The Chief Executive of the Hong Kong Special Administrative Region has announced the appointment of Anna Wu Hung-yuk as the first chairperson of Hong Kong’s newly formed Competition Commission, together with 13 Members of the Commission.

Ms Wu’s appointment will commence from 1 May 2013 and will continue for a period of 3 years. She is currently a non-official member of the Executive Council of Hong Kong, chairperson of Hong Kong’s Equal Opportunities Commission and has previously held the positions of chairperson of the Hong Kong Consumer Council and vice chairperson of the Consumer Council’s Competition Policy Committee.

The establishment of Hong Kong’s first market-wide competition law regime has gained momentum following the approval of the Competition Ordinance in June 2012, as outlined in our previous post and alerts here and here.

Hong Kong’s Competition Commission was established in January this year and its 14 members, including Ms Wu, were appointed during the course of last week. The other Members Commission are:

  • Chan Kwok-wai, M.H;
  • Chan Sui-kuen, Agnes;
  • Cheng Kin-hon, Thomas;
  • Professor Cheng Kwok-hon, Leonard;
  • Hui Wah-kit, Michael;
  • Kwok Kwok-chuen;
  • Kwok Lam-kwong, Larry (a partner of King & Wood Mallesons);
  • Kwok Pui-fong, Miranda;
  • Honorable Leung Kwan-yuen, Andrew;
  • Anthony William Seeto Yiu-wai;
  • Professor Tsang Shu-ki;
  • Wong Fung-han, Gilly; and
  • Wong Kit-lung, Simon
Commission’s initial priorities

We expect the Commission’s initial priorities will be to:

  1. Build public awareness of the market-wide competition regime, including through a dedicated website and public appearances by the Chairperson and Members;
  2. Set its enforcement priorities;
  3. Build relationships with other competition law agencies, including in Asia, the Americas and Europe, with a view to sharing expertise with those agencies and co-operating with them on enforcement initiatives;
  4. Issue draft guidelines on the administration and operation of the Competition Ordinance for public consultation; and
  5. Issue orders for block exemptions, no doubt after consultation with key stakeholders.

Enforcement priorities

The Commission is expected to vigorously enforce the Competition Ordinance. While it’s difficult to predict the content of the Commission’s initial enforcement priorities, if the Commission takes a similar approach to other competition law agencies, its initial enforcement priorities are likely to include hard core conduct, including collusive practices, which result in significant detriment to competition and consumers.

Guidelines

The Commission’s initial draft guidelines are likely to reflect the guidance published by the Hong Kong Government to the Legislative Council Bills Committee found here: CB(1)2336/10-11(01), CB(1)2618/10-11(01) and CB(1)2420/10-11(03).

The guidance indicates that the initial draft guidelines will:

  • outline the Commission’s approach to the First Conduct Rule (which prohibits agreements, concerted practices and decisions of associations that prevent, restrict or distort competition
  • outline the Commission's approach to the Second Conduct Rule (which prohibits abuse of substantial market power by engaging in conduct that prevents, restricts or distorts competition)
  • outline the Commission’s approach to market definition, a concept that is embedded in the Competition Ordinance and that will be critical to its administration and enforcement.

The Commission may also determine to issue guidelines which:

  • are specific to the de minimis turnover thresholds (for example, how undertakings should calculate “combined turnover”) for the exemption for undertakings with a global turnover of less than or equal to HKD 40 M or undertakings with a combined global turnover less than or equal to HKD 200 M
  • describe how any leniency program will work
  • describe how it will exercise its powers to compel the production of evidence and to search premises.

We expect the Commission to issue its initial guidelines in draft, and to invite comment from interested parties, before finalizing its guidelines.

Consistent with the practices in other countries, any guidelines published by the Commission will represent the Commission’s policy only and will not be binding on the Commission.

Orders for block exemptions

It’s likely that industry associations and individual participants in industries will wish to make submissions to the newly formed Commission about which conduct the Commission should exempt from the First Conduct Rule (agreements, concerted practices and decisions of associations which have the object or effect of preventing, restricting or distorting competition).

If the Commission follows the European practice, the Commission will draft orders for block exemptions in relation to agreements containing vertical restraints and horizontal co-operation agreements, that will apply, for example, to production joint ventures.

The exemptions will not be specific to particular industries but will likely be expressed to exclude hard core restrictions, such as cartel conduct, minimum resale price maintenance and parallel importation restrictions.

In addition, if the Commission follows the European practice, the Commission will issue draft orders for block exemptions that are specific to industries. For example, in Europe, the European Commission has issued block exemption orders that apply to the following industries:

  • Insurance
  • Motor vehicles
  • Maritime transport
  • Postal services
  • Railroad and inland waterways