Hong Kong: Competition Commission

The Competition Commission (Commission) in Hong Kong has had a very busy and encouraging second year of full operations, achieving a number of important milestones across the spectrum of enforcement, policy and outreach. Both businesses and the general public in the territory are increasingly aware of the Competition Ordinance (Ordinance) and how it works, as well as the benefits brought by it. This article outlines some of the Commission’s activities over the past year.

Enforcement activities

Overview

In 2017, the Commission received over 800 complaints and queries about potentially anticompetitive conduct. Over half related to the First Conduct Rule (anticompetitive agreements) with cartel conduct being the major concern. The Commission also received intelligence from other regulators, whistleblowers and leniency applicants. These various sources have led to a number of investigations into potential contraventions of the Ordinance in areas of the Commission’s enforcement focus.

In March 2017, just 15 months after full commencement of the Ordinance, the Commission commenced its first proceedings in the Competition Tribunal (Tribunal) against five technology companies for alleged bid-rigging. The proceedings concern a tender related to the supply and installation of a new IT system for a social service organisation. Five months later, in August 2017, the Commission brought its second case to the Tribunal alleging that 10 construction and engineering companies have engaged in market sharing and price fixing in relation to the provision of renovation services for a public rental housing estate. Both cases are slated for trial in 2018 and they will serve an important role in developing precedent that will guide conduct of the business community as well as the Commission’s future enforcement efforts.

Publication of first Block Exemption Order

The Commission published its first Block Exemption Order (Order) in August 2017 for vessel sharing agreements (VSAs) between liner shipping companies, subject to certain conditions. The Order was issued in light of the Commission’s assessment of the economic efficiencies generated by VSAs, and it has also taken account of the submissions received in various consultations. The Order does not cover voluntary discussion agreements (VDAs) as it was not demonstrated that the relevant VDA activities meet the requirements of an efficiency exclusion.

The Order, which will remain in effect for five years, was issued in response to an application from the Hong Kong Liner Shipping Association submitted in December 2015. The Commission granted a six-month grace period to allow the parties concerned to make changes to their commercial arrangements, which ended on 8 February 2018.

MOU with Canadian Competition Bureau

The Commission entered into its first international Memorandum of Understanding (MOU) with the Canadian Competition Bureau (Bureau) in December 2016 with the purpose of enhancing cooperation, coordination and information sharing between the two agencies on competition issues of mutual concern. Under the terms of the MOU, the two agencies will share competition law knowledge and enforcement experience and engage in other forms of technical cooperation including staff exchanges, under which the Bureau seconded an experienced investigator to assist in the Commission’s investigation work in early 2017. The Commission will continue to build on its bilateral exchanges with overseas counterparts to ensure an effective and collaborative approach to competition policy and law enforcement.

Advocacy and outreach

Study into local auto-fuel market

Hong Kong’s petrol prices being highlighted as the highest in the world have brought the state of competition in the auto-fuel market into sharp focus. In response to public concerns, the Commission conducted a study into the market and released a report of the findings in May 2017.

In addition to looking at auto-fuel prices and their movements, the Commission identified a number of structural and behavioural features of the local auto-fuel market that are hindering competition and which the Commission believes would likely have contributed to the high auto-fuel prices in the territory. The Commission made recommendations in the report on how to address these issues and engaged with the government regarding implementation of those recommendations.

Market sharing campaign

Riding on its second case before the Tribunal, the Commission launched a ‘Combat Market Sharing Cartels’ Campaign (Campaign) in November 2017 to raise public awareness of market sharing and to strengthen detection of such conduct.

The Campaign features a TV and radio announcement together with a brochure outlining practical information on how to identify market sharing and guidance on what to do should it be suspected. Two educational videos were produced to explain the concept in a light-hearted and easy to understand manner. These videos have received over one million accumulated views, which far exceed the number of views generally received by government online videos. To further educate and reach out to a wider audience, the Commission is organising targeted seminars and mini roving exhibitions across the territory in the first half of 2018.

As a further initiative of its advocacy campaigns on bid-rigging and market sharing, the Commission published a model ‘non-collusion clause’ in December 2017 with an aim to providing easily accessible references for procurers to strengthen defence against cartel conduct.

The Campaign has been effective in fostering a compliance culture and bringing suspected cartel conduct to our attention. This is reflected by a notable increase in the number of complaints received on market sharing as well as growing requests for seminars since the launch of the campaign.

Youth education campaign

The Commission started reaching out to the younger generation in 2017 as the Commission believes it is important to instill the spirit of fair competition before they join the workforce. In February 2017, the Commission rolled out a youth programme comprising a creative advocacy contest to promote competition as well as seminars and workshops on the Ordinance targeting all senior secondary students and teachers in Hong Kong. The response was overwhelming and the winning teams were sent on a three-day study tour to Singapore to learn about how competition law works in another jurisdiction.

Ongoing advocacy

The Commission has been actively engaging its stakeholders through meetings and seminars, educational materials and special projects. In the past year, the Commission has conducted and participated in more than a hundred events, and won numerous local and international awards for its outreach and publicity activities including the Competition Advocacy Contest co-organised by the International Competition Network and the World Bank Group.

On the policy advisory front, the Commission has continued its efforts in liaising with the government and public bodies on issues of public concern that relate to competition such as the Voluntary Health Insurance Scheme, as well as the code of marketing and quality of formula milk for infants that affect the daily lives of the people in Hong Kong.

Looking forward

The Commission will continue to make active use of its enforcement power and bring cases to the Tribunal that address significant local competition abuses. This is important not only for the sake of enforcement itself, but also for the purpose of establishing judicial precedents that interpret the Ordinance and provide guidance to the business and legal communities. In ensuring the government’s initiatives are safeguarded from collusion and that its regulations and ordinances take into account competitive impact, we are developing greater tools to allow policy makers to recognise and assess competition issues.

While local advocacy and international engagement remain a key focus, the Commission is organising its first-ever international conference in Hong Kong in November 2018, bringing in local and international competition law experts, academics and business professionals to discuss and share their perspectives on important competition issues from a Hong Kong standpoint.

The Commission has an ambitious portfolio of work and is moving it forward in multiple ways. Much has been accomplished in the Commission’s mission to promote and safeguard competition in the past two years, and we look forward to continuing our work in bringing everyone in Hong Kong the many benefits that flow from competition.