Hong Kong enacts competition law

Hong Kong has its first law against anti-competitive conduct after a decade of trying but doubts persist about the law’s effectiveness.

The Competition Bill passed by the Legislative Council will provide a legal framework to curb anti-competitive business conduct. The law forbids anti-competitive business practices such as price-fixing and cartels and calls for the creation of a Competition Commission and a Competition Tribunal to investigate these activities.

It will be implemented in phases so the public and the business sector can become familiar with the new legal requirements during the transitional period and make necessary adjustments.

The law, however, does nothing to address a key issue: the powerful position of monopolies and duopolies and the families that control them.

Critics said the law falls short of tackling the economic dominance of a few families and their massive business empires that still control much of the city's wealth.

Hong Kong corporate governance advocate David Webb said the law is ". . . better than nothing" and admitted there are several shortcomings in the legislation, one of the most glaring of which is the omission of criminal sanctions on those that break the law.

Others, however, said the law was a welcome step. A law professor said local and international businesses will no longer be able to exploit Hong Kong consumers, whether private individuals or business consumers, by abusing market power or through pernicious price fixing or other cartel practices.

Secretary for Commerce & Economic Development Gregory So described the law as “. . . a major milestone in the development of competition policy in Hong Kong, signifying the determination of the government in maintaining fair and free competition in the market.”

Strenuous opposition to the law from the business community forced the government to water down parts of the law, including reducing the penalties that can be imposed on companies that break the law. The law fines erring companies 10% of their Hong Kong turnover instead of 10% of their global revenue under the original proposals.