OECD kpcdb

1. Competition Law 

The Competition Ordinance (Cap 619) (the “Ordinance”) was enacted on 14 June 2012 and is the main legal instrument in competition policy in Hong Kong. The establishment of an enforcement authority and publishing enforcement guidelines were completed in stages and the Ordinance came into full effect on 14 December 2015.

 

The Ordinance prohibits restrictions on competition in Hong Kong through three competition rules, namely the “First Conduct Rule” (prohibiting anti-competitive agreements, concerted practices and decisions), the “Second Conduct Rule” (prohibiting abuse of market power), and the “Merger Rule” (prohibiting mergers that substantially lessen competition). Under Section 4 of Schedule 7 to the Ordinance, the Merger Rule only applies to mergers involving telecommunications carrier licensees.

 

Hong Kong is a common law jurisdiction.

General exclusion: The Ordinance applies to undertakings, that is, any entity, regardless of legal status or the way it is financed that is engaged in an economic activity. 

 

The competition rules generally do not apply to statutory bodies (some of the excluded statutory bodies, such as the Airport Authority or the Hospital Authority, may carry out some business or market activities). However, the competition rules apply to six named statutory bodies, such as the Ocean Park Corporation and Federation of Hong Kong Industries.

 

Seven entities related to Hong Kong Exchanges and Clearing Limited, such as the Stock Exchange of Hong Kong Limited, has been specifically excluded from the application of the Conduct Rules pursuant to subsidiary legislation.

 

Extra-territorial application: The Ordinance applies also to undertakings located outside Hong Kong whose behaviour directly affects competition in domestic markets. 

 

The Merger Rule applies to a merger even if the merger takes place outside Hong Kong, or any party involved in the merger is outside Hong Kong.

 

2. The Competition Commission of Hong Kong

The Competition Commission of Hong Kong (“CCHK”) is an independent statutory body responsible for enforcing the Ordinance. Hong Kong has a civil enforcement regime and, in contrast to administrative enforcement regimes, the CCHK is required to apply to the Competition Tribunal (the ”Tribunal”) for (among other orders) the imposition of a pecuniary penalty.

 

The CCHK conducts investigations of conduct that may contravene the Ordinance. Among other things, the CCHK may also make decisions as to whether an agreement or certain conduct is exempt or excluded from the Ordinance. 

 

The Tribunal is a specialised court which may review certain decisions of the CCHK, and hear and determine enforcement cases initiated by the CCHK with regard to alleged contraventions.

 

The Tribunal is responsible for the imposition of pecuniary penalties for anti-competitive conduct and other orders for remedies and sanctions. The Tribunal consists of the judges of the Court of First Instance.

 

Organisational structure of the CCHK: Located in Wan Chai, the CCHK has a permanent staff of around 50 as of 2016 and a budget of 80 million Hong Kong dollars As of 31 December 2016, the Commission consists of 15 Members (including the Chairperson) appointed by the Chief Executive of the Hong Kong Special Administrative Region. The executive arm comprises the Chief Executive Officer, Senior Executive Director, Executive Director (Operations) and Executive Director (Legal Services). There are four divisions: Corporate Services & Public Affairs Division; Legal Services Division; Operations Division and Economics Division.

 

Commission members may be removed from office by the Chief Executive under certain circumstances, such as failure to attend 3 consecutive meetings of the Commission without sufficient cause, bankruptcy, mental incapacity or failure to comply with a conflict of interest disclosure obligation. 

 

Other regulators with competition powers: Under Section 159 of the Ordinance, the CCHK and the Communications Authority have concurrent jurisdiction to enforce the Ordinance in respect of conducts of certain undertakings operating under the Telecommunications Ordinance and Broadcasting Ordinance. The CCHK and the Communications Authority signed a MoU to co ordinate the exercise of their functions. Under the MoU, for cases falling within the concurrent jurisdiction, the Communications Authority will ordinarily take the role of the lead authority.

 

Competition advocacy: The CCHK has the power to undertake market studies and also to advise the government on competition matters in and outside Hong Kong. The CCHK has conducted studies into aspects of the market for residential building renovation and maintenance, and the auto-fuel market in Hong Kong and have made recommendations to the government on both.

 

International co operation: The CCHK signed a Memorandum of Understanding with the Canadian Competition Bureau in December 2016.

 

3. Investigation

Initiation of investigation: Under Sections 37 and 39(1) of the Ordinance, the CCHK may conduct an investigation on its own initiative, where it has received a complaint, or where the Court of First Instance, Tribunal, or Government has referred any conduct to it for investigation. To undertake an investigation the CCHK must have “reasonable cause to suspect that a contravention of a competition rule has taken place, is taking place, or is about to take place” (s. 39(2)).

 

However, the power to close an investigation lies solely with the CCHK.

 

Powers of investigation: Under Section 41, the CCHK can compel persons to provide documents and information relating to any matter the CCHK reasonably believed to be relevant to an investigation. This extends to a power to make copies or take extracts from documents or to require an explanation of documents. To use such powers the CCHK must have reasonable cause to suspect that a person may have possession or control of documents or information or may be able to assist in relation to a potential contravention.

 

Under Section 42, it can require persons to attend before the CCHK to answer questions relating to any matter reasonably believed to be relevant to the investigation.

 

The CCHK may also enter and search premises after obtaining a warrant from the Court of First Instance in accordance with Section 48. To issue such a warrant the judge needs to be satisfied that there are reasonable grounds to suspect that there are (or are likely to be) documents on the premises that may be relevant to the CCHK’s investigation. 

 

Failure to comply with investigation: Under Section 52, a person who fails to attend before the CCHK or produce documents and information without reasonable excuse commits an offence and is liable, on conviction on indictment, to a fine of HK$200,000 and imprisonment for 1 year or on summary conviction, to a fine at level 5 to imprisonment for 6 months.

 

Under Sections 53 and 55, destruction or falsification of documents and providing false or misleading documents or information are also offences punishable, on conviction on indictment, with a fine of HK$1 million and by imprisonment for 2 years or on summary conviction to a fine at level 6 and to imprisonment for 6 months.

 

Section 54 provides that the obstruction of a person acting under a Section 48 warrant is an offence punishable, on conviction on indictment, by a fine of HK$1 million and by imprisonment for 2 years or on summary conviction to a fine at level 6 and to imprisonment for 6 months.

 

The CCHK’s information gathering powers overrides any privilege against self-incrimination (Section 45). However, no such statements are then admissible against that person in proceedings where a pecuniary penalty is sought, or in criminal proceedings, subject to some exceptions.

 

Procedural fairness: The Guideline on Investigations sets out the process under which the CCHK undertakes its investigations. According to the Guideline, the CCHK will endeavour to keep parties who are under investigation informed of the progress of the investigation subject to overriding operational or confidentiality considerations. The CCHK may invite parties under investigation to make voluntary submissions with regard to facts or legal and economic arguments.

 

The Ordinance imposes certain procedural obligations on the CCHK in relation to, for example, the issuance of infringement notices, the acceptance of commitments, and the making of decisions as to whether an agreement / conduct is excluded or exempt from the Ordinance. 

 

For cases that are brought in the Tribunal for the imposition of pecuniary penalties and other orders, the parties have the right to defend the case in accordance with procedures similar to other common law jurisdictions.

 

Confidentiality protection: The CCHK and the Communications Authority are obliged to ensure the non-disclosure of any confidential information which may come into their possession. Disclosure of confidential information is permitted only under the circumstances specified in the Ordinance.

 

4. Remedies and sanctions

In certain circumstances the CCHK may exercise its powers to: (i) issue a warning notice, (ii) issue an infringement notice, (iii) accept a commitment. 

 

For conduct which contravenes the First Conduct Rule (see section below) and which does not involve serious anti-competitive conduct, the CCHK must issue a warning notice prior to bringing proceedings before the Tribunal.

 

An infringement notice may be issued for both contraventions of the First (for serious anti-competitive conduct) and Second Conduct Rules where the CCHK has not yet initiated proceedings with the Tribunal. By issuing an infringement notice, the CCHK offers not to initiate such proceedings provided the involved parties commit to comply with the requirements of the notice (Section 67). This may include refraining from the conduct, taking specified action, or admitting to a contravention. The CCHK must first notify the person of its proposal to issue a notice and consider representations made in response. Where the person makes a commitment to comply with the requirements of an infringement notice, the CCHK may not bring proceedings before the Tribunal in respect of the relevant contravention.

 

Under Section 60, the CCHK may also accept voluntary commitments which it considers appropriate to address its concerns about a possible contravention of a competition rule. If the CCHK accepts a commitment under Section 60, it may not commence or continue an investigation nor bring or continue proceedings in the Tribunal in relation to matters addressed by the commitment. 

 

When the CCHK considers appropriate it may apply under section 92 to the Tribunal for a pecuniary penalty. The Tribunal can impose a pecuniary penalty  on an undertaking for a contravention of a competition rule of up to 10% of the undertaking’s turnover for each year in which a contravention occurred for a maximum of 3 years.

 

The pecuniary penalties provided in the Ordinance are civil penalties. The only criminal sanctions generally relate to non-compliance with the investigative powers of the CCHK or obstruction (see Section I.3 above). 

 

Under Section 94, the Tribunal may also make a range of orders specified in Schedule 3, including injunctions, disposal of assets, modification or termination of an agreement. 

 

The Tribunal may, in certain circumstances, also disqualify a person from being a director of a company or from being involved in the management of a company for up to 5 years.

 

5. Appeal

Specific decisions of the CCHK (e.g. decision to issue a block exemption order, decision to terminate a leniency agreement) are defined as “reviewable determinations” (Section 83) and are subject to review by the Tribunal under Section 84. Other decisions of the CCHK are subject to judicial review by the Court of First Instance.

 

Under Section 154, decisions of the Competition Tribunal may be appealed to the Court of Appeal.

 

6. Private Enforcement

Under Section 110 a party can bring an action for loss or damage suffered as a result of a contravention of the First or Second Conduct Rule only where a finding has been made by the Tribunal (or another court) that there has been a contravention or where the person has made an admission of contravention in a commitment.