Competition law is still at least three years away

南華早報
EDT2 | EDT | By Tanna Chong and Dennis Eng 2010-11-22

The long-awaited competition law is not expected to take full effect until 2014 at the earliest, Undersecretary for Commerce and Economic Development Greg So Kam-leung says.

Before that a string of procedures needs to be completed, including establishing a commission to investigate anti-competitive activities and a tribunal to act on the commission's findings, and drawing up guidelines on how the law should operate.

Despite worries from business, the bill has general support. It is expected to be passed by the Legislative Council before July 2012.

So said a phased approach would be adopted to get the law working.

"The first phase is primarily about building the institutional framework. We envisage that the first phase will take a year or more to implement subject to progress of the setting up of the commission and the tribunal as well as their respective work on the preparation for the various guidelines and court rules."

A competition commission would be set up to investigate anti-competitive conduct and a competition tribunal with jurisdiction to hear and determine applications filed by the commission.

In the second phase, guidelines will be established, after a consultation. "This will pave the way for decisions on what can and cannot be done and exceptions and exclusions on business agreements under a competition law," So said. He said other countries' guidelines would be consulted.

The final phase will see the new bodies delivering judgments and imposing penalties. Some business leaders and legislators are worried about "steep and unreasonable" penalties, but So said the proposed maximum - 10 per cent of the global turnover of the business unit in the year of contravention - was in line with international standards.

"Penalties rarely reach 10 per cent in the European Union, for example," he said. "For a fine to have any deterrent effect on businesses at all, the court must be free to hand down an appropriate amount."

Multinational corporations were accustomed to this approach, he added. The bill would tackle two major types of anti-competitive behaviour. The first rule covers practices including price-fixing and market-sharing. The second combats abuse of market power, such as predatory behaviour by competitors.

So said that while penalties would be imposed only on the business unit breaching the law, the court would be looking at the involvement of a parent company in the anti-competitive conduct in question, including whether the parent company had sufficient control over subsidiaries.

Other than public enforcement through the tribunal, alternatives would exist to resolve small-scale contraventions.

Individuals could make commitments to the commission to stop anti-competitive conduct. The commission may issue an infringement notice before a case is brought.

Highlighting worries expressed by small and medium enterprises, So said de minimis approach and other measures, including allowing a transitional period for businesses to make necessary adjustments, would provide protection. People with experience of small and medium enterprises would also be appointed as commission members.

Some companies fear the complaints mechanism could be abused, but the commission will be able to refuse to investigate complaints it considers trivial, misconceived or lacking in substance. So said the new law would not apply retrospectively.

As with the introduction of other new laws, observers expect the first few cases after the bill has come into effect to have a substantial impact.

So said it "would be a great pity" if the business sector hindered the progress of the bill.

"The bill will bring economic benefits to consumers and the business sector in the long run by preserving the competitive nature of our economy," he said.

"This bill has been prepared with the benefits of the implementation experiences of other competition law jurisdictions. We believe that it presents good and balanced measures while catering to the environment in Hong Kong."

The Legco bills committee has scheduled 37 meetings for scrutiny of the terms. Committee chairman Andrew Leung Kwan-yuen said extra meetings would be inserted during the Legco's summer recess next July if progress was too slow.