Hong Kong’s Competition Commission (“HKCC”) and Communications Authority (“CA”) have today published six draft guidelines (“Draft Guidelines”) in respect of the Competition Ordinance (“Ordinance”). As a pre-requisite to substantive implementation of the Ordinance, publication of the Draft Guidelines represents a significant milestone in the passage towards full enforcement of competition law within Hong Kong.
Although the Ordinance was passed in June 2012, Hong Kong’s competition regime has yet to undergo substantive implementation. Following the substantial progress made in establishing the necessary administrative structures over the last year, the primary obstacle to implementation has been the need for the HKCC to draft and obtain Legislative committee approval for the guidelines which it is required to produce under the Ordinance. The Draft Guidelines are intended to fulfil this requirement and it may therefore be anticipated that the Ordinance will come into effect in the near future.
Overview of the Draft Guidelines
The Draft Guidelines are set out within six separate documents covering:
Procedural matters: (i) Complaints, (ii) Investigations, and (iii) Applications for exclusions and exemptions, and block exemption orders; and
Substantive application of: (i) the First Conduct Rule (which governs agreements between undertakings), (ii) the Second Conduct Rule (relating to abuse of market power), and (iii) the Mergers Rule.
The Draft Guidelines are extensive and detailed, reflecting a similar level of detail to that which has been seen in many established competition law jurisdictions. Most helpfully (and as suggested by our firm to the HKCC during previous consultations) the HKCC has included a range of worked examples within the Draft Guidelines to assist readers’ understanding of its interpretation of the law and how it expects it to apply. As well as assisting business in understanding the Ordinance, worked examples are often the best way of understanding a regulator’s interpretation of the law and how it might be expected to be applied in practice.
Perhaps the most significant omission from the Draft Guidelines, however, is any provisions in respect of the HKCC’s leniency and enforcement policies. Given the importance of leniency policies in particular in encouraging parties to abandon their anti-competitive conduct, it is to be hoped that the HKCC will not delay in publishing appropriate guidelines on both of these topics. Encouragingly, HKCC has indicated that it intends to do so in the near future.
Next steps for implementation
Consultation on the substantive guidelines will continue until 10 December 2014, giving businesses and practitioners an opportunity to influence the shape of competition law in Hong Kong. The consultation period for the procedural guidelines will be shorter, running for only one month to 10 November 2014. The HKCC has invited all interested parties to comment, though given that it is understood that responses will be published on HKCC’s website it remains to be seen how many will want to take up this opportunity on their own.
The timetable for responses is consistent with the HKCC’s previously-stated timetable for implementation such that, barring any serious issues arising out of the consultation, it may be anticipated that HKCC will aim to put its final draft guidelines to the Legislative Committee in the early part of 2015. Depending on the length of the Legislative Committee’s review, therefore, the final guidelines, and with them the Ordinance, could therefore come into force in mid-2015.
Implications for business
Since it came into existence, the HKCC has been consistent and clear that it expects businesses operating in Hong Kong to make all necessary preparations for implementation of the Ordinance. It has transpired that businesses have had longer than they might have expected to adjust their practices to be competition law-compliant. For those which have not, the prospect of the Ordinance coming fully into force in the first half of 2015 means that the recent steps taken by the HKCC should serve as a timely reminder to review and, if necessary, amend practices to ensure compliance with competition law in Hong Kong.