The Hong Kong government appears set to introduce its long-awaited competition law into the Legislative Council by mid-July 2010, according to newspaper reports. This follows previous indications by government representatives that the law would not surface in time to meet the previously announced schedule of introduction in the current 2009/2010 legislative session - the most recent of several delays since the government firmly committed to introducing such a law in 2007.
Hong Kong's Commerce & Economic Development Bureau (CEDB) has not formally confirmed the reports, however if they are correct then the most likely timeframe for passage of the bill will be after the Legislative Council resumes in October 2010 following the annual summer break.
To date, there are no indications that the content of the proposed bill has changed substantially since the government's proposals were articulated in a consultation paper published in May 2008 and several planned refinements were subsequently announced in September 2009. These proposals are summarised in our Legal Updates linked here and here, and include:
- a general prohibition on anti-competitive agreements and concerted practices that substantially lessen competition (which in addition to addressing cartel-type conduct, could also potentially be used as a basis to challenge certain M&A deals on an ex post basis in the absence of a pre-merger notification regime), and a general prohibition on the abuse of a substantial degree of market power;
- a general exemption from the law for the government, and 'block exemptions' for specified categories of agreement or conduct that are believed likely to yield economic benefits outweighing their anti-competitive harm;
- a judicial enforcement model, with a new Competition Commission to conduct investigations and prosecutions (and implement block exemptions), and a Competition Tribunal to be charged with deciding cases in this area, and empowered to impose fines, grant injunctions and disqualify directors involved in relevant violations;
- retention of the existing sector-specific competition regimes applicable to Hong Kong's broadcasting and telecommunications sector; and
- allowance for "follow-on" and "stand-alone" private actions by parties who had suffered loss or damage as a result of another's contravention of the law.
In the most recent of those alerts, we noted that the government's delay in introducing the bill was in-part due to ongoing debate and review regarding the extent to which statutory authorities should be subject to a general competition law. Over the last six months, CEDB has coordinated a review of the powers and functions of hundreds of statutory bodies that exist in Hong Kong, with government representatives indicating that only statutory bodies meeting specific criteria will benefit from a total exemption, with the remainder subject to the proposed law insofar as they engage in commercial economic activities. The latest reports suggest that this review is near completion, and that most statutory bodies will benefit from the broad exemption. Further, it is understood that those bodies who have not qualified for the exemption will also be able to appeal to the Executive Council on this point. To read more about the debate on application of the proposed law to statutory bodies, see our report here.
With Hong Kong firmly on the course to introduction of a general competition law, it is important that businesses operating in (or selling into) Hong Kong ensure that they prepare for compliance. Although full details of the bill remain to be published, it is clear that activities such as cartel-style collusion and 'abuse' by businesses of any substantial power they hold in particular markets (such as activities aimed at restricting new entry to the market or the legitimate expansion of competitors) will be prohibited. As these types of prohibitions are common to competition laws around the world, and the wording of Hong Kong's bill is likely to be substantially modelled on analogous laws in jurisdictions such as the European Union and Singapore, clear and practical guidance on how to maximise compliance and reduce the risk of future regulatory investigations can now be provided to businesses - to help them ensure that deals and trading arrangements implemented now do not need to be revisited or abandoned once the new law takes effect.
Businesses interested in learning more about the forthcoming law, and the appropriate steps to take to prepare for compliance, are invited to contact Mayer Brown.
For inquiries related to this Legal Update, please contact:
John Hickin (firstname.lastname@example.org)
Hannah Ha (email@example.com)
Gerry O'Brien (firstname.lastname@example.org)