HK's antitrust model offers clear separation of powers
Waha and Chang of Norton Rose take a look at how the city's new Competition Ordinance stacks up against similar legislation in the region
Businesses that are familiar with competition laws in Asia will be in for a few surprises when they read the Hong Kong Competition Ordinance that was recently enacted. Overall, however, the surprises will mostly be good.
In most other Asian countries, government agencies act as investigators, prosecutors and judges. But in Hong Kong the model of enforcement reflects a clear separation of functions. The ordinance sets up a Competition Commission and a Competition Tribunal for investigation and adjudication.
The commission may launch investigations on its own initiative, on receipt of complaints, or on referral from the government or a court. Sanctions can only be imposed by judges, and civil action may be brought after contravention of the law is established.
Hong Kong's neighbours, most of which have had experience enforcing competition law for at least a few years, usually only impose significant sanctions for serious anti-competitive activity. Of the more than US$1 billion of fines imposed annually in South Korea and Japan, most sanctions involve bid-rigging and price-fixing practices. Singapore's Competition Commission imposes fines for serious violations of the local competition legislation.
In Hong Kong, the ordinance limits the possibility of imposing fines and awarding civil damages for non-serious restrictive practices. This makes for legal certainty, but doubts remain as to what constitutes serious anti-competitive conduct. Also, the ordinance lacks similar statutory protection for non-serious abuses of market power.
The ordinance sets out two major prohibitions that apply to any businesses engaged in economic activity: a prohibition on restrictive practices and a prohibition on the abuse of market power, known as the conduct rules. Merger control is excluded from the scope of the law, except in the telecommunications sector. This is uncommon. Other jurisdictions, such as Malaysia, have introduced competition rules without a merger control regime, but it remains a feature of all other regimes in the region. What makes the Hong Kong regime unique is that merger activity is expressly excluded from the scope of the conduct rules. Another notable feature is that statutory bodies enjoy immunity under the law.