| Hong Kong’s Legislative Council rather momentously passed its Competition Bill on 14 June 2012. Ahead of our upcoming ASIAN-MENA COUNSEL special report on Anti-trust and Competition (Vol 10 Issue 4), we take a look at the impact the new legislation will have on an economy which has traditionally been resistant to change in this arena. The new Bill (which will shortly be enacted) seeks to make anti-competitive behaviour (for example, price fixing and agreements to limit production) illegal. Hong Kong is the last developed economy to introduce such a law.*
But amidst the controversy and resistance, it is important to look at firstly what the Competition Bill hopes to achieve and secondly the practical impact it will have on companies in the region. As a starting point, the two-tiered Ordinance aims to (i) prohibit agreements, decisions and concerted practices that prevent/ restrict or distort competition in Hong Kong and (ii) prohibit the abuse of a substantial degree of market power in a particular market. On a practical level the new law casts a fairly wide net and it would behove many business owners in Hong Kong to ready themselves by seeking legal advice as to its effects. The fact that it will ‘bite down’ on for example, the structuring of joint ventures as well as various contractual negotiations indicates how far-reaching the new Ordinance is. Compliance will be integral if companies wish to avoid penalties. The new Competition Ordinance will additionally have extra-territorial effect. In other words it will encompass conduct undertaken by an overseas business which impacts in some way upon the Hong Kong market. So from a compliance standpoint, it is critical for businesses overseas as well as companies in Hong Kong to familiarise themselves with the key prohibitions of the new legislation. Companies will be assisted insofar as the Ordinance allows for a transitional or grace period – as it will not have retrospective effect. As we come up on 15 years since the handover, Hong Kong’s free market economy is coming under increasing scrutiny given its tendency to favour the wealthy. The decision to enact this legislation (despite the fact that it is much more diluted than what was originally envisaged by LegCo in July 2010) has been greeted with mixed feelings. Whilst an attitude of intransigence remains – given that many still believe it goes against the grain of a free-market economy – the new law has been applauded by many owners of small-medium sized enterprises who are hoping that the new Competition Ordinance will promote fair competition by clamping down on cartels. *according to “Hong Kong to introduce Competition Law” – Financial Times 15 June 2012 |
