not impose an unnecessary burden on Hong Kong’s dynamic economy. HKGCC feels that the Bill currently before Legco does not meet these criteria.

Since it was introduced last October, the Bill has generated a lot of discussion in the community, with the key concern being on the lack of clarity. The Chamber feels that in its current draft, the Bill has a number of serious deficiencies which could adversely affect and weaken Hong Kong’s competitiveness. Specifically:

Lack of clarity and huge uncertainties: The ‘general prohibition approach’ modeled after the EU gives rise to huge uncertainties, because it does not state what specific conduct will be prohibited. Companies are also concerned about compliance and legal costs of unknown regulations.

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, cannot be 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 grave concerns. Companies worry that private actions, in particular stand-alone actions, may open up a floodgate for claims and other legal actions.

Hong Kong SMEs worry that the regulation will jeopardize their interests. Their concerns are reasonable, and the Government must take these seriously and find solutions to put their worries at ease. The Chamber has already proposed a solution, which would at the same time achieve the objective of prohibiting anti-competition practices.

We believe the competition law in Hong Kong should only prohibit ‘hardcore conduct’ which can be clearly defined and which substantially lessen competition, namely price fixing, bid rigging and market sharing.  For non-hardcore conduct which is difficult to define or needs intensive study, no matter whether it is under the First or Second Conduct Rule, we suggest using an administrative review procedure. This approach does not prohibit non-hardcore conduct in principle from the outset, but to prohibit it only if and when the Tribunal has ruled, after careful examination, that the conduct produces substantial harm to competition is not outweighed by its efficiencies. In practice, a business would be given the opportunity to amend or terminate the conduct before the matter reached the Tribunal.  Penalties would apply if the conduct continued after the Tribunal had ordered the business to stop.

This solution is advisable as the law enforcement agency would not take legal action immediately when there is lack of a clear legal definition for certain conduct. Companies which inadvertently contravene the law because of a lack of clarity of the law will have a chance to correct the undesirable behaviour.

The Chamber believes the ultimate goal of a competition law is to enhance market competitiveness and outlaw anti-competition practices. However, our competition law should be based on the premise that the approach is minimalist, and that the regime will ensure fairness, transparency and certainty, so that our economy may remain flexible to market changes and attractive to the global business world.

Posted on 2011/09/15