Clear The Air News Tobacco Blog Rotating Header Image

May 7th, 2008:

Price-Fixing, Bid-Rigging Will Be The Major Focus

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

View on Competition Law

A letter sent by James Middleton of Clear The Air to in response to the Views Sought On Competition Law article posted on the Business and Finance site.

Dear Sir,

Consultation on Competition Law – we read that the current proposals include the usual Government let out.

“Government and statutory bodies exempt from law”

No Government should be and must never be above the Law.
They should be the example, not the exemption.

The Government should ensure its laws and policies are fair and just before enacting them.
If they enact policies which are unfair and anti competitive they should be liable to to tasked accordingly. The same applies to the Race Discrimination laws where they sought to exclude Government from liability and which has been queried on high from afar as well as by local legislators.

A perfect example is the current debacle created by Government to appease the Liberal party with the smoking exemptions for ‘Qualified Premises’.

In the UK in the lead up to their smoking ban last year, the House of Commons report discussed the possible options by way of allowing exemptions to the new laws for specific premises . The public and the Catering Trade unanimously agreed that a level playing field was required whereby all licensed premises would be subject to the ban.

In Hong Kong the Government has unfairly allowed exemptions to premises choosing to bar the entry of U-18s to the licensed premises. This has created an unfair competition between those premises choosing to follow the new anti smoking laws here and those who took the freely available exemption. The proposed use of “A cross-sector competition law to prohibit conduct that reduces competition substantially;” seems prima facie already to have been broken in this example.

The Government should be held responsible for instigating such an unfair trading advantage whilst at the same time ignoring the workers who are being killed by passive smoke. They have usurped their Duty of Care to their workforce and should be held accountable, not exempt from current and any future laws they intend to mess with to suit political compliance.

yours faithfully,

James Middleton
Clear the Air

Views Sought On Competition Law

Business and Finance – 6th May 2008

A three-month consultation on the proposed new competition law for Hong Kong has been launched. Secretary for Commerce & Economic Development Frederick Ma says such a law can help facilitate a better business environment for companies and protect consumers’ rights, for the benefit of all sectors of society.

Mr Ma said the Government is looking forward to receiving the public’s views on the proposed framework before finalising the Competition Bill for introduction to the Legislative Council in the 2008-09 legislative session.

“Introduction of the new law will help us to more effectively implement our competition policy, which is aimed at enhancing economic efficiency and the benefit of consumers through promoting sustainable competition,” Mr Ma said.

Rights protected

“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,” he added.

Mr Ma said during the last public consultation exercise on the way forward for Hong Kong’s competition policy, there was general support for the introduction of a cross-sector competition law.

“However, we recognise that some stakeholders, particularly business-sector representatives and small and medium-sized enterprises, had concerns that such a law should not create extra compliance costs or lead to excessive litigation. To this end, the public consultation paper has specifically set out a number of proposals to address their concerns,” he added.

The consultation paper covers key elements that will form the basis of a competition law, including the proposed regulatory structure, types of conduct that will be prohibited, penalties that will apply for infringing the law, the right to take private action, and criteria and mechanisms for granting exemptions and exclusions from the law’s application.

Key elements

The new competition law has proposed:

* to set up a Competition Commission, which would operate independently from the Government, to investigate anti-competitive conduct, determine whether law infringements had occurred and impose remedies as appropriate;

* to set up a separate Investigation Committee within the commission to maximise checks and balances; and

* to set up an independent Competition Tribunal to review the commission’s decisions.

The commission would require an annual budget of up to $80 million and the initial cost of operating the tribunal would be about $6 million a year.

The law will set out general prohibitions against anti-competitive agreements between competing undertakings and abusive conduct by undertakings with substantial market power. Three options for merger regulation have been proposed in the consultation paper for stakeholders’ comments and discussions.

Under the new law the commission should have the authority to grant exemptions for agreements where it considers these would not cause any net economic harm. The Chief Executive-in-Council should have the power to exclude the relevant activities from the law’s application where broader public-policy considerations apply.

The new, cross-sector competition law would not apply to the Government or statutory bodies. The penalties for infringement would be civil in nature, with fines of up to $10 million imposed by the commission. The commission could apply to have the tribunal impose more serious penalties, including higher fines with a cap of 10% of total turnover during the period when the infringement occurred and disqualification from holding a directorship or a management role in any company for up to five years.

More details about the proposed new law can be found here. The consultation will end on August 5. People can air their views by writing to the bureau at Level 29, One Pacific Place, 88 Queensway, faxing 2877 5650 or emailing

Mr Ma said views willl be taken into full account when finalising the Competition Bill.