After several years of preparation, the Hong Kong government published the Competition Bill (Bill) on 2 July 2010. The Bill aims to introduce a cross-sector competition law regime in Hong Kong for the first time.

Importantly, and in line with international practice, the Bill proposes competition law with extraterritorial application. Even where anticompetitive conduct is carried out outside of Hong Kong, an undertaking would still be caught if the conduct has the object or effect of preventing, restricting or distorting competition in Hong Kong.

Businesses should take steps now to assess the possible impact of the Bill on their activities, and to map out the changes that they will need to make to their practices if the Bill is enacted.

Summary of the Bill

In line with global competition laws, the Bill proposes to prohibit abuses of substantial market power and the making of anti-competitive agreements. Whilst the Bill does not include a general merger control regime, it does establish a new Competition Commission (Commission), which will have substantial powers to enforce the laws that have “made the cut”. Similar to other competition regulators such as the Australian Competition and Consumer Commission, the Commission will have search and seizure powers and the ability to instigate investigations.

The penalty regime set out in the Bill is significant and includes: fines of up to ten percent of a company’s turnover for each year in which the contravention occurred; awards of damages to those who suffered loss as a result of anticompetitive conduct; disqualification orders preventing individuals from holding directorships; and criminal sanctions for obstructing the Commission’s investigations. Individuals who breach the laws, or who have assisted or been involved in the anti-competitive conduct, may also incur pecuniary sanctions.

The evolution of the Bill

The publication of the Bill comes after several years of policy debate, culminating in a recommendation from the Competition Policy Review Committee in 2006 to establish cross-sector competition legislation. Following this, there were two rounds of public consultation. The Bill reflects many of the Government’s earlier proposals, in particular those relating to the enforcement model, the level of fines, and the treatment of public sector bodies.

Timing for implementation

If the Bill is enacted, it is understood that the Government intends to use a phased-in approach in regard to implementation; the institutional provisions would come into force first to allow the authorities to be set up and to commence work on the enforcement Guidelines. The substantive provisions would come into force at a later date and probably not before 2012, by which time Guidelines should have been finalised. The Guidelines will be important, as the Bill is drafted in fairly broad terms and is reliant on the Guidelines to fill in key gaps.