Mr Alex Fong
SCMP (17 March 2011)
In light of a near stalemate in the legislature over the proposed Competition Bill, the government has stepped up its efforts to promote it. But the support of officials and academics for the bill as it is currently drafted ignores the real issue, which is not about whether Hong Kong should have a competition law, but what kind of competition law.
One fundamental problem is that the government's proposed law is based largely on the European Union model, which raises serious concerns about its lack of clarity. The current bill - like the EU law - proposes to impose general, widely framed prohibitions on agreements and "abuses" that "prevents, restricts or distorts competition", without specifying what they are or what these concepts mean. The government said that European case law can be used for guidance, but, as officials should know, EU competition case law is notoriously unclear in a lot of areas.
Officials have also repeatedly said the guidelines to be issued by the future competition commission will provide the necessary details. But, as European precedents have shown, commission guidelines cannot resolve the intense economic debate that continues over certain types of conduct.
The reality, as borne out by the European experience, is that, under the current bill, businesses will have to assess whether their conduct today could be judged in the future to have fallen foul of the rules, at a time when the authorities could scrutinise the conduct in question with hindsight and data that businesses could not possibly have when they engaged in the conduct.
Businesses will have to try to guess which way the commission will lean on the economic evidence, against the background of intense debate and differences of opinion between experts about what is and is not anti-competitive. This is the inherent problem with European-style general prohibitions.
Even the EU is realising now that a lack of predictability in competition law as to which conduct is legal is inconsistent with the European Convention on Human Rights, which Hong Kong courts use as a benchmark in interpreting the Basic Law. The government appears to have overlooked this fact.
To help resolve the impasse, the Hong Kong General Chamber of Commerce has put forward an amendment to the bill that provides greater legal certainty, while meeting the government's objective of preventing economically harmful conduct. It is based largely on a recent amendment to the Canadian competition law, and requires relatively little change to the bill.
Canada distinguishes between "hard core" conduct and all other potentially anti-competitive conduct. It specifically prohibits hard core conduct, which includes horizontal agreements to fix prices, bid-rigging and market sharing. (Though Canada's competition law provides for criminal sanctions, the government and most stakeholders in Hong Kong have agreed that its competition law should not be criminal in nature.)
As for other conduct that cannot be defined in advance, if it causes economic harm in the future, Canadian authorities will assess it only through an administrative review. Businesses may choose to amend or terminate their conduct after negotiation with the regulator, or they can choose to argue their case in the tribunal, which may result in a "cease and desist" order if they lose. Only breach of the order would trigger sanctions.
As some experts have pointed out, the economic paradigms on which the competition policies of big economies such as the EU are based do not necessarily apply to small and open market economies like Hong Kong's. The competition law that we choose for ourselves must be certain, fair and cost-efficient.
In this regard, Canada's approach has clear merits over the current bill - businesses will not have to take the risk of acting illegally or incurring penalties as a result of a wrong judgment about a conduct's effects on competition, and the government will achieve its purpose of stopping economically harmful behaviour in the market. It is a win-win formula.
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