Competition Law Update

On 14 June 2012, certain provisions in the Competition Ordinance (Cap. 619) came into effect, including the establishment of the Competition Commission and the Competition Tribunal. Whilst the Commission comprises 14 members with Ms. Anna Wu Hung Yuk as the Chairperson, Ms. Justice Godfrey Lam and Madam Justice Queeny Au-Yeung have respectively been appointed as the President and the Deputy President of the Competition Tribunal.

What has been done

The Commission has been preparing for the full implementation of the Ordinance, including the preparation of the "Guidelines" on how the Commission will interpret and give effect to the conduct rules and other key provisions of the Ordinance, the applications for a decision or block exemption order, complaint handling and investigations, etc. The Commission has also started conducting promotion of the Ordinance and discussion with various business sectors, and will issue the draft Guidelines for public consultation later this year.

The Commission has on 26 May 2014 published a document entitled "Getting Prepared for the Full Implementation of the Competition Ordinance". In this document, the Commission sets out the key provisions of the Ordinance and provides an outline of how it intends to approach its advocacy and enforcement role. Most importantly, this document serves to collect views from the stakeholders of different business sectors, especially information about some of the trade practices in Hong Kong, so as to enable the Commission to develop the Guidelines for the purpose of helping businesses to review and adjust their practices.

With the promotion and discussion, the Commission is trying to enhance public understanding of the Ordinance and to facilitate the business community to prepare for full implementation of the Ordinance by, for example, putting in place risk management systems, good practices and compliance policies for the purpose of complying with the Ordinance and Guidelines.

Proposed Legislative Amendments

After consulting both the Bar Association and Law Society and upon the advice of the Executive Council, the Chief Executive has on 29 April 2014 ordered that the Competition (Amendment) Bill 2014 ("the Amendment Bill") be introduced into the Legislative Council to ensure the proper functioning of the Competition Tribunal. The proposed amendments under the Amendment Bill are directed at the following matters:-

1. Specific powers for the functioning of the Competition Tribunal
   Under the Ordinance, the Competition Tribunal may follow the practice and procedures of the Court of First Instance and has power to grant orders, remedies and relief that the Court of First Instance is empowered to grant. The Executive Council proposes to confer more specific powers on the Tribunal to enforce orders, to award interest on damages and judgment debts, to award interest on non-payment or late payment of penalties and fines, and to prohibit debtors from leaving Hong Kong, etc.
   
2. Proposed amendments relating to Registrar
   Despite the existing framework for the appointment of the Registrar under the Competition Ordinance, the Executive Council proposes amendments to empower the Registrar to perform judicial duties under the Competition Ordinance, similar to those performed in the High Court.
   
3. Proposed consequential amendments to other legislation
   These proposed amendments to other ordinances (including the Legal Practitioners Ordinance (Cap. 159), and Evidence Ordinance (Cap. 8)) are solely for the purpose of facilitating the operation of the Competition Tribunal, such as transfer of proceedings, higher rights of audience, bringing a person in custody to give evidence, etc.

Steps to be taken before the full implementation of the Ordinance

What we have learned from other jurisdictions is that anti-competitive conduct usually relates to established practices which have been recognised by the industries, i.e. practices which have been widely accepted as the norm for companies to do business. Therefore, companies must take immediate action to review and seek legal advice on any established arrangements which could be caught by the Ordinance upon its full implementation.

Participations in trade associations will raise concerns, as the decisions made by the associations may influence the members in different aspects, particularly recommendations relating to prices and fees. Another concern is the discussion and information exchange among competitors in informal meetings or social events.

In light of the Commission's rights and powers of investigation under the Ordinance, particularly the power to search and enter premises under a warrant, compliance policies should be drawn up for all employees to follow.

Finally, every company should be aware of the leniency policy provided in the Ordinance so that any possible breach of the Ordinance is promptly reported to management before making an application to the Commission. One should bear in mind that the first applicant to the Commission will receive full immunity in terms of the financial penalty and other punitive orders. In any event, the best way to avoid a breach of the Ordinance is to have an effective compliance system in place.