As a business, you are probably a member of a trade or professional body that represents your interests as well as that of other firms in your industry or service sector. These bodies provide valuable services for their members, such as providing a sounding block for proposed regulatory initiatives affecting the sector, coordinating responses from members to such regulatory initiatives, organizing industry events, collating and sharing industry data and information, and so on.
However, because members of these bodies are, by definition, competitors, their participation in such bodies involves certain risks under the Competition Ordinance, for both the bodies themselves and their members. This is particularly the case if such bodies make recommendations to members which might affect their market conduct. A recent announcement by the Hong Kong Competition Commission (“the Commission”) makes this clear.
Commission’s Intervention
On 12 July 2023, the Commission announced that it had approached the Hong Kong Taxi and Public Light Bus Association to stop the Association’s practice of recommending to its taxi-owning members the rental fees that they charge to taxi drivers.1 The Commission believes that, because such recommendations by associations can influence the fees which members charge to customers (in this case to taxi drivers), they potentially restrict competition between members on fees. Such a recommendation by the association could therefore result in it being in breach of the Competition Ordinance. If the members decide to implement the recommendation, they could also be in breach.
In this case, the Association agreed to stop its practice of recommending rental fees to its members, and instead will switch to issuing consolidated quarterly data on past taxi rental fees, in an anonymized format, for members’ reference, thus removing any competition concerns.2
Legal Basis for Intervention
Section 6 of the Competition Ordinance (the so-called “First Conduct Rule”) does not just prohibit agreements between business that have the “object or effect” of harming competition. It also prohibits them, as members of an association of businesses, from making or implementing a decision of the association that has this object or effect.
In its Guideline on the First Conduct Rule (available on the Commission’s website),3 the Commission states: “Where undertakings, as members of an association of undertakings, make or give effect to a decision of the association of undertakings which has the object or effect of harming competition, the undertakings and the association may both incur liability under the Ordinance.” (emphasis added) 4
In the practical, hypothetical example which follows this statement in the Guideline, the Commission makes two other important comments:
• The example concerned a trade association’s recommendation to its members to increase the price of a product by a certain amount. This, the Commission said, was a decision of the association that had the “object” of harming competition contrary to the Ordinance. This meant that there was no need to analyze the actual effect of the recommendation (i.e. what effect, if any, the recommendation had on competition in the market). The mere fact that the association had made the recommendation, and that one or members had implemented it, was enough for all of them to incur liability under the Ordinance.
• The Commission considers that such a recommendation would (because it concerned price) constitute “serious anti-competitive conduct” under the Ordinance. This means that it could bring proceedings in the Tribunal directly against the association (and any members who implemented the recommendation) directly, without giving them the opportunity first to rectify the conduct. It also means that the association, and any of its members which implemented the recommendation, could be liable to high financial penalties and other sanctions, including potential disqualification of directors.
Most, if not all, businesses in Hong Kong know that if they discuss or agree pricing (among other issues) directly with their competitors, this will be treated as a serious breach of the Competition Ordinance and be subject to severe sanctions. This is the case whether or not the discussions take place in the context of a meeting of a trade or professional body. What this case indicates is that, even if the members of a trade or professional body do not discuss or agree pricing issues between themselves directly, but implement a recommendation or decision by the body on pricing, it will be treated as seriously as if the members had agreed the pricing between themselves directly.
Practical Implications
It remains to be seen whether the Commission’s interpretation of the Ordinance, as discussed in the previous section, will be shared by the Competition Tribunal (whose view would prevail over the Commission’s if there was a conflict between them). However, it would be prudent for both associations and their members, in the meantime, to assume for compliance purposes that the Commission’s view is correct. The following practical lessons should therefore be drawn:
• Associations should avoid making any decisions or recommendations which may influence how their members compete with each other, particularly on price. Associations should keep their terms of reference and meeting agendas under review to ensure that this does not happen.
• Members should continue to avoid discussions with their competitors on pricing, or their commercial intentions generally, whether in the context of a trade or professional body meeting or otherwise. If they do receive a decision or recommendation of the body on pricing, or on other matters that might influence their market conduct, they should think very carefully before implementing it, and take legal advice if necessary.
1 Commission Media Release of 12 July 2023, available at www.compcomm.hk.
2 Note 1 above.
3 www.compcomm.hk.
4 At para 2.37.