15 years on, draft competition law comes to Legco

Fifteen years after debate on the issue began, legislation that seeks to create a level playing field for companies doing business in Hong Kong is set to come before the Legislative Council. The government is finalising a draft competition law covering all sectors of business, to be submitted by mid-July for approval. It seeks to establish a government-appointed independent commission with the power to investigate and prosecute companies which breach the law. A special tribunal will hear cases. The government will be largely exempt from the competition law, but there will be a list of statutory bodies that the legislation will cover. Most statutory bodies, however, are exempt from the new law, senior government officials say. There are some 500 statutory bodies, including the Airport Authority, the MTR Corporation, the Trade Development Council and companies set up by law. To determine if a statutory body is exempt, the government is evaluating each one against certain criteria, including whether it is engaged in an economic activity and whether there are merits in having it continue that activity. Charities, for example, that conduct some form of business may be subject to the competition law. To be absolutely clear, the legislation will define what a statutory body is. In general, it is an organisation that is legally empowered and authorised to take part in a particular activity. Statutory bodies that believe they should be exempt from the competition law could appeal to the Executive Council, the officials said. This means the list of bodies that the law covers can change. Amendments require the approval of the legislature. Two rounds of public consultations on the proposed law were held in 2006 and 2008. But the proposal dates back to the mid-1990s, when the Consumer Council recommended that a competition authority be set up to break up cartels, ban monopolies and enforce new laws to eradicate anti-competitive practices. The government rejected the proposals in late 1997. Under the new law, the original civil-enforcement model - where the commission would be empowered to investigate, prosecute and impose penalties while the tribunal hears appeals - was dropped in favour of the judicial model. This aims to partly address concerns over the concentration of too much power in a single body. Although existing legislation covers anti-competitive conduct in the broadcasting and telecommunications sectors, the introduction of a competition law is expected to bring certain businesses under the spotlight, including supermarkets and petrol station operators. Critics often cite the supermarket duopoly of ParknShop and Wellcome that controls more than 80 per cent of the market, and creates high barriers against new entrants. But the lack of a competition law means complaints about alleged abuses of their dominance have not been acted on. Under the proposed competition law, the commission can launch an investigation or begin an inquiry because of a complaint, or be referred a case by the courts or the government, but 'only if there is reasonable cause'. The need to establish a reasonable cause helps address concerns over frivolous lawsuits. But the threshold would not be set too high otherwise the commission would become ineffective, the government insiders said. Although the commission can decide to prosecute based on an investigation, it has the discretion to issue an infringement notice instead. The commission decides under what circumstances this notice would apply, but time may be a factor as this is 'a speedy way to deal with it', they said. If the firm complies with the notice, which will include a deadline for compliance, the case is closed. If not, the commission can prosecute and the case will go to the tribunal, which will be a division of the High Court. Refusing to accept an infringement notice does not prejudice the case, the government insiders say. Infringement notices are used to deal with breaches of competition law in markets, such as Australia. The tribunal will have the power to impose fines and injunctions, for example, similar to that of the Court of First Instance. Experts will help tribunal judges, the government insiders said. The Court of Appeal will hear appeals. The two-tiered organisation will see a government-appointed chairman overseeing the commission and a chief executive in charge of the day-to-day administration. Level playing field A draft competition law, aimed at ensuring fair practice in all business sectors, is expected to break the supermarket duopoly of ParknShop and Wellcome which have long dominated more than this much of the market: 80%