Law needs to spell out anti-competitive actions

PUBLISHED : Tuesday, 07 December, 2010, 12:00am
UPDATED : Tuesday, 07 December, 2010, 12:00am

As legislators start scrutinising the competition bill, the fundamental questions of what kind of competition regime Hong Kong wants, and needs, have been raised once again.

Until the bill was presented to the Legislative Council, many had been led to believe that it would be about weeding out hard-core anti-competitive behaviour, such as price-fixing, bid-rigging and market-sharing. However, the bill appears to target market structure, with provisions that may result in highly intrusive regulatory operations.

The Hong Kong General Chamber of Commerce supports the introduction of a good competition law for Hong Kong, on the premise that the approach is minimalist, and that the regime will ensure fairness, transparency and certainty.

The lack of clarity of the present bill is a major concern. It is crucial to lay out which kinds of behaviour are prohibited. To this end, one important task for the government is to prepare and publish a set of detailed implementation guidelines for consultation, going hand in hand with the legislative process.

Under the bill as drafted, whether agreements or conduct are prohibited will in many cases depend on their future effect on competition. Businesses will find it difficult to forecast whether a proposed arrangement or an action will be regarded as having an anti-competition effect, especially before a body of case law is built up.

One solution is to prohibit only specific types of conduct: price-fixing, market-sharing and bid-rigging. Other agreements or conduct should not be deemed unlawful until the future competition tribunal decides they are. In other words, the prohibition will take effect from the date of the tribunal's ruling. There is a recent precedent for such an approach in Canada.

Many had believed that only telecommunications and broadcasting mergers would be regulated. But the government has said the proposed rule that prohibits anti-competition agreements and concerted practices could be applied to mergers in other sectors. If the government chooses to introduce general merger control in this way, it will impose further unjustified costs to businesses, as Europe has come to realise. In the meantime, people will have no certainty as to what is and is not prohibited.

As for maximum penalties, it should be capped at 10 per cent of the turnover in the year of infringement of the product or service in Hong Kong , not 10 per cent of worldwide turnover, as it is being proposed now. And private actions should be allowed only after the court has found infringement.

Indeed, Hong Kong should proceed with caution, so that we get a competition law that works in its interests. It would help to ease business concerns if there is adequate business representation on the competition commission to be set up. It is important that the commission's enforcement is always informed by good understanding of business operations.

Alex Fong Chi-wai is chief executive of the Hong Kong General Chamber of Commerce