Hong Kong: Competition Commission

The year 2019 was a very important and encouraging year for the Competition Commission (Commission) in Hong Kong, with significant progress made across the spectrum of its enforcement, policy and advocacy work. This article outlines some of the Commission’s activities in the past year.

Enforcement activities

Overview

In 2019, the Commission received over 600 complaints and enquiries about potentially anti­competitive conduct. About 40 per cent related to the First Conduct Rule (anticompetitive agreements), with cartel conduct being the major concern; over 20 per cent related to the Second Conduct Rule, which prohibits abuse of substantial market power.

In May 2019, the Commission gladly welcomed the judgments handed down by the Competition Tribunal (Tribunal) in Hong Kong’s first two competition cases involving bid-rigging, market-sharing and price-fixing. The outcomes were largely in favour of the Commission, with 14 of 15 named respondents in the two cases found to have contravened the Competition Ordinance (Ordinance). Although both judgments were appealed by certain respondents, the rulings nonetheless represent a key milestone for the Commission and the Hong Kong competition law regime, setting important foundational precedents that provide guidance for the Commission’s enforcement work as well as for the business and legal communities.

In July 2019, the Commission commenced proceedings in the Tribunal against six reno­vation companies and three individuals for alleged market-sharing and price-fixing in relation to the provision of renovation services in a public housing estate. This was the fourth case brought before the Tribunal in less than four years of full implementation of the Ordinance. The case was also the Commission’s third enforcement action against cartel conduct in relation to renovation services at public housing. It drives home a deterrent message that the Commission will spare no efforts in pursuing conduct that is particularly egregious when the people targeted are some of the city’s most vulnerable and low-income consumers.

Investigation into the Hong Kong Seaport Alliance

Four major container terminal operators entered into a joint operating agreement to form the Hong Kong Seaport Alliance, whereby they will operate and manage their 23 berths across eight terminals in Hong Kong. The Commission announced in early 2019 that it was carrying out an investigation into the matter. The Commission hopes to complete the investigation in the first half of 2020.

Publication of Cooperation Policy

To enhance its effectiveness and efficiency in investigations, the Commission published a Cooperation and Settlement Policy for Undertakings Engaged in Cartel Conduct (Cooperation Policy) in April 2019 as a supplement to its existing Leniency Policy for Undertakings Engaged in Cartel Conduct (Leniency Policy) and Enforcement Policy. Under the Cooperation Policy, undertakings that do not obtain leniency in connection with a cartel investigation may choose to admit their contravention and cooperate with the Commission in its investigations. In return, the Commission will offer discounts off the pecuniary penalties it would otherwise recommend to the Competition Tribunal and may refrain from taking an action against the cooperating under­taking’s employees. The new framework also offers a Leniency Plus programme, which encourages cartel members to report other cartel activities to the Commission.

Together with the existing Leniency Policy, the Cooperation Policy provides a framework with clear incentives for companies to cooperate with the Commission and to resolve liability short of having to litigate and go through a trial. By increasing the effectiveness of investigations, it will also discourage the formation and continuation of cartels in Hong Kong.

Publication of Decision on proposed pharmaceutical sales survey

The Commission published a Decision in October 2019 finding that a proposed pharmaceutical sales survey is not excluded from the First Conduct Rule by the Ordinance’s economic efficiency exclusion.

The Decision was made in response to an application received from the Hong Kong Association of the Pharmaceutical Industry (HKAPI), an industry association whose members provide over 70 per cent of prescription medicines in Hong Kong. The Application concerned HKAPI’s proposal to conduct a quarterly survey to collect certain data on the sales of prescription and over-the-counter pharmaceutical products in Hong Kong and Macau. The data would then be compiled into a sales survey report available for purchase.

In reaching its Decision, the Commission considered the application as well as the representations and submissions received in the public consultation on the application. The Decision, together with a Statement of Reasons, provides further clarity on the Commission’s approach towards information exchange and practical guidance on its interpretation of the economic efficiencies exclusion.

Policy and advisory

Advice on Franchised Taxi Scheme

During 2019, the Commission provided advice on approximately 30 public policies and initiatives that concern Hong Kong’s consumers and the business environment. Notably, the Commission submitted its views to the Legislative Council on the government’s proposed Franchised Taxi Scheme, under which 600 premium franchised taxis will be introduced with three franchises to be granted by open tender, each allowing the operation of 200 vehicles.

Apart from recommending specific pro-competition changes to the Scheme, the Commission calls on the government to give serious consideration to wider reforms of the taxi industry with the aim of allowing consumers to obtain the full benefit of competition.

Comparative study of competition impact assessment regimes

As part of its effort to provide the public sector with the training and tools necessary to take competition into account in the policy-making process, the Commission launched a research project in August 2019 involving academics from Hong Kong, Australia and the Mainland to compare different approaches to competition impact assessment of policies and their effectiveness, with the aim of producing recommendations and practical guidelines for the public sector in Hong Kong.

Advocacy and outreach

‘Report Anti-competitive Conduct’ Campaign

The Commission launched a multi-pronged advocacy campaign in August 2019 to encourage the community to report suspected anticompetitive practices to the Commission and address common concerns that businesses and the public may have in coming forward to file a complaint. In addition to new TV and radio announcements, a mini-website was rolled out with red flags of anticompetitive conduct and information on how complaints will be handled by the Commission. Leveraging different outdoor and online platforms, the Commission has reached a wide spectrum of audience resulting in a marked increase in the number of complaints and enquiries received since the launch of the Campaign.

Interactive school workshop

Engagement with Hong Kong’s youths continues to be a focus of the Commission’s advocacy work. To instill the value of fair competition in the younger generation before they join the workforce, the Commission has furthered its youth outreach during the year by rolling out a new round of interactive workshops on the Ordinance to all secondary schools in Hong Kong.

Ongoing advocacy

The Commission has been actively engaging its various stakeholders through meetings and ­seminars, exhibitions, educational materials and special projects since inception. In the past year, the Commission conducted and participated in more than 80 events targeting businesses and the general public, and won numerous local and international awards for its outreach and publicity activities.

International activities

The Commission believes firmly in the need for competition authorities and academics to work together, and that this benefit can be further enhanced when they do so across borders. Towards this end, the Commission, partnering with Hong Kong’s Lingnan University, organised its ­inaugural Competition Enforcers and Academics Summit in the city in August 2019. Forty-five distinguished scholars and enforcers from 13 jurisdictions in the Asia-Pacific region gathered to discuss ways and areas in which academic institutions and competition law enforcement agencies can mutually benefit from effectively leveraging each other’s knowledge, expertise and resources.

Outlook

Going forward, the Commission will continue to carry out its various functions efficiently and effectively. On the enforcement front, the Commission’s portfolio of investigations has been growing in number, variety and complexity across a wide range of sectors encompassing both the First Conduct Rule (anticompetitive agreements) and Second Conduct Rule (abuse of substantial market power). It is expected that a number of promising investigations will result in various enforcement outcomes in 2020, such as issuing warning or infringement notices, as well as accepting commitments, in addition to bringing cases to court. Some of these investigations will set important new precedents for competition enforcement in Hong Kong and result in greater guidance to the business community regarding certain types of conduct and agreements.

As for policy and advocacy, the Commission will continue to play an active role in assisting the public sector and policymakers in the assessment of competition risks and impacts of public policies and initiatives. The Commission will also carry on its momentum in advocacy and engagement with a particular focus on ‘intermediary’ groups such as auditors, lawyers, compliance officers, company secretaries and accountants, as these professions are in the best position to advise businesses and companies on risk management and compliance matters. To expand its engagement, the Commission also intends to strengthen the use of social media in the coming year.

It was an exciting year in which the Commission matured rapidly as an enforcement agency, and we look forward to taking new strides in the coming year with the aim of ensuring a level-playing field for everyone in Hong Kong.