The Hong Kong Government has been considering the promulgation of a competition law for many years. Such law may finally be issued since a public consultation paper in relation to the draft law has been circulated for comments with the aim of passing the bill in the 2008-2009 legislative session.

Similar to other countries, the proposal seeks to prohibit two types of conducts when they have the purpose or effect of substantially lessening competition: “[participating] in agreements and concerted practices” and “abusing substantial market power.” The “agreements and concerted practices” prohibition focuses on horizontal arrangements, whereas vertical arrangements are instead evaluated under the "substantial market power" prong. Neither conduct is a “per se” infringement, though the suggested market share threshold which triggers review for “abusing substantial market power” is 40%. An independent Competition Commission would be established to issue guidelines specifying examples of anti-competitive activities and clarifying infringement thresholds, to investigate and determine whether an infringement has occurred, and to apply sanctions and remedies. This Commission would be authorized to impose civil penalties of up to HK$10 million for violation of the proposed law. A separate Competition Tribunal would also be established to review the rulings of the Commission, with the power to impose even more severe penalties. These administrative proceedings of the enforcement bodies would likely be less formal and swifter than the courts’, and the Tribunal’s decisions are appealable to the Court of Appeal.

Despite its efforts, the new Law raises additional issues. One major issue relates to how mergers should be considered. The paper suggested three options: (i) only completed mergers raising “serious competition concerns” would be investigated without clear definition for that term; (ii) include a merger provision but with a delay in enforcement; or (iii) exclude a merger provision but allow reconsideration after review of the new Law’s effect. Clearly none of the options is satisfactory. Another issue involves the proposed Law’s exemptions and exclusions. “Government and statutory bodies” are controversially excluded, raising concerns of Government self-interest. Other exceptions are relatively undefined and raise questions as to how and to whom they might apply, including for anti-competitive agreements with overriding economic benefits, operations of public services of general economic interest, and certain activities to be exempted by the Chief Executive on public policy grounds.

Will Hong Kong enhance its competitive edge by the enactment of this Law? Until these uncertainties are resolved and questions answered, the answer to this question will not be known for awhile.