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The Competition Ordinance – The Story So Far

  • Hong Kong
  • Global
  • Competition, EU and Trade

10-11-2016

On 19 October 2016, the Competition Commission (“CC”) published its fourth Annual Report (see here). The Annual Report covers the period 1 April 2015 to 31 March 2016, and is particularly significant because it covers work undertaken by the CC since the implementation of the Competition Ordinance (“Ordinance”) on 14 December 2015. The Annual Report also provides a useful update on some of the progress the CC has made since the end of its financial year.

In this briefing, we summarise key areas of the CC’s work in 2015/16.

Enforcement activity

Between 14 December 2015 and 31 March 2016, 924 complaints and enquiries were received by the CC. A significant majority of these initial complaints and enquiries related to the First Conduct Rule (“FCR”) and, specifically, cartel type conduct and resale price maintenance.

Complaints and enquiries received by the CC1.

First Conduct Rule Second Conduct Rule

Cartel conduct

192

Tying and Bundling

41

Resale Price Maintenance

211

Exclusive Dealing

29

Exchange of Information

60

Refusal to Deal

29

Exclusive Dealing

40

Predatory Pricing

24

Other

101

Other

67

The CC also received 295 complaints and enquiries that were not within the scope of the Ordinance, for example because they related to the general state of competition rather than to a specific conduct rule. In addition, 27 cases were referred to the Communications Authority as the lead authority on broadcasting and telecommunications sector issues.

Of those complaints that were within the scope of the Ordinance, 97 were referred to the initial assessment phase, where the CC will consider whether there is sufficient evidence to warrant a detailed investigation. Of these initial assessments:

  • 60 relate to cartel conduct or horizontal information sharing between competitors;
  • 39 relate to resale price maintenance;
  • 18 relate to other FCR conduct; and
  • 12 relate to the Second Conduct Rule2.

Though the differences might be explained by the quality of evidence submitted, that 62% of the initial -assessments relate to cartel conduct clearly supports the CC’s assertion that it will prioritise the most serious anti-competitive conduct to a much greater extent than, for example, vertical agreements.

It is also significant to note the wide range of sectors that have been the subject of the CC’s initial enforcement activity, with the following sectors being subject to the most initial assessments in the CC’s last financial year:

  • Professional & Technical Services (16)
  • Transport, Logistics & Storage (10)
  • Food & Groceries (10)
  • Real Estate & Property Management (9)
  • Construction & Infrastructure (8)
  • Banking, Financial & Insurance Products & Services (8)

Since the beginning of its new financial year, the CC has continued to receive complaints and enquiries, and has now received over 1,600 in total to date. The CC has reportedly also undertaken six dawn raids since the implementation of the Ordinance, so it is clear that the CC has begun “hard enforcement”.

Other activity

  • The CC continued its work on a market study into the residential building renovation and maintenance sector. The market study was brought about to address long-held public concerns about collusive conduct in the market. The findings of the residential building renovation and maintenance study were published in May 2016 (see here) with the CC noting that it had found evidence of activity “consistent with the widely alleged bid-manipulation practices in Hong Kong”. The CC also commenced a market study into the auto-fuel market, which is on-going.
  • The CC undertook a review of the public practices of over 350 trade and professional associations, identifying over 20 associations with public practices that had a high risk of contravening the Ordinance, and publishing a report in March 2016 (see here). The CC notes that it is now at the stage where it may take enforcement action against associations and their members which continue to impose price restrictions or engage in cartel type conduct.
  • The CC received an application for a block exemption order from the Hong Kong Liner Shipping Association. The CC engaged in an initial consultation and recently published its proposed block exemption order for certain types of vessel sharing agreements (see here). The CC will be consulting with interested parties on its proposed order until 14 December 2016 and will subsequently finalise its decision.

Comment

The CC’s enforcement activity to date has clearly focused on the First Conduct Rule and, in particular, cartel conduct and information sharing between competitors. This is perhaps not surprising given that the CC’s enforcement policy prioritises that conduct which has the potential to cause significant harm. However, what is also clear from the Annual Report is that the CC has already begun taking steps to enforce the Ordinance across a wide range of sectors and a range of infringement types.

While it is still early days, it is clear that the CC is no paper tiger. Companies should ensure they have audited their businesses for compliance and that they have adequate dawn raid procedures and robust competition law compliance policies at the heart of their internal controls.


1 Complaints and enquiries have been counted more than once where they relate to more than one type of conduct.

2 Ibid.

 

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