Hong Kong's competition laws are in full force as of 14 December 2015. This will have important and wide ranging implications on the way business is conducted in Hong Kong as the Hong Kong Competition Commission (Commission), will have powers to investigate and enforce breaches. Simply put, when dealing with your competitors (even if the conduct occurs outside of Hong Kong) there are 4 key "Don'ts". These rules apply even if a party or conduct takes place outside of Hong Kong. The key factor that the Commission will look at is whether the relevant conduct affects competition in Hong Kong. What should I know? Don't fix prices Agreeing on customer prices or price elements such as discounts or credit terms, including pricing formulas Don't restrict output Agreeing with competitors to limit the volume or type of goods or services to drive up prices or otherwise maximise market positions Don't share markets Allocating segments of the market amongst competitors such as by geography or customer type or agreeing not to enter or expand into a competitor's market Don't rig bids Subverting the normal competitive nature of tenders and bid processes by agreeing with competitors who will make or refraining from making bids and on what terms These don'ts are based on the following rules First Conduct Rule Prohibits conduct involving multiple parties that restricts competition Agreements, decisions and concerted practice among undertakings that have an anticompetitive object or effect. This includes vertical and horizontal agreements but does not apply to conduct involving two or more entities if the relevant entities are part of the same undertaking or corporate group Second Conduct Rule Prohibits conduct by a party with substantial market power that restricts competition Conduct that has an anti-competitive object or effect. This includes unilateral conduct by an undertaking such as predatory behaviour towards competitors or limiting production, markets or technical development to the prejudice of customers. If it takes the form of an agreement this may also contravene the First Conduct Rule. There is no definition of 'substantial market power' but market share, power to make pricing, barriers to entry and other relevant factors will be taken into consideration Mergers Rule Prohibits telecommunications mergers and acquisitions that restricts competition These rules apply even if a party or conduct takes place outside of Hong Kong. The key factor that the Commission will look at is whether the relevant conduct affects competition in Hong Kong. Source: Hong Kong Competition Commission Most frequently asked questions answered (FAQs) What are the penalties for breaches? Penalties are broad raging and may include: • Monetary fine individual fines up to HK$1,000,000 and company fines up to 10% of the total gross revenues of the entity obtained in Hong Kong • Imprisonment for individuals for up to 2 years • Director disqualifications for up to 5 years • Injunctions, other mandatory orders What industries will the Commission targeting? All industry sectors • However, the Commission has already received a number of complaints and queries. Based on this we anticipate that the early targets will include: o Fuels (petrol, oil and gas) o Construction and building maintenance o Tourism o Trade associations Who is the Commission? The Commission is an independent statutory body • Thare are 14 Commission members (including the Chairperson) from a variety of backgrounds Will the Commission investigate every complaint? No the Commission acts in the public interest: • The Commission will consider any complaint regarding anti-competitive behaviour but it may not pursue all such complaints What if I'm only a small medium enterprise (SME)? All businesses must comply with the competition laws but: • There is an exception for SME's subject to thresholds, the first conduct rule will not apply to arrangements between businesses where their combined turnover is ≤HK$200 million so long as that arrangement is not 'serious anti-competitive conduct', and the second conduct rule will not apply to businesses with turnover ≤HK$40 million • SME information brochures also available on the Commission's website click here Is there a leniency policy? Yes there is a cartel leniency policy • In exchange for a cartel member's cooperation, the Commission will agree not to commence proceedings for a pecuniary penalty against the first cartel member reporting the cartel conduct to the Commission and meeting all the requirements under the policy • There is also a Commission Leniency Hotline +852 3996 8010 Are there any general exclusions? Yes certain exemptions may apply • Exemptions may include: o Economic: agreements enhancing overall economic efficiency o Legal: agreements for the purpose of complying with a Hong Kong legal requirement o Statutory bodies: most entities established by specific Ordinances are exempt – though undertakings dealing with such entities may still be liable o Public service: certain companies providing services of general economic interest o Government: statutory bodies and certain persons engaged in 'specified activities' o Block exemptions: for specific sectors o SMEs: agreements and conduct of lesser significance (see SMEs above) • Exemption fees may apply. Fees range between HK$50,000 – HK$500,000 but in certain circumstances fees can be waived or reduced
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Competition overview - What should I know?
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