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Hong Kong Competition Exchange 2018 - Summary of Discussions

Panel 4: Fast-Evolving Competition Law Regime - Three Years of the Competition Ordinance in Hong Kong

Moderator:

Mr Yonden LHATOO, Chief News Editor, South China Morning Post

Panellists:

Mr Jack LANGE, Chairman, The American Chamber of Commerce in Hong Kong
Ms Winnie TAM Wan-chi SC, Chairman, Hong Kong Communications Authority
Prof Richard WHISH QC (Hon), Emeritus Professor, King’s College London
Ms Natalie YEUNG, Partner, Slaughter and May

Summary of discussions:

The panellists discussed the issues surrounding the implementation of the Competition Ordinance (“CO”) in Hong Kong and its future development from international, business and regulatory perspectives.

CO Implementation

Prof Richard Whish QC (Hon), at the outset of his discussion, made reference to the three-pillar model of competition law, namely provisions governing cartel conducts, abuse of market power, and merger and takeovers. They have been described as the three most important aspects of competition law, and have been implemented in most of the jurisdictions, such as Singapore.

However, he noted that merger control provisions are absent in Hong Kong, except for the telecommunications sector. Drawing an analogy of a three-legged chair, he was of the view that without any one of the three legs, the chair will fall over. The law would be unstable and flawed if not all three aspects were present in a competition jurisdiction. Ultimately, the future of the CO is very much dependent upon the efforts of the Competition Commission, and he pinpointed as directions of improvement the aims of expanding the scope of the law and making it more effective.

Ms Natalie Yeung took an optimistic view by highlighting the three things about the implementation of the CO that she believed to have worked well. Firstly, the cartel enforcement: there are already three cartel cases brought to the Tribunal in the first three years of the implementation of the CO, and the cases have been investigated efficiently e.g. the first case being concluded by the Commission in just seven months. She was also impressed by the Commission’s strategy, of which the cases it decided to pursue covered the important issues of bid rigging, price fixing, and individual liability, which are instrumental to developing the case law in Hong Kong. However, some enforcement challenges remained, such as the procedural issues will need to be further ironed out. Secondly, Yeung found it encouraging to see two applications for block exemption and decision based on the efficiency and the legal requirement arguments respectively have been handled. With her personal experiences in working on those applications, she was impressed by the engagement, transparency and the analysis by the Commission. Thirdly, the Commission has done a lot on advocacy and engagement to increase awareness among the public and business community, and she thought it should be a continuing initiative.

Feedback from the business community

Mr Jack Lange said that international businesses have global compliance programs, which take into account other jurisdictions’ competition laws. The implementation of the Competition Ordinance did not impact their businesses to a large extent. Nevertheless, the competition law regime in Hong Kong drew reference from different overseas jurisprudence (e.g. UK, US, EU). For example, the court system and prosecutorial aspect are similar to that of the US system, but the principles and rules of competition law in Hong Kong are similar to that of the EU systems. The challenge for the commercial sector is the difficulty to predict its “personality”.

Stand-alone actions

Currently, only the Competition Commission can apply to the Competition Tribunal to declare a contravention. There have been suggestions to extend this right to affected parties and therefore to allow stand-alone actions.

Prof Richard Whish QC(Hon) emphasized that as stated in the Competition Ordinance, after the Tribunal found that there is an infringement of the Ordinance, the victims of the anti-competitive behaviour can seek damages. In simple terms, the only remedy for victims of anti-competitive behaviour is to ask the Competition Commission to act. But if the Commission does not act, there are no other channels for the affected parties to seek remedy, except by overturning the Commission’s decision on not to act through judicial review and the process would likely take a long time. Such change may also help release some of the Commission’s enforcement burden at least in terms of resources. There could also be a collective action for damages, as individuals may find it difficult to litigate on their own behalf. He also mentioned that private stand-alone actions in mainland China have been used extensively and are practising well. However, in his opinion, it is not a perfect time to introduce the standalone right to HK now.

Mr Jack Lange believed it is a chicken and egg problem. Private action is the most efficient and least political way to identify meritorious cases. Without private actions, there will be no good case brought to the court. He also believes that the timing of the introduction of private action is important. It appears to be immature to introduce private actions now, but it will certainly be an important aspect of Hong Kong’s competition law regime in the future.

Ms Winnie Tam SC thought that the market needed more time to understand the law. Judicial experience needs to be accumulated through cases. However, in future, there could be thirdparty litigation funding, because nowadays the third-party funding exists in arbitration. She predicted that third-party funding would become a grand trend to support the private actions in HK.

Implementation of the warning notice

Although HK has introduced the competition law regime for three years, the warning notice mechanism has not yet been tested. The issue is that given trials take a long time, whether warning notices should be used more often.

Ms Natalie Yeung believes that the warning notice can be issued before commencing judicial proceedings if the issue in question does not involve cartel conduct (serious anti-competitive conduct) under the First Conduct Rule. In the past three years, the Competition Commission focused mostly on serious market misconducts, such as cartels. It follows that some non-cartel conducts seem not to have been handled, thus the development of non-cartel jurisprudence is hindered. Companies have the “can get out of jail free” card.

The government has promised that it will review and improve the CO after three years of its implementation. It is hoped that the implementation of CO will adapt and be consistent with the HK market and contribute to the development of the HKSAR legal system.

The Telecommunications and Broadcasting Sectors

Ms Winnie Tam SC remarked that after the coming into full force of the CO, the sector-specific competition provisions in the Broadcasting Ordinance and Telecommunications Ordinance were repealed and finally unified in the CO. The Communications Authority (“CA”) now has a concurrent jurisdiction with the Competition Commission to enforce the CO in the telecommunications and broadcasting sectors.

Ms Tam made her point that while it would fall outside the CA’s purview to decide whether the merger rule should apply outside the telecommunications sector, as it currently does not, it would not be correct for the public to have the impression that the telecommunications sector is not subject to merger rule.

Responding to the moderator’s question on “no new entry” to the television broadcasting market, Ms Tam suggested that, for example, HKTV’s recent exit may not be solely related to the government’s refusal to issue a license, but perhaps also because of business factors that were outside the terrain of licensing issues, which might include there being more lucrative business elsewhere.

Ms Natalie Yeung took the view that online broadcasting companies, such as Netflix, is a salient example of competition being introduced and eventually more and better choices for consumers.