What is the legal framework in your jurisdiction covering the behaviour of dominant firms?
The principal legislation covering unilateral conduct of firms with market power is set out in Part 2, Division 2 of the Competition Ordinance (Cap 619) (CO).
Specifically, section 21(1) CO prohibits an undertaking that has a substantial degree of market power (SDMP) from abusing that power by engaging in conduct that has as its object or effect the prevention, restriction or distortion of competition in Hong Kong. This prohibition is referred to as the Second Conduct Rule (SCR) and applies to conduct taking place after 14 December 2015, when the substantive provisions of the CO came into force.
In July 2015, the Hong Kong Competition Commission (CC) and the Communications Authority (CA) jointly issued the Guideline on the SCR (SCR Guideline). The SCR Guideline does not have binding legal effect, but sets out how the CC and CA intend to interpret and give effect to the SCR.
The CO also introduced a new section 7Q to the Telecommunications Ordinance (Cap 106) (TO), which prohibits a licensee in a dominant position in a telecommunications market from engaging in conduct that is, in the opinion of the CA, exploitative (such as excessive pricing or setting unfair trading terms).
Definition of dominance
How is dominance defined in the legislation and case law? What elements are taken into account when assessing dominance?
The SCR applies to abuses of a substantial degree of market power. The SCR Guideline sets out the CC and CA’s interpretation of SDMP which, according to paragraph 3.2, arises ‘where an undertaking does not face sufficiently effective competitive constraints in the relevant market’ and can be thought of as ‘the ability profitably to charge prices above competitive levels, or to restrict output or quality below competitive levels, for a sustained period of time’. The authorities would normally consider a sustained period to be two years, although the relevant period may be shorter or longer depending on the facts, in particular with regard to the product and the circumstances of the market in question.
The CC and the CA have indicated that this definition does not preclude the possibility of more than one undertaking having SDMP in a relevant market, particularly if the market is highly concentrated with only a few large market participants (paragraph 3.3 of the SCR Guideline). SDMP appears on the face of it to connote a lower threshold than dominance. However, it will ultimately be for the Competition Tribunal to interpret the CO definition.
Section 7Q of the TO applies to exploitative conduct of a licensee in a dominant position in a telecommunications market. A licensee is considered to be in a dominant position if, in the opinion of the CA, it is able to act without significant competitive restraint from its competitors and customers (section 7Q(2) of the TO). Section 7Q(3) of the TO sets out the factors that, in considering whether a licensee is dominant, the CA must take into account.
Purpose of legislation
Is the purpose of the legislation and the underlying dominance standard strictly economic, or does it protect other interests?
The SCR has a clear economic focus. The CC and CA have stressed that the SCR applies only to undertakings carrying out economic activity that engage in conduct that has an anticompetitive object or effect.
The economic focus is also reflected in the CC’s Enforcement Policy, which indicates that the CC intends to direct its resources to matters that provide the greatest overall benefit to competition and consumers in Hong Kong.
In the telecommunications sector, the additional prohibition under section 7Q of the TO seeks to prevent a dominant firm from engaging in exploitative conduct and therefore has a greater focus on protection of consumers rather than competition.
Sector-specific dominance rules
Are there sector-specific dominance rules, distinct from the generally applicable dominance provisions?
The SCR prohibits any abuse of SDMP occurring on or after 14 December 2015, irrespective of the economic sector in which the conduct in question takes place. With the exception of section 7Q of the TO, there are no sector-specific rules that apply to conduct of this type after 14 December 2015.
Prior to implementation of the CO, firms operating in Hong Kong’s broadcasting and telecommunications sectors were subject to sector-specific legislation, namely:
- sections 7L and 7N of the TO, which prohibited a licensee in a dominant position in a telecommunications market from abusing its position (7L) and engaging in certain discriminatory practices (7N); and
- section 14 of the Broadcasting Ordinance (Cap 562) (BO), which prohibited a licensee in a dominant position in a television programme service market from abusing its position.
These sector-specific provisions were repealed by the CO. The conduct of telecommunications and broadcasting licensees with market power after 14 December 2015 is now subject only to the SCR. However, pursuant to sections 3 and 4 of Schedule 9 of the CO, alleged abuses of dominance that took place (in whole or in part) prior to 14 December 2015, and that would otherwise have been regulated by the section 7L of the TO or section 14 of the BO, may be investigated by the CA under the provisions of the BO or TO as if those sections had not been repealed.
Exemptions from the dominance rules
To whom do the dominance rules apply? Are any entities exempt?
Subject to a number of specific exclusions set out in the CO and secondary legislation, the SCR potentially applies to the conduct of any entity engaged in economic activity (regardless of its legal status or the way in which it is funded).
The key exclusions are as follows.
The SCR does not apply to statutory bodies constituted by or under an Ordinance, except those specified by a regulation of the Chief Executive in Council. (At the time of writing, six specific statutory bodies are specified as being subject to the SCR by virtue of the Competition (Application of Provisions) Regulations (Cap 619A).)
The Competition (Disapplication of Provisions) Regulation (Cap 619B) also excludes from the application of the SCR seven specific entities related to Hong Kong Exchanges and Clearing Limited.
Finally, section 6 of Schedule 1 of the CO excludes conduct of an undertaking that has a global turnover not exceeding HK$40 million for the previous financial year.
Transition from non-dominant to dominant
Does the legislation only provide for the behaviour of firms that are already dominant?
As noted in the answer to question 1, the SCR prohibits an undertaking that has SDMP from abusing such market power. Likewise, section 7Q of the TO applies to exploitative conduct of a licensee in a dominant position in a telecommunications market. It follows that neither the SCR nor section 7Q of the TO prohibits conduct unless the firm in question has the requisite degree of market power at the time the conduct in question takes place.
The SCR Guideline stresses that the legislation is not concerned with preventing firms from gaining market power, as it is recognised that the pursuit of market power through innovation and competition is key to a prosperous free market economy (paragraph 1.9 of the SCR Guideline).
Is collective dominance covered by the legislation? How is it defined in the legislation and case law?
There is no separate concept of collective dominance in the CO. However, according to the SCR Guideline, the wording of the SCR does not preclude the possibility of more than one undertaking having SDMP in a relevant market.
No additional guidance has been provided and no cases have come before the Competition Tribunal to clarify the circumstances in which joint or collective market power may arise. Nor have the authorities opined on the extent to which the joint conduct of two or more undertakings could amount to a breach of the SCR. Therefore, while the wording of the CO does not appear to envisage a collective market power doctrine, in the light of the SCR Guideline, the possibility that such a doctrine could emerge cannot be excluded.
Does the legislation apply to dominant purchasers? Are there any differences compared with the application of the law to dominant suppliers?
The SCR is not limited to the conduct of suppliers with SDMP and the SCR Guideline expressly acknowledges that market power might equally arise where a buyer has the ability to obtain purchase prices below the competitive level for a sustained period of time.
Market definition and share-based dominance thresholds
How are relevant product and geographic markets defined? Are there market-share at which a company will be presumed to be dominant or not dominant?
The SCR Guideline sets out the analytical framework the CC and CA intend to use in defining the relevant product and geographic markets for the purposes of conducting a competition assessment under the CO. In common with many other global competition law enforcers, the CC and CA have stressed that the exercise of defining the relevant market is no more than an analytical tool, designed to assist them in identifying, in a systematic way, the competitive constraints faced by an undertaking and is not an end in itself.
The CC and CA will adopt a familiar, and largely uncontroversial, methodology. According to paragraph 2.6 of the SCR Guideline, the relevant market within which to analyse market power has both a product dimension and a geographic dimension. In this context, the relevant product market comprises all those products that are considered interchangeable or substitutable by buyers because of the products’ characteristics, prices and intended use; and the relevant geographic market comprises all those regions or areas where buyers would be able or willing to find substitutes for the products in question.
In determining the relevant product market, substitutability from the perspective of the buyer is key (see paragraph 2.10 of the SCR Guideline). For this purpose, the CC and CA would generally apply the ‘hypothetical monopolist test’. This entails the authorities considering whether a hypothetical firm with a monopoly in a narrowly defined category of goods or services would be able profitably to impose a small but significant non-transitory increase in price (SSNIP) (typically between 5 per cent and 10 per cent). If sufficient buyers would switch to substitute products in response to a SSNIP to render it unprofitable, the candidate market may be expanded to include the substitute products to which buyers would switch. The same analysis will be performed on the expanded candidate market until a group of products over which a hypothetical monopolist can profitably impose a SSNIP is identified. The group of products forms the relevant product market.
The CC and CA have stated that they will not generally consider supply-side substitutability or potential competition when defining a market. Rather, the likelihood of supply-side substitution will be considered at a later stage in the analysis (typically when considering whether an undertaking may have market power).
Market share thresholds
Although a market share threshold of 25 per cent (below which it was suggested that SDMP was unlikely to arise) was proposed by the Commerce and Economic Development Bureau during the debates on the legislation, the CO did not ultimately adopt any market share thresholds or ‘rules of thumb’.
The CC and CA have resisted giving an indication of any particular market share at which SDMP is likely to arise or at which the CC or CA would consider to be conclusive of an undertaking’s market power. While the CC and CA recognise that an analysis of market shares may be useful as an initial screening device in the assessment of substantial market power and that undertakings are more likely to have market power where they have high market shares, the SCR Guideline stresses that high market shares do not necessarily imply SDMP and the determination should be made on the facts of the particular case, including the characteristics of the industry involved and the nature of competition in the relevant market. (See question 2 for further discussion of the SDMP test.)
It is worth noting generally that, given the prosecutorial nature of the CO regime, the tests to be applied in defining the extent of the relevant economic market or the level of market shares indicative of market power will ultimately be a matter for the Competition Tribunal. At the time of writing, no cases involving abuses of SDMP have been brought and there is no guidance on the approach the Tribunal is likely to adopt in CO cases.
Abuse of dominance
Definition of abuse of dominance
How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?
The SCR applies to conduct carried out by an undertaking with SDMP that has as its object or effect the prevention, restriction or distortion of competition in Hong Kong. The legislation, therefore, follows both form-based and effects-based approaches in identifying abusive conduct.
The SCR Guideline provides that conduct may be considered to have the object of harming competition if it can be regarded, by its very nature, as being so harmful to the proper functioning of normal competition in the market that there is no need to examine its effects. In this context the object of conduct refers to the purpose or aim of the conduct, viewed in its context, and in light of the way it is implemented, and not merely the subjective intentions of the undertaking concerned. The SCR Guideline further sets out a number of examples of conduct that the CC and CA regard as potentially having the object of harming competition, including predatory pricing (setting prices below average variable costs); certain exclusive dealing arrangements; and paying to delay the introduction of a competitor’s products.
In cases where the conduct in question does not have the object of harming competition, it will be considered to be an infringement if it has an anticompetitive effect. According to the SCR Guideline, when demonstrating that conduct has an anticompetitive effect, the CC or CA may consider not only any actual effects, but also effects that are likely to flow from the conduct. The SCR Guideline also states that for conduct to have an actual or likely effect on competition, it must harm the process of competition (as opposed to harming individual competitors) and identifies tying and bundling, margin squeeze, refusals to deal and exclusive dealing as (non-exhaustive) examples of the types of conduct that may potentially constitute an abuse.
Exploitative and exclusionary practices
Does the concept of abuse cover both exploitative and exclusionary practices?
In its Enforcement Policy dated November 2015, the CC indicated that it will accord particular priority to conduct involving exclusionary behaviour by incumbents operating in one or more markets in Hong Kong. As noted in the answer to question 10, the SCR Guideline states that for the CC or CA to regard conduct as having an actual or likely effect on competition, it must harm the process of competition. All of the examples of abuses provided in section 5 of the SCR Guideline are exclusionary in nature and exploitative abuses such as excessive pricing or price discrimination are not mentioned. This clearly indicates that the CC’s focus will be on exclusionary conduct. Nevertheless, the SCR does not draw any distinction between exploitative and exclusionary practices and it is at least arguable that both types of practices could constitute an abuse.
Exploitative conduct by a licensee in a dominant position in a telecommunications market is specifically prohibited by section 7Q of the TO.
Link between dominance and abuse
What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?
The SCR prohibits an undertaking that has SDMP in a given market from abusing its power in that market by engaging in conduct with an anticompetitive object or effect. This suggests there must be a nexus between the market in which the undertaking in question has power and the (ab)use of that power. However, the SCR does not expressly require that the impugned conduct must have effect in the same market in which the undertaking maintains market power: the abusive conduct need only have as its object or effect the prevention, restriction or distortion of competition in Hong Kong.
The SCR Guideline makes it clear that, in the view of the CC and CA, it is possible for an undertaking with SDMP in one market to engage in conduct that has an impact in a different market. Paragraph 4.2 of the SCR Guideline gives as an example a situation in which an undertaking leverages its market power in a one market to harm competition in a second. Likewise, paragraphs 5.8 to 5.12 of the SCR Guideline envisages that tying and bundling (whereby an undertaking abuses SDMP in the tying market with a view to harming competition in the tied market) would amount to an abuse.
What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?
The CO does not contain any statutory defences. However, there are a number of exclusions and exemptions to the SCR, which are set out in Schedule 1 to the CO.
Broadly, the SCR does not apply to conduct:
- to the extent it is engaged in for the purpose of compliance with legal requirements;
- that would obstruct the performance of particular tasks assigned to an undertaking entrusted by the Hong Kong government with the operation of services of general economic interest;
- that would result in a merger within the meaning given by sections 3 and 5 of Schedule 7 of the CO; and
- of an undertaking that has a turnover (whether in or out of Hong Kong) not exceeding HK$40 million in the financial year preceding the calendar year in which the conduct in question was engaged in.
There is no efficiency-based exclusion available for conduct within the scope of the SCR. However, the SCR Guideline envisages that it would be open to an undertaking to argue that the conduct in question is not abusive because either: it was indispensable and proportionate to the pursuit of some legitimate objective unconnected with the tendency of the conduct to harm competition; or the conduct entails efficiencies sufficient to guarantee no net harm to customers.
Neither the CO nor the SCR Guideline precludes the application of these exclusions to conduct that is abusive by ‘object’.
In addition to the defences outlined above, an undertaking may be able to defend a prosecution of an abuse by effect on the basis that no anticompetitive effect is likely to arise. However, such an argument would not be available in a case where the abuse in question was found to have had the object of preventing, restricting or distorting competition in Hong Kong.
Specific forms of abuse
Types of conduct Types of conduct
The SCR Guideline recognises that rebates conditioned upon purchasing obligations that are granted by undertakings with SDMP can have anticompetitive foreclosure effects similar in nature to exclusive dealing arrangements. In some cases, the CC and CA may regard exclusive dealing arrangements (a term that is defined as including rebate schemes) as having an anticompetitive object.
The SCR Guideline draws a distinction between rebates granted on all purchases from the undertaking (retroactive rebates) and those granted upon purchases above a certain threshold (incremental rebates). The CC and CA’s view is that retroactive rebates have the potential to foreclose the market significantly, whereas generalised quantity rebates are less likely to raise competition concerns unless they are predatory in nature.
Tying and bundling
According to the SCR Guideline, tying occurs when a supplier makes the sale of one product conditional upon the purchase of another, whereas bundling refers to a situation in which a package of two or more products is offered at a discount. The SCR Guideline recognises that tying and bundling are common commercial arrangements that do not harm competition in the absence of SDMP, but that such conduct can contravene the SCR where an undertaking leverages its SDMP in a market for one product to foreclose competition in the market for another.
According to the SCR Guideline, the term ‘exclusive dealing’ covers exclusive purchase and exclusive supply obligations as well as incentive arrangements having a similar effect. The SCR Guideline recognises that exclusive dealing is a common commercial arrangement, which generally does not harm competition. However, it may amount to an abuse where it is used by an undertaking with SDMP to foreclose competitors from a market by preventing those competitors from securing supplies of key inputs or from being able to supply certain customers.
According to the SCR Guideline:
- exclusive supply obligations are likely to be of concern where the obligation in question locks up most of the efficient input suppliers in the market and competitors are unable to secure the inputs from alternative suppliers; and
- exclusive purchasing or minimum stocking obligations are likely to be of particular concern where the undertaking with SDMP has imposed such obligations on many customers; it is likely that consumers as a whole will not derive a benefit; and the relevant obligations, as a whole, have the effect of preventing entry or expansion by competitors (because, for example, the exclusive purchasing obligation locks up a significant part of the relevant market).
The CC and CA take the view that certain exclusive dealing arrangements might be considered to have the object of harming competition when viewed in their context (see paragraph 4.14, SCR Guideline).
Section 21(2)(a) of the CO lists predatory behaviour towards competitors as conduct that may constitute an abuse. The SCR Guideline provides that an undertaking with SDMP engages in predatory pricing where it deliberately foregoes profits in an attempt to force competitors out of the market, or to otherwise discipline them. Adverse effects on competition will arise where there is, or is likely to be, anticompetitive foreclosure of existing competitors or new entrants.
When assessing whether predation has taken place, the authorities will typically look to identify if the undertaking is pricing below an appropriate measure of costs. The SCR Guideline distinguishes between situations in which an undertaking is:
- pricing below its average variable cost (AVC), which the CC may infer is undertaken for a predatory purpose and will likely be considered anticompetitive by object; or
- pricing below average total cost (but above AVC), which may be considered to be an infringement if there is evidence of actual or likely anticompetitive effects or a predatory strategy.
Price or margin squeezes
The SCR Guideline states that margin squeeze may arise where:
- a vertically integrated undertaking with SDMP supplies an important input to businesses operating in a downstream market in which the undertaking with SDMP also operates; and
- the undertaking with SDMP ‘squeezes’ the margin between the price it charges to its downstream competitors for the input and the price its downstream operations charge customers for the products incorporating the input.
In assessing whether conduct amounts to an abusive margin squeeze, the authorities consider the extent to which:
- the upstream input is indispensable; and
- the margin allowed to rivals (ie, the difference between the price charged for the input and the undertaking’s own downstream operations’ sales price) is sufficient to cover the undertaking with SDMP’s own downstream product-specific costs.
Refusals to deal and denied access to essential facilities
According to the SCR Guideline, a refusal to deal is likely to be abusive only in very limited or exceptional circumstances. Competition concerns are most likely to arise when the undertaking with SDMP competes in the downstream market with the party with whom it refuses to deal and where the input to which the refusal relates is indispensable for the competitor in the downstream market.
In assessing whether a refusal to deal is abusive the CC or CA may consider:
- the feasibility of the undertaking with SDMP providing the input in question;
- whether there is a history of dealings between the undertakings (termination of an existing supply arrangement might more readily be characterised as abusive); and
- the terms and conditions upon which the input are generally supplied or are supplied in other contexts.
While not specifically addressed in the CO or the SCR Guideline, a denial of access to an essential facility could potentially amount to an abuse if such denial prevented or restricted competition in a downstream market.
Predatory product design or a failure to disclose new technology
Neither the CO nor the SCR Guideline specifically address the question of whether, or in what circumstances, launching new (or updating existing) products or technology could amount to abusive conduct. However, the category of abusive conduct is stated to be open, and it cannot be excluded that a design decision in relation to a primary product could fall foul of the SCR if it tended to foreclose competitors in a market for products that are complementary to the primary product. The risks are likely to be highest where the primary reason for designing the products in a particular way is to prevent interoperability of a rival’s complementary product or the benefits of innovation are not clear.
The SCR Guideline provides that the authorities will consider a refusal to license an intellectual property right to be a contravention of the SCR only in exceptional circumstances. In addition to the factors relevant to any case of a refusal to deal (see question 19), the authorities may also assess whether a refusal to license prevents the development of a secondary market or new product, or whether it otherwise limits technical development resulting in consumer harm. If intellectual property is essential to an industry standard and an undertaking with SDMP gave a commitment at the time when the standard was adopted by the industry that it would licence the intellectual property on fair, reasonable and non-discriminatory terms, it may be an abuse for the undertaking to a refuse to honour it or to seek injunctive relief against a willing licensee in certain circumstances.
There are no laws in Hong Kong prohibiting price discrimination outside the context of the SCR.
Exploitative prices or terms of supply
The CC’s Enforcement Policy indicates that it will accord particular priority to conduct involving exclusionary behaviour and, as noted above, the SCR Guideline is wholly focused on exclusionary conduct. Nevertheless, as the category of abusive conduct is stated to be open, it follows exploitative pricing or terms of supply could potentially be caught where they have an anticompetitive object or effect.
Exploitative conduct (including pricing or terms of supply) by a licensee in a dominant position in a telecommunications market is specifically prohibited by section 7Q of the TO.
Abuse of administrative or government process
Neither the CO nor the SCR Guideline specifically address the question of whether, or in what circumstances, an abuse of administrative or government process could amount to abusive conduct. However, the category of abusive conduct is stated to be open and conduct of this type may be prohibited where it has an anticompetitive object or effect.
Mergers and acquisitions as exclusionary practices
Section 4(2) of Schedule 1 to the CO provides that, to the extent conduct results in or would result in a merger, the SCR does not apply to that conduct.
The category of abusive conduct is stated to be open and other types of conduct may be prohibited where they have an anticompetitive object or effect.
Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?
The CC is the principal authority responsible for enforcing the SCR. The CC may do all such things as appear to it to be necessary, advantageous or expedient for, or in connection with, the performance of its functions. Specifically, the CC has power under the CO to:
- require any person to produce relevant documents;
- require any person to attend to answer questions; and
- conduct unannounced inspections under warrant.
Section 159 of the CO provides that the CA may perform the functions, powers and duties of the CC insofar as they relate to the conduct of undertakings that are licensees, or persons whose activities require them to be licensed under, or persons who have been specifically exempted from, the TO or the BO.
The CC and CA do not have the power to reach a finding of infringement of the SCR, or to impose sanctions under the CO. Instead, where they have reasonable cause to believe that a person has contravened or been involved in a contravention of, the SCR, they may initiate proceedings in the Competition Tribunal for a pecuniary penalty to be imposed.
Sanctions and remedies
What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?
If, having heard a case, the Competition Tribunal is satisfied that a person has contravened or been involved in a contravention of the SCR it may order that person to pay a fine of up to 10 per cent of the turnover of the undertaking concerned for each year in which the contravention occurred (up to a maximum of three years).
In addition, the Competition Tribunal may make an order:
- prohibiting a person from engaging in the infringing conduct;
- prohibiting the withholding from any person of any goods or services;
- requiring a person to pay damages to any person who has suffered loss or damage as a result of the contravention;
- requiring any person be given access to or the right to use specified goods, facilities or services;
- requiring an account of profits; and
- disqualifying a director of a company.
Can the competition enforcers impose sanctions directly or must they petition a court or other authority?
The CC and CA do not have the power to reach a finding of infringement of the SCR, or to impose sanctions under the CO. Instead, where they have reasonable cause to believe that a person has contravened or been involved in a contravention of the SCR, they may initiate proceedings in the Competition Tribunal for a pecuniary penalty to be imposed.
Section 60 of the CO provides that the CC may accept from a person a commitment to take or to refrain from taking any action if it considers appropriate to address its concerns about a possible contravention of a competition rule.
What is the recent enforcement record in your jurisdiction?
As at the date of writing, the CC had initiated proceedings in the Competition Tribunal in three cases. To date, the CC is still yet to bring a prosecution under the SCR . However, in its 2017/2018 Annual Report (published in December 2018), the CC stressed it would not shy away from bringing cases under the SCR where the facts supported them. Around 16 per cent of the total number of 789 enforcement contacts in the period between 1 April 2017 and 31 March 2018 related to the SCR, with the largest number of abuse-related complaints relating to tying and bundling and exclusive dealing. During this period, the CC referred a total of 36 cases to the initial assessment phase, five of which related to the SCR. It is not known what proportion of these cases have proceeded to formal investigation stage.
Of the prosecutions brought to date, the first two cases (relating to alleged (i) bid rigging and (ii) price fixing/market sharing, respectively) have been heard and judgment is awaited. The judgments are expected to address a number of issues that will have a bearing on how future cases under both the FCR and SCR will be decided - including the applicable burden and standard of proof. In addition, in its third case, relating to price fixing and market sharing, the CC has for the first time brought proceedings against individuals involved in the alleged conduct.
Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?
If the Competition Tribunal makes a finding that the making or the effect of a clause in a contract constitutes a contravention of the SCR, it may make any or all of the orders specified in Schedule 3 to the CO in terms it considers appropriate. For instance, it may make an order declaring that the contract to be void or voidable to the extent specified in the order, or an order requiring the parties to modify or terminate the agreement.
To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?
Section 110 of the CO provides that a person who has suffered loss or damage as a result of any act that has been determined to be a contravention of the SCR may bring follow-on actions before the Competition Tribunal. Following a finding of infringement, the Competition Tribunal may make any one or more of the orders specified in Schedule 3 to the CO it considers appropriate (outlined in the answer to question 30). However, the CO prohibits any enforcement of the SCR other than by the CC and CA.
Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?
See question 31. At the time of writing there are no precedents or guidance as to calculation of damages.
To what court may authority decisions finding an abuse be appealed?
Under section 154 of the CO, an appeal lies as of right to the Court of Appeal against any decision, determination or order of the Competition Tribunal made under the CO.
Under section 32N of the TO, the CA’s decisions in relation to the exploitative conduct of a licensee in a dominant position in the telecommunications market under section 7Q of the TO may be appealed to the Telecommunications (Competition Provisions) Appeal Board. Section 32Q provides that the Appeal Board’s decision will be final.
Unilateral conduct by non-dominant firms
Are there any rules applying to the unilateral conduct of non-dominant firms?
Prior to implementation of the CO, firms operating in Hong Kong’s broadcasting and telecommunications sectors were subject to provisions in the TO and the BO that prohibited a licensee from engaging in conduct that has the purpose or effect of preventing or substantially restricting competition in a telecommunications market (section 7K of the TO) and the television programme service market (section 13 of the BO), respectively.
These sector-specific provisions were repealed by the CO. The conduct of telecommunications and broadcasting licensees after 14 December 2015 is now subject only to the SCR and not the TO or BO. However, pursuant to sections 3 and 4 of Schedule 9 to the CO, alleged conduct that took place (in whole or in part) prior to 14 December 2015, and that would otherwise have been regulated by section 7K of the TO or section 13 of the BO, may be investigated by the CA under the provisions of the BO or TO as if those sections had not been repealed.
Update and trends
Are changes expected to the legislation or other measures that will have an impact on this area in the near future? Are there shifts of emphasis in the enforcement practice – for example, that enforcement is expected to focus on a particular business sector in the time to come, or that, more generally, economic considerations are given greater weight than in the past?
35 Are changes expected to the legislation or other measures that will have an impact on this area in the near future? Are there shifts of emphasis in the enforcement practice?
The Hong Kong government previously undertook to review the CO after it had been in operation for a number of years, taking into account the experience gained and problems encountered in the implementation of the CO. As we approached the third anniversary of the CO coming into full force in December 2018, members of the Legislative Council urged the government to conduct its review of the CO, including the need to introduce stand-alone private actions. The CC has also indicated its intention to review some of its guidelines and policies, which were drafted prior to the implementation of the CO, to establish if refinements are necessary.
The CC’s enforcement focus remains on cartels, other serious anticompetitive agreements causing significant harm to competition in Hong Kong and abuses of SDMP involving exclusionary conduct. Although two of the first three cases the CC has taken to the Competition Tribunal relate to cartel conduct in the provision of building renovation services, according to the CC’s Annual Report 2017/2018, cases that have been escalated to initial assessment and investigation phases have involved a variety of sectors. Examples include real estate and property management, information technology, machinery and equipment, transport, logistics and storage, automotive, travel and hospitality, banking, financial and insurance products and services, beauty and personal care products and services.
In September 2018, the CC brought prosecutions against individuals involved in an alleged cartel, seeking pecuniary penalties and a director disqualification order. The CC views the possibility of individual pecuniary penalties and disqualification to be necessary deterrents and intends to focus on those who were in the management of the contravening company or otherwise directed the conduct. This may be expected to be a feature of the CC’s enforcement approach in future.