Hong Kong’s Competition Policy Advisory Group (COMPAG) recently released its 2008/2009 annual report, which includes an outline of complaints that it has received and monitored over the past 12 months relating to alleged anti-competitive practices in Hong Kong, as well as an update on preparation for introduction of the region’s first cross-sector competition law in the coming 6-7 months.
The Hong Kong government established COMPAG in December 1997, and charged it with establishing a high-level and dedicated forum for review of competition-related cases which had substantial policy or systemic implications for Hong Kong. A major part of COMPAG’s work is the handling of competition-related complaints from the public or business sector, although it does not have any substantive investigation and enforcement powers - reflecting the fact that Hong Kong lacks cross-sector competition legislation, and instead simply has a broadly worded competition policy statement encouraging avoidance of anti-competitive conduct but lacking the force of law.
Upon receipt of a competition-related complaint, COMPAG commonly refers the key issues raised in the complaint to the appropriate government bureau or department for follow-up investigation. It then monitors the progress of such investigation before publishing details on case outcomes (as well as making additional, non-binding recommendations to the parties concerned, or the government, where it deems this appropriate).
Details of recent case outcomes and any related recommendations appear in COMPAG’s annual reports, the most recent of which was published on 8 December 2009 and covers the period 1 July 2008 to 30 June 2009.
Complaints regarding alleged anti-competitive practices monitored by COMPAG
According to its latest annual report, COMPAG handled seven complaints during the relevant 2008/2009 period, only one of which was substantiated. A brief summary of three representative complaints and the relevant investigation outcomes is set out below.
(i) The Hong Kong Container Depot & Repairer Association Limited (HKCDRA)
This complaint was made by the Hong Kong Shippers Counsel (HKSC) against the Hong Kong Container Depot & Repairer Association Limited (HKCDRA) regarding the collective imposition of a Depot Management fee by the members of HKCDRA. COMPAG referred the complaint to the Transport and Housing Bureau, which found HKCDRA had engaged in anti-competitive price-fixing. The finding was based on three key factors: firstly there were evidence showing it was a collective pricing decision made by the members of HKCDRA; secondly no specific improvement measures were proposed by HKCDRA which supported the imposition of the fee; and thirdly the shippers did not have the option to switch to other depots. As a result of the finding, the Transport and Housing Bureau has written to HKCDRA urging its members to cancel the fee.
(ii) An internet auction service provider
A complaint had been made against an unnamed internet auction service provider which allegedly abused its dominant market position to unilaterally impose conditions restricting the display of sellers' contact information on its website. The complaint was referred to the Office of the Government Chief Information Officer, which considered that while the service provider might be in a dominant market position in providing on-line auction services, there was no evidence to support the allegation that the provider's terms and conditions with respect to the display of the sellers' contact details amounted to an abuse of market power or reduced competition in the market for on-line auction services. COMPAG agreed the complaint was not substantiated but noted in its annual report that the alleged behaviour might be caught under the proposed cross-sector competition law.
(iii) A domestic pay TV licensee
Another complaint concerned alleged practices adopted by a pay TV licensee in preventing its subscribers from terminating their service and transferring to other pay TV services in breach of sections 13 or 14 of the Broadcasting Ordinance. According to COMPAG’s annual report, this complaint is still being investigated by the Broadcasting Authority.
Preparation of the Competition Bill
In addition to summarising the outcome of investigations into recent complaints it has received, COMPAG's latest annual report confirms that the Hong Kong government is continuing preparations for introduction of a new Competition Bill into Hong Kong’s Legislative Council by the end of June 2010.
From information in the report, and recent statements by Hong Kong government representatives, it is understood that certain aspects of the Competition Bill have changed significantly since the Hong Kong government published draft proposals relating to it in May 2008. In particular, it is understood the role of the proposed new Hong Kong Competition Commission will be limited to investigation and prosecution of cases (not adjudication of cases, as previously proposed) and the Bill will include a schedule listing specific statutory bodies who will be carved out from an otherwise broad exemption for statutory bodies under the proposed law.
It is expected that further details on the contents of the Competition Bill will be revealed by government representatives in the months leading up to the bill's introduction into the Legislative Council.
Key Points to Note
It is clear that the Hong Kong Government is committed to introducing the long-awaited cross-sector Competition Bill during the 09/10 legislative session. In the lead-up to this event, it is expected the awareness of competition issues among the business community and consumers in Hong Kong will continue to grow - and that the volume of complaints handled by bodies such as COMPAG may rise as a result.
Even if there is a formal 'grace' or 'transition' period after passage of the Competition Bill and before its commencement (as is widely anticipated), it will be prudent for business operators in Hong Kong to look at taking steps now to reduce the prospect of their conduct being the subject of complaints and public scrutiny. This will assist to avoid the risk of substantial brand damage and future attention by competition regulators that could arise where a business is found to have engaged in anti-competitive conduct in breach of the government's current competition policy.
For inquiries related to this Client Alert, please contact:
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Gerry O'Brien (firstname.lastname@example.org)