Letters

Legal concerns over proposed competition law

The discussion about the proper foundation for the Competition Bill is gaining tremendous depth and momentum. In an interesting contribution to these columns ('EU welcomes competition law in Hong Kong', March 23) the head of the European Union Office to Hong Kong and Macau, Maria Castillo, highlighted the differences between EU law and the Competition Bill.

It is no secret though that the EU model has had a profound influence over the drafters of the bill. Yet, some could argue that the EU model may not be entirely suitable in Hong Kong, as it pursues EU-specific goals (internal market, industrial policy) and it is a complex regime which bears the risks of unpredictability and internal inconsistency.

On the key issue of what constitutes illegal behaviour, the bill embraces the identical far-reaching test as the EU regime. Under the bill's First and Second Conduct Rules, which target anti-competitive agreements and abuse of market power respectively, conduct having 'as its object or effect the prevention, restriction or distortion of competition' would be prohibited.

Similarly, the grounds for exemption under the bill are based on the same criteria as the EU system. In effect, businesses will have to make their own assessment as to the legality of their practices and if they get it wrong (for reasons that could emerge long after the fact), they may face significant fines. (Although the bill allows businesses to seek comfort from the future commission, the EU experience shows that such a system may be ultimately unworkable due to the large demand for clearances.)

The analogy with the EU system goes beyond substantive tests. The legal architecture of the bill has largely borrowed from the EU, where the general framework (Treaty and Regulations) is complemented by non-binding 'guidelines' adopted by the European Commission on an ad hoc basis. Guidelines are said to provide flexibility as they allow the commission to adapt to changing realities, but at the same time they introduce a level of uncertainty.

In Hong Kong, this law-making process, together with the self-assessment requirement, understandably raise concerns, which turn on the issues of legal certainty and fairness in the application of the law. Both concerns are real, and ought to be evaluated in light of the bill's compatibility with Hong Kong's Basic Law.