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Policy Statement & Submission

2008/08/15

Public Consultation Paper on "Detailed Proposals for a Competition Law" Comments by the Hong Kong General Chamber of Commerce

2008/08/01

Introduction

1. In the Chamber's response to the government discussion paper romoting Competition "Maintaining our Economic Drive"in February 2007, the Chamber stated that "whether or not a competition law will protect the competitive environment and promote competition relevant to the Hong Kong context will depend on how the law is designed and drafted." The Chamber notes that the detailed proposals for a competition law are now spelled out in the present consultative paper.

2. The Chamber's position remains that we are prepared to consider supporting a competition law if it is well designed in accordance with a minimalist approach, and "if there are enough safeguards to address business concerns and to ensure that it will be pro-market and business-friendly." The present consultation paper has been considered against this long-held position of the Chamber.

3. Our response consists of the following three parts. The first addresses the broad principle and approach to competition law. In the second section, we shall discuss eight general issues on various aspects of the proposed law. The final part lists our comments on the 50 specific proposals in the consultation paper.

Principle and approach

4. The Chamber's position with regard to competition law can be summarized in four words: minimalist law, incremental implementation.

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Minimalist law means the coverage of the law must be restricted to a limited set of anti-competitive behaviour. As stated in our previous paper, "The law should be limited in application. The seven categories of conduct as suggested are reasonable and there is no need to extend to other types of conducts." The "seven categories of conduct" refers to the following behaviours mentioned in consultation paper in November 2006, namely, price-fixing, bid-rigging, market allocation, sales and production quotas, joint boycotts, unfair or discriminatory standards, and abuse of dominant position.

- Incremental implementation is required because not every one of the seven types of conduct is equally well-defined. Hence the law can be made effective in stages, applying first to the most clearly defined behaviours (such as price-fixing and bid-rigging) and giving more time for the regulator to prepare for implementation of the more contentious aspects (e.g. abuse of dominant position).

5. The Chamber will have no objection to a law designed in accordance with the above principle. However, we are concerned that the proposals in the consultation paper lack clarity in objective and coverage, and suggest a possibility of future "regulatory creep". Without clearly defined objective and coverage, there is every likelihood that what may have started off as a sensible policy would in time be expanded and distorted through the political process into a different creature from what was conceived at the outset.

General issues

6. In our view, it is considered as important to get the approach right as it is to consider the fine points of the detailed proposals. In this section we shall discuss eight general issues, namely, object and coverage, thresholds and determinations, merger regulation; penalties, private action, sectoral competition laws, exemptions, and implementation.

(1) Object and coverage

7. According to the present consultation paper, the purpose of the legislation is to "enhance economic efficiency and thus the benefit of consumers through promoting sustainable competition". The behaviours to be regulated will not be specified; instead the law will apply to a generic concept of "undertakings" which are engaged in conducts that have "the purpose or effect of substantially lessening competition". It will be left to the Competition Commission to establish guidelines to illustrate what are the actual conducts to be regulated.

8. The Chamber finds such an approach problematic. Hong Kong is basically a free market where competition is a matter of course among companies. The Competition Commission's primary task should be as a regulator against problematic behaviour, not to promote competition which is usually the task of regulators of specific economic sectors.

9. Besides an objective which we find problematic, we are concerned that the coverage (undertakings with behaviours that substantially lessen competition) is too ambiguous. There would be a huge grey area between "benign" and "bad" behaviours thus giving too much burden on, and discretion to, the Commission and the Tribunal. This is not a matter that can be entirely resolved through illustrative guidelines - it is reasonable for guidelines to be formulated to give practical guidance, but the law itself must be clear before guidelines can be issued.

10. We would prefer that the object of the law be specifically limited to regulating anti-competitive behaviour, which should be specified explicitly in the law. In line with the minimalist principle, the list of behaviours should be specifically limited to the seven types of conduct outlined above.

11. Naming the infringing behaviours in the law will not do away with the need for guidelines. Besides serving an illustrative purpose, the guidelines will help provide a bridge of understanding between the regulator and the market. To ensure that the guidelines are drawn up only after thorough engagement with stakeholders, the need for consultation in drawing up guidelines should be provided for in the legislation.

(2) Thresholds and determinations

12. According to the Consultation Paper, the Commission will have wide powers of discretion to determine:
- thresholds for action: 20% market share to trigger possible action on anti-competitive agreements, and 40% for abuse of dominant position;
- what constitutes anti-competitive behaviours and hence warranting action - in deciding this, the Commission will consider purpose or effect of substantially lessening competition;
- what constitutes "rivolous complaints" and hence not to take action.

13. Insofar as thresholds provide a safe harbour for small businesses, they have our support. On the other hand, they must not be administered in a way to suggest any implication of "big is bad" Whatever the upper threshold is, it should at most be an indicator of possible substantial market power and should not be taken as definitive as other indicators such as relative market share and barriers to entry should also be taken into account. There must not be any a priori assumption of problematic behaviour for companies with market shares beyond the thresholds.

14. It is not clear to us how the levels suggested (20% and 40%) are justified, and whether the same level should apply for every market in every sector. In either case, we would like to emphasise that the "market" must be defined clearly and properly, to enable market participants to assess the effects of their conduct, especially when most Hong Kong-based companies are competing in a market that goes beyond the geographical boundary of Hong Kong and links the Mainland to the world. The definition of market is crucial, but it is an issue which is not adequately addressed in the consultation paper.

15. On determining infringing behaviour, the Chamber has two concerns. First, the "substantially lessen competition" criterion is questionable: a competitive market means precisely that players are trying to "substantially lessen" the role of each other and they should not be punished if they succeed. In the competition policy debate, there is a huge body of literature about the need to focus on market contestability rather than forming arbitrary judgements of allegedly more or less competition. Secondly, the concept of assessing purpose or effect is problematic - while it is reasonable to examine effect and conduct, it goes against common sense to punish people for what is "in their mind" (purpose). It is more reasonable for the criteria to be changed to both purpose and effect.

16. In our view, no single test would work, whether in determining thresholds, infringing behaviour or frivolous complaints. More specific guidelines would be needed to enable the public to understand the standards to be applied, and in some circumstances a case-by-case approach may be required before an across-the-board standard is established.


(3) Merger regulation

17. While the current proposals do not cover regulation of mergers, the consultation paper indicates that the subject may be reviewed in future, and invites views on whether merger provisions should be introduced and if so, when. The options offered in the consultation paper include:
- to introduce merger provisions now;
- to introduce merger provisions but delay enforcement till later;
- not to include merger provisions but to reconsider after a review of the law.

18. To the Chamber, none of above options is acceptable. Our position has long been that if a law were to be enacted, it should be limited to regulating behaviour, not market structure. To introduce merger regulation will violate the principle of a minimalist law. Market structure rules, whether on monopolies or mergers, are simply not needed, whether now or in the future.

(4) Penalties

19. According to the consultation document, the Commission can hand down penalties of 10% of turnover up to $10 million. Penalties beyond $10 million can be imposed by the Tribunal. There seems to be a presumption that the regulatory expertise in competition regulation is readily available in Hong Kong - an assumption which the Chamber is not entirely satisfied with.

20. The Chamber's view is that there should be clear, objective and transparent guidelines to enable the Commission and the Tribunal to determine penalties. Some issues that need to be clarified include:
- how would "turnover" be decided - would it be specific to the infringing behaviour or does it refer to the total turnover of a company;
- the period over which turnover applies, whether it correlates with the period of the anti-competitive behaviour, and if so, whether the penalty would be retroactive, i.e. applying to existing action which would be deemed infringing after the law were in force, and whether there would be grand-fathering arrangement;
- how a "group" comprising several entities will be impacted, e.g. companies under "common control" whether they would be treated as a single undertaking and subject to one penalty or several undertakings each subject to a penalty specific to its own turnover;
- the nature of the fine, whether it would be punitive on the infringer, or compensatory to the aggrieved, or used as deterrent for other players;
- the 10% being the cap, what would be the norm;
- what would be the right of legal representation for defendants in the determination of penalties, since the penalty level might be comparable to those imposed under criminal sanction.


(5) Private actions

21. In common with other jurisdictions, the proposed competition law would allow "follow-on" actions, allowing victims of misconduct to take private action to recover damages. In addition, the consultation paper proposes that "stand-alone" actions be allowed to enable alleged victims to take cases directly to the Tribunal without going through the Commission. For both follow-on and stand-alone cases, representative actions on behalf of groups such as consumers or SMEs would be possible subject to permission by the Tribunal.

22. It is reasonable for aggrieved parties to have the right to seek redress through private action. On the other hand, if there is no certainty that parties taking action are genuinely aggrieved, it may give rise to an abundance of frivolous complaints, as well as inflation of expectations in areas with less clarity or certainty (such as abuse of market dominance). The potential cost of administering private actions should not be under-estimated, as it could seriously tax the priorities and resources of the regulator.

23. In our view, an appropriate balance would be to limit private action to follow-on actions only, with the certainty that an infringement has been established. Stand-alone actions should be excluded. With regard to representative actions, since those currently permitted in Hong Kong are only available in very limited circumstances, for prudential reasons we suggest that their introduction be delayed to a later phase in the implementation of the competition law.

(6) Sectoral competition laws

24. At present there are two sector-specific competition laws on telecommunications and broadcasting. With the enactment of the new competition law, the telecommunications and broadcasting sectors will be subject to one more ordinance which overlaps with existing laws, and market players will have more than one regulator on competition to answer to. This is clearly not satisfactory, and requires careful thinking in achieving regulatory and institutional harmony. The matter is made more complicated by the pending merger of the regulatory regimes in telecommunications and broadcasting. The proposal in the consultation paper is that the overlapping provisions in the telecommunications and broadcasting laws would be repealed, and the Telecommunications Authority and the Broadcasting Authority will share jurisdiction with the Competition Commission over competition matters in these sectors. In other words, there will be two sets of competition provisions, namely, the regulation of conduct rules under the Competition Ordinance (on which the shared jurisdiction applies), and the residual provisions not in the new Ordinance but retained in the Telecommunications and Broadcasting Ordinances.

25. However, to have two regulators on the same competition issues, and two competition laws for the same sector, is structurally problematic. This is recognised in the consultation paper itself, which acknowledges, for instance, that shared jurisdiction "could lead to a situation where the respective regulators might interpret the law differently"(p.49, para 8). Such discriminatory treatment for selected sectors is not justifiable and it diminishes the rationale for an all-embracing competition law.

26. In reforming our competition policy regime, the ultimate objective should be to subsume the competition policy roles of OFTA/Broadcasting Authority into the new Competition Commission, so that all companies should become subject to a single body of competition law under a single competition regulator. OFTA and Broadcasting Authority can and should retain their role as market regulators and overseers of the myriad technical issues relating to telecommunications and broadcasting, but they should over an agreed period of time cede their powers in respect of anti-competitive behaviour.

27. Besides telecommunications and broadcasting, some other sectors are also subject to regulation by their own respective regulatory authorities, e.g. the financial services industries. Although the sectoral regulatory regimes are not necessarily directed towards competition, the introduction of the new cross-sectoral competition law may give rise to issues of consistency between the new law and existing sectoral laws, regulations, and international agreements and obligations. The Competition Commission should recognise that conduct that is required or recommended by sector-specific regulations and guidelines should not be liable to constitute a breach of the competition law.

(7) Exemptions

28. We welcome the provisions for exemptions and exclusions on the grounds of economic benefits, public interest or public policy. In addition, we suggest that there should be an exclusion provision to avoid potential conflict between the new competition law and Hong Kong's legal requirements arising from international treaties or obligations, for example, bilateral aviation agreements entered into by the HKSAR government and other jurisdictions. A clause on "avoidance of conflict with international obligations" would be appropriate.

29. While welcoming exemptions and exclusions, we would express concern about the discriminatory way in which they are to apply between government and the private sector. According to the consultation paper, the future competition law will include a non-application clause for government and statutory bodies. The Chamber's position is that the principles for exemptions and exclusions should apply across the board, i.e. to both the private sector and the government in the same manner. For precisely the reason stated in the consultation paper - that "the activities of the public sector almost invariably would fall under the criteria for exemptions and exclusions"(para 3, p.50) - there is no need to non-apply the law for government and statutory bodies. In most cases, government and statutory bodies would be exempt or excluded as a matter of course, as they provide public instead of economic or commercial services. However, it remains the case that some public sector bodies, albeit a minority, may be engaged in commercial activities and competing in and influencing the market place with other players. There is no reason to exempt these from regulation solely on the ground that they belong to the public sector; to do so would distort the definition of "market" of which the public sector bodies are players.


(8) Implementation

30. The Consultation Paper describes several levels of behaviours which will be regulated, including:
- "hard core" behaviours which are always illegal;
- non-hard core conduct which is infringing only under certain circumstances;
- abuse of dominant market position which applies only to certain players ("dominant" firms) under certain circumstances.

31. The consultation paper has not stated which activities are to be considered "hard core" they will have to be defined by the Commission. However, the consultation paper itself indicates several different possibilities:
- "hard core conduct such as price-fixing or bid-rigging"(para 3, p.44)
- "price-fixing, market allocation and bid-rigging...such 'hard core' conduct" (para 18, p.28)
-"hard core conduct, i.e. price-fixing, bid-rigging, output restriction and market allocation"(para 7, p.45)

32. The lack of consistency even within the consultation paper itself underlines the difficulty in defining clearly the subject matter to be regulated. Even if we were to limit the conducts to the seven types mentioned above, there are varying degrees of clarity in definition, and hence different levels of difficulty in applying the law.

33. In view of that, we would recommend an incremental, phased approach in implementing the law. The experience gained in each phase will help prepare for implementation of the next. According to this incremental approach, the implementation can be carried out in three phases:
- Phase I deals with price-fixing and bid-rigging.
- Phase II deals with other anti-competitive agreements, including market allocation, sales and production quotas, joint boycotts, and unfair or discriminatory standards. The introduction of representative action could also be considered.
- Phase III will tackle abuse of dominant position.

34. Phase I is to deal with price-fixing and bid-rigging, presumably the most "notorious" anti-competitive conducts judging from the way they are presented in the consultation paper. There is also considerable regulatory experience to draw from both internationally and locally (e.g. the provisions against bid-rigging in Sections 6 and 7 of the Prevention of Bribery Ordinance). Even so, there are many tasks to be undertaken before full implementation of Phase I - consultation will have to be conducted and guidelines to be drawn up before they are applied. The regulator will have to accumulate experience in making determinations on infringement or exemption.

35. Limiting the law's application only to the Phase I conducts does not mean giving a free ride to all other behaviours. Other conducts which are less capable of clear definition in advance, and whose economic effects are less clear, could be addressed on a case-by-case basis, and be subject to a cease and desist order (i.e. prohibiting conduct on a prospective basis only) for the future if found to be anti-competitive in the Commissioner's judgement. The cease and desist provisions will thus be useful as an interim measure to help both the regulator and market players build up experience.

36. Phase II would see more conducts added to the list of prohibited practices but the same principles and procedures should be applicable. The introduction of representative actions could also be considered under this Phase. With smooth implementation of the first two phases, the Commission will be in a much better position to proceed to Phase III to tackle issues that are contentious in the international arena.

37. Under Phase III, issues like abuse of dominant position can be dealt with after gathering more international experience. This is needed because of the current lack of clarity as to the concept of abuse, which has been widely acknowledged. In time an effective regime could be established when the ongoing international effort to achieve greater clarity bears fruit. Besides, another challenge is to tackle the possible need for cross-border collaboration, such as joint investigations, given that some regimes may have the authority of imposing criminal sanctions. There is no need to rush into implementation of these complicated issues, for which the implications must be examined carefully.

Specific proposals


 
Proposal (from consultation paper) Chamber comments
Objective 1. The objective of the Competition Ordinance should be to enhance economic efficiency and thus the benefit of consumers through promoting sustainable competition. The objective should be more specifically stated and limited to economic efficiency, but specific types of conduct should be addressed rather than the generic concept of "substantially lessening competition". The conduct to be regulated should be limited to seven types of anti-competitive behaviours, namely, price-fixing, bid-rigging, market allocation, sales and production quotas, joint boycotts, unfair or discriminatory standards, and abuse of dominant position.
Definitions 2. The following are examples of terms that might be defined in the ordinance: "Board", "Commission", "conduct rules", "horizontal agreement", "leniency programme", "representative action", Tribunal", "undertaking", "vertical agreement".
Two-tier system 3. An independent Competition Commission in the form of a body corporate should be set up to enforce the new competition law. The Commission should have a "two-tier" structure, with an appointed board of Commission members overseeing a full-time executive arm. This is broadly in line with the Chamber's established view of a simple institutional structure, with some form of checks and balance.
  4. The Commission should have a minimum of seven members, including a Chairman, appointed by the Chief Executive. At least one Commission member should have experience in SME matters. The actual number of Commission members appointed could be more than the minimum required so as to ensure that there was a sufficiently large "pool" of members to allow for the efficient conduct of the Commission's business. We welcome the SME representation. Instead of "at least one" member, the representation should be expressed in such a way to require the Commission to have "members (plural) who have experience in SME matters", to enable a reasonable proportion of members with SME experience to be appointed to the Commission.
Powers and functions 5. The Commission should have the power to investigate, determine and apply remedies in respect of infringements of the conduct rules under the competition law. This is reasonable for a regulatory body.
  6. The Commission should have other functions directly related to the objective of the competition law, including educating the public and business about the competition law and promoting compliance programmes. Agreed. There are other aspects of competition policy in which the Commission should have a role, but its primary function should be limited to regulating defined conducts.
Investigation and adjudication 7. The Commission should be able to commence an investigation either of its own initiative or in response to a complaint. It should be able to exercise its formal investigative powers when it has reasonable cause to believe that an infringement of the conduct rules has taken place.
8. The Commission should have the power to require a person, by notice in writing, to provide information and produce documents that it considers relevant to an investigation or to appear before the Commission to give evidence. The Commission should also have the power to conduct a physical search of premises if so empowered by a warrant issued by a magistrate.
9. There should be a formal separation within the Commission between the investigation and adjudication of infringements, through the establishment of an Investigation Committee, which is to be responsible for conducting the investigation. The Investigation Committee will be chaired by a Commission member who will not then participate in the decision on the complaint in question.
10. A Commission member who in any way, directly or indirectly, has interest in a matter being investigated by the Commission should be required to disclose the nature of his or her interest. The relevant member should thereafter not take part in any deliberation or decision of the Commission with respect to that matter.
The Chamber supports a passive and light-handed regulatory approach, with the regulator acting on complaints rather than be a pro-active enforcer.
Notification 11. Before the Commission makes a determination of infringement of the conduct rules, it should first notify the party concerned of the material facts and particulars of the conduct and its considerations in making such a determination. The party should be given the opportunity to provide information or documents and make submissions that it considers are relevant to the case, which the Commission should be required to take into account. This stands to reason.
  12. The Commission should have the power to enter into binding settlements with a party under investigation. It is the Chamber's established view that it would be reasonable for the authority to have the power to reach settlement with the potentially guilty party to provide flexibility and enable efficiency."
Confidential information 13. Confidential information provided to the Commission by complainants or persons under investigation, or acquired by the Commission using its formal investigative powers should be protected under the law. Concurs with the Chamber's established view.
Oversight and reporting 14. The Commission should keep proper accounts and records of transactions, and prepare financial statements which give a true and fair view of its financial status. 15. The Commission should furnish an annual report to the Secretary once a year. The Secretary should table this annual report in the Legislative Council no later than six months after the end of the previous financial year. A reasonable provision which has the Chamber's support.
Functions 16. A Competition Tribunal should be established to hear, among other things, applications for review of the decisions of the Commission and private actions under the competition law. The Chamber has no objection; this will provide for some checks and balance in the institutional structure.
Membership and proceedings 17. Tribunal members would be either "judicial" members (i.e., judges or former judges), or "non-judicial" members with expert knowledge of economics, commerce or competition law. One of the judicial members would be the President of the Tribunal. Both the President and other judicial members would be appointed by the Chief Executive on the recommendation of the Chief Justice. Non-judicial members would be appointed by the Chief Executive.
18. When hearing reviews, the Tribunal should sit as a three-member panel, chaired by a judicial member, and comprising at least one non-judicial member with expertise in economics. The Tribunal should have the power to review cases on their merits on the same evidence as was before the Commission, and should have the power to admit new evidence if it considers this appropriate.
19. The Tribunal should possess the necessary powers for discharging its functions effectively and efficiently. The Tribunal proceedings should be conducted as informally and expeditiously as possible. The Tribunal should not be bound by rules of evidence.
This stands to reason.
Rights to seek review 20. Any person aggrieved by a determination by the Commission should have the right t o seek a review by the Tribunal of the determination, including the penalty imposed by the Commission.
21. The Tribunal should have the power to decide whether or not to suspend a Commission decision before determining a review application.
22. An appeal against a decision of the Tribunal should be available. Such an appeal should be heard by the Court of Appeal and should be limited to points of law or any remedy applied in respect of an infringement, including the amount of any fine.
This stands to reason.
Application 23. The conduct rules should apply to "undertakings", which may be defined as individuals, companies or other entities engaging in economic activities. "Undertakings" only refer to the parties being regulated. It is important to be specific on what behaviours they are being regulated for.
Prohibition: anti-competitive agreements 24. There should be a general prohibition on agreements and concerted practices that have the purpose or effect of substantially lessening competition. The Chamber view is that both purpose and effect should be taken into account when determining whether a particular anti-competitive conduct constitute an infringement.
25. The Ordinance should not give a list of examples of anti-competitive agreements. However, the Commission should be required to issue guidelines that would give examples of the types of conduct that would commonly be considered anti-competitive. We would prefer that the conducts to be regulated be specified clearly in the Ordinance, and be limited to the seven types mentioned above. Guidelines should be issued to serve an illustrative purpose but not to define the conducts to be regulated.
  26. The focus of the prohibition on agreements should be on horizontal agreements. Vertical agreements should only be addressed in the context of abuse of substantial market power. Agreed.
Prohibition: abuse of substantial market power 27. There should be a general prohibition on an undertaking that has a substantial degree of market power from abusing that power with the purpose or effect of substantially lessening competition. While agreeing that abuse of dominant positions should be regulated, this is a contentious area which could be implemented later under an incremental phased approach, when enough regulatory experience and international consensus has been achieved. In any case, in the determination of infringing behaviour, both purpose and effect should be taken into account.
Conduct to have purpose or effect 28. There should be no per se infringements and the Commission would be required to conclude that conduct had the purpose or effect of substantially lessening competition before it could determine that an infringement had taken place. Again, both purpose and effect should be taken into account when determining whether a particular anti-competitive conduct constitute an infringement.
Penalties 29. Infringement of the conduct rules should be subject to civil, but not criminal, penalties. Fines of up to $10 million could be imposed by the Commission. More serious penalties, including higher fines and disqualification from holding a directorship or a management role in any company for up to five years, could be imposed by the Tribunal, on application by the Commission. The Chamber strongly agrees that only civil penalties should apply. On the level of penalties, there must be clear, reasonable and transparent guidelines on how penalties are determined.
Power to make directions 30. The Commission should have the power to make such directions as it considers appropriate to -

a) bring the infringement of the conduct rules to an end
b) eliminate the harmful effect of such infringement
c) prevent the re-occurrence of such infringement.
This stands to reason.
31. On application by the Commission, the Tribunal should have the power to make an interim "cease and desist" order before a decision is made on whether conduct constitutes an infringement. Agreed.
Leniency programme 32. The Commission should introduce a leniency programme, under which a party to a prohibited agreement that comes forward with information that is helpful to an investigation may have any subsequent penalty waived or reduced. We support a leniency programme, which may help positively in the law's enforcement.
Right to take private action 33. Parties should have the right to take both "follow-on" and "stand-alone" private action. The Chamber supports the right only to take follow-on action. Allowing stand-alone actions may give rise to frivolous complaints and impose pressure on the resources of the regulator which should otherwise have been used to investigate genuine cases of concern.
Standing of a party intending to take private action 34. Any person who has suffered loss or damage from a breach of the Ordinance should have the right to bring private proceedings seeking damages. Agreed but this should be limited to genuine and proven cases only, i.e. to follow-on actions.
Hearing of private cases 35. Private cases that involve only competition matters should be heard solely by the Tribunal. 36. For "composite" claims that involve both competition and non-competition matters, the courts should have the power to transfer competition matters to the Tribunal for determination. When a court decides that it would hear a composite case in full, it would have the power to apply remedies in respect of all aspects of the case, including matters related to the competition law.
Safeguards against excessive litigation 37. The Tribunal, of its own motion or on application by a party or the Commission, may strike out any action which the Tribunal considers to be without merit or vexatious. There should not be a need if private action is limited to follow-on actions only. But in any case, the Tribunal should always be able to strike out frivolous cases.
  38. Where a matter is being investigated by the Commission and a third party commences a private action on the same matter, the Tribunal may adjourn the private case pending the outcome of the Commission's investigation if the Tribunal considers that the matter would be better handled by the Commission. There should not be a need if private action is limited to follow-on actions only.
Intervention by Commission 39. With the agreement of the Tribunal or the courts, the Commission may intervene in any private proceedings relating to a contravention of the competition conduct rules. To maintain the light-handed regulatory approach, there should be a high threshold by the Tribunal or the courts before approving an unsolicited intervention by the Commission.
Representative actions 40. With the permission of the Tribunal, representative actions, such as on behalf of consumers or SMEs, should be permitted. In granting such permission, the Tribunal must have reached the view that the representative can fairly and adequately represent the interests of the parties concerned. This stands to reason. However, given the limited provisions for representative actions currently in Hong Kong, for prudential reasons their introduction should be delayed to a later phase in the implementation of the competition law.
Scope of remedies 41. The Tribunal should have the power to apply the following remedies in cases of stand-alone private action -
a) injunction or declaration
b) award of damages
c) termination or variation of an agreement
d) such other relief as the Tribunal deems appropriate
This appears reasonable for a regulator.
Reference to leniency programme 42. Any leniency granted to a party by the Commission should have no impact on rights of private action. Information provided to the Commission by a party granted leniency should not be discoverable in private proceedings. This stands to reason.
Market share threshold 43. The Commission should be required in its guidelines to clarify that it would not pursue an agreement where the aggregate market share of the parties to the agreement did not exceed a certain level, except where "hard core" conduct was involved. The guidelines should give clear examples of what would be considered "hard core" conduct. This would be welcomed by SMEs but there should be thorough consultation in setting the guidelines and determining thresholds. The "market" must be defined clearly and properly, taking account of the fact that some companies are competing in a market that goes beyond the geographical boundary of Hong Kong.
Sectoral regulations: telecom and broadcasting 44. The Competition Ordinance should apply to all sectors, including the telecommunications and broadcasting sectors. The competition provisions in the Telecommunications and Broadcasting Ordinances that duplicate those in the Competition Ordinance should be repealed.
45. The Telecommunications Authority and the Broadcasting Authority should share with the Competition Commission jurisdiction over competition matters in their respective sectors.
To have two regulators on the same competition issues, and two competition laws for the same sector, is discriminatory and structurally problematic. If it were necessary as an interim measure, over time the aim should be to subsume the competition policy roles of OFTA/Broadcasting Authority into the new Competition Commission, so that there will only be one competition regulator with one competition law. OFTA and Broadcasting Authority should retain their role as market regulators and overseers of the myriad technical issues in the respective sectors. Besides telecommunications and broadcasting, there should be consistency between the new competition law and other sectoral regulatory regimes as well. The Competition Commission should recognise that conduct that is required or recommended by sector-specific regulations and guidelines should not be liable to constitute a breach of the competition law.
Exemptions on grounds of economic benefits 46. An agreement may be exempted from the prohibition on anti-competitive agreements if it yields economic benefits that outweigh the potential anti-competitive harm. A party to an anti-competitive agreement may apply to the Commission for an exemption if it has grounds to believe that such an exemption should be granted. The exemption and exclusion provisions are welcomed. In addition, there should be an exclusion clause to avoid potential conflict with international obligations.
Block exemptions 47. The Commission may issue a block exemption in respect of a category of agreement that is likely to yield economic benefit that outweighs any anti-competitive harm.
Exclusions on grounds of public interest 48. The conduct rules should not apply to any undertaking entrusted with the operation of services of general economic interest, such as essential public services of an economic nature.
Exclusion on public policy grounds 49. The Chief Executive-in-Council may exclude conduct from the prohibition on anti-competitive conduct if he considers that there are sound reasons of public policy for so doing.
Non-application to government and statutory bodies 50. The conduct rules should not apply to the Government or statutory bodies. The Government would conduct a review of the issue in the light of actual experience in implementing the competition law. The exemption and exclusion clauses should not be discriminatory between the public and private sectors. Public sector entities engaged in commercial activities should also be subject to the same regulation under the same criteria.

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