Dennis Eng – Updated on May 07, 2008 – SCMP
Businesses that engage in price-fixing, bid-rigging, carving up markets, and fixing sales and production quotas will be targeted under the government’s proposed competition law, although exemptions will be allowed.
An independent competition commission with investigative powers, and a separate tribunal, will be set up to give the cross-sector law teeth. Civil penalties can be imposed, with fines of up to HK$10 million.
The government estimates the commission will need about 70 full-time staff and cost between HK$60 million and HK$80 million a year. The tribunal’s annual overheads are expected to be around HK$6 million.
Exemptions and exclusions are to be judged on economic benefits and public interest, like essential medical services. The law does not apply to the government or statutory bodies.
“By setting out a clear and enforceable prohibition against anti-competitive conduct, a competition law can help facilitate a better business environment for companies and protect consumers’ rights for the benefit of all sectors of society,” Secretary for Commerce and Economic Development Frederick Ma Si-hang said.
The focus on the four anti-competitive practices does not mean the proposed law excludes other areas, such as joint boycotts, unfair or discriminatory standards and abuse of dominant position.
Mr Ma’s deputy, Linda Lai Wai-ming, said the commission would determine the economic impact on competitiveness in other cases.
Merger rules have been left out of the proposed law for now. Three options for public consideration are: to adopt a “light-handed approach”; to delay adopting a policy until the effect of the competition law is reviewed; or not to include merger rules but to reconsider the issue after a review of the law.
The government has launched a three-month public consultation on the proposed law. A similar one was held in November 2006.
Government policies on competition have come under increasing scrutiny, highlighted in recent years by the potential for price-fixing by major operators of petrol stations.
However, the prospect of an all-encompassing competition law has polarised the business community. Small and medium-sized firms (SMEs) fear it would lead to higher costs and frivolous lawsuits. There is also a risk that a “catch-all” law would unintentionally include firms that would not necessarily be covered by it. The government says measures are in place to address these concerns, including appointing at least one commission member with SME experience.
Jonathan McKinley, principal assistant secretary for commerce and economic development, said: “Generally speaking, SMEs regard competition law as something that is very positive, something that will help them. We have found very few cases where … private action has been taken against SMEs in any of the major jurisdictions we’ve looked at.”
Key proposals
- A cross-sector competition law to prohibit conduct that reduces competition substantially;
- Actions such as price fixing, bid-rigging, output restriction and market allocation would be considered serious anti-competitive conduct;
- An independent competition commission would investigate anti-competitive conduct, determine infringements and impose remedies;
- A competition tribunal with power to review the commission’s decisions;
- Commission to cost up to HK$80 million a year; initial operating costs of tribunal about HK$6 million a year;
- Commission may impose penalty up to HK$10 million; tribunal may impose even higher penalty – up to 10 per cent of company business turnover and disqualification from directorship for five years;
- Anti-competitive agreements may be exempted if the economic benefits outweigh potential harm;
- Agreement between firms involving aggregate market share of 20 per cent or less would not be pursued;
- Victims of anti-competitive conduct to seek compensation privately;
- Government and statutory bodies exempt from law;
- Chief executive and Executive Council empowered to exempt certain activities