Part I of II - What you should know

After years of consultation and debate, and in the face of continuing opposition from many business sector representatives, Hong Kong is finally on the verge of enacting its first cross-sector competition law. The Competition Bill received its third and final reading last night (14 June) in the Legislative Council, meaning it is destined to become law when the final formalities (signature and promulgation by the Chief Executive and gazetting as an Ordinance) are completed shortly.

The Bill that has now received the approval of legislators is a very different creature to the version that was first presented to the Legislative Council in July 2010, as discussed in our recent legal updates Hong Kong Government Announces Significant Changes to Its Competition Bill and Competition Law Approaches the Finishing Line, but still has the potential to significantly impact the way business is conducted in Hong Kong going forward. And with significant penalties applicable for infringements, including fines of up to 10% of relevant corporate group turnover in Hong Kong, it demands the attention of all businesses.

In this, the first (‘Part I’) of a two-part legal update, we highlight key aspects of the competition law that all businesses who operate or sell into Hong Kong should be aware of, and explain how each of those aspects may directly impact or raise issues for such businesses. Our summary includes discussion of the transitional period that will apply before enforcement of the law’s key prohibitions, the scope of these prohibitions and how Commission guidelines and other instruments will impact this, the enforcement method, and relevant exemptions and exclusions.

Though somewhat watered down from the version originally conceived by the Administration in Hong Kong, the competition law is a significant piece of legislation that has the potential to impact the day-to-day trading activities and strategic commercial decision making of nearly all businesses in Hong Kong - big or small. Making price-related decisions, involvement in contractual negotiations, structuring of joint ventures, participation in trade associations, communicating with competitors, and imposing of exclusivity obligations on trading partners are just a few of the responsibilities that many business staff have on a daily basis and which may be regulated by the new law.

Business representatives and legal teams should therefore ensure they comprehend the broad scope of the law, how it may affect their business, and the steps that can be taken to ensure compliance. With significant penalties able to be levied for infringements of the law, the importance of risk management in this area cannot be understated.

Please see overleaf our summary of key aspects of the law and what they mean for your business.

Please click here to view table.