Toward a more robust competition policy regime for Hong Kong

Ping Lin; Thomas W Ross

doi:10.1093/jaenfo/jnaa039

Lin, Ping; Ross, Thomas W

2020-08-27 00:00:00

Abstract After years of debate, Hong Kong’s new competition law, the Competition Ordinance (CO), took effect in December 2015. Laying out rules to support competitive markets and creating the institutions to administer and enforce those rules, the CO is a modern competition law in many respects, following many best-practices and respecting recent learning in competition economics. This article argues, however, that—at least from an economist’s perspective—in its drafting a series of decisions were made that weaken the law. None is that unusual or critical on its own, however collectively they leave the law less powerful than competition enthusiasts might desire in a modern market economy. We discuss the implications of these decisions and go on to consider some other more unique aspects of the law that might need reconsideration at some point. Finally, we document and discuss the early activities of the Competition Commission of Hong Kong. We conclude that Hong Kong is off to a good start with its new law and its enforcement but that several reforms have the potential to bring a more robust competition policy regime. I. INTRODUCTION After several years of debates, studies, proposals, and revisions, in 2012 the Legislative Council of Hong Kong finally adopted a cross-sectoral competition law, the Competition Ordinance (CO).1 The CO took effect in December 2015. With language clearly influenced by similar statutes in Singapore, Europe, and Australia, the CO reflects, in most respects, a modern approach to competition law, one that integrates accumulated learning in competition economics. In the years since the CO was passed into law, a Competition Commission has been constituted and has launched into an ambitious agenda to first advocate for competition; educate business and consumers; to issue significant guidance documents; and, more recently, to begin active enforcement. A Competition Tribunal has also been created to hear matters brought to it by the Commission. The Tribunal has recently begun hearing its first cases, issuing two important decisions. Modern competition law is a form of economic regulation. It seeks to preserve the competitiveness of markets principally because we believe that competition drives efficiency. And efficiency leads to greater wealth for individuals and societies. As positive and welcome as this first step undoubtedly is, and while the CO generally follows many of the best-practices that have been informed by competition economics, in our view this first version should not be the final word. There are many debatable, to an economist, elements in the CO that merit further thought, possibly leading to legislative or other policy changes over time. The purpose of this article is to offer an economist’s perspective on the new law and the first years of its implementation.2 We feel that this perspective is particularly timely, given indications that there may soon be a review of Hong Kong’s competition policy regime.3 We hope that our views may usefully contribute to this process. We begin by providing some background on the development of the new law in Section II. Section III then briefly summarizes the basic elements of the CO as adopted in 2012. This is meant to be a broad and brief overview and not a detailed, clause-by-clause, review. A close examination of the various components of the CO, in our view, reveals a missed opportunity to embrace as robust and effective a competition regime as economists might like. Section IV makes this case, discussing a number of elements in the CO that are not as strong on certain threats to competition as they might have been. Some additional interesting features of the CO are discussed in Section V. Section VI then briefly reviews the early activity of the Hong Kong Competition Commission. Finally, Section VII concludes, summarizing areas of concern that we feel merit additional attention. II. SOME BACKGROUND ON COMPETITION POLICY IN HONG KONG4 The road to Hong Kong’s new competition regime began many years earlier. It started with the introduction of competition elements to sectoral regulation: sections on abuse of dominance were added to the Telecommunications Ordinance in 2000 with an additional section allowing for the review of mergers in the sector added in 2004;5 and sections on anticompetitive conduct and abuse of dominance were introduced to the Broadcasting Ordinance in 2000.6 In July 2005, the Hong Kong Special Administrative Region (SAR) government set up the Competition Policy Review Committee (CPRC) to evaluate the effectiveness of Hong Kong’s existing competition policy, drawing on international experience, and to examine the need to introduce a comprehensive and cross-sector law on fair competition. A year later, in June 2006, the CPRC released a report (Competition Policy Review Committee, 2006)7 which recommended that a comprehensive competition law be introduced in Hong Kong to guard against anti-competitive conduct that would have an adverse effect on economic efficiency and free trade in Hong Kong. According to this report, the new legislation should apply to all sectors, rather than targeting only some sectors of the economy. In November 2006, following the recommendation of the CPRC, the government issued a public consultation document, entitled ‘Promoting Competition – Maintaining our Economic Drive’ and invited responses from the general public. Respondents included political parties, private companies, academics, the Hong Kong Consumer Council, and trade organizations. While the majority of the respondents supported the introduction of a cross-sector competition law in Hong Kong, there were concerns in the business sector, especially among some small and medium-sized enterprises (SMEs), at the possible effects a competition law might have on their business operations. For example, members of the Federation of Hong Kong Industries ‘are concerned that enacting such a law would impose hefty compliance burden on SMEs to the detriment of their competitiveness vis-à-vis large corporations’.8 After an extended period of consultation and debate, the CO was enacted in June 2012. Getting to this point was not easy for competition law supporters: as noted, there was considerable unease in some quarters in Hong Kong—particularly in the SME sector—about regulatory overreach. Several compromises were necessary to move forward, but the result was a modern competition law, at least with respect to horizontal agreements and abuse of dominance.9 It is interesting to speculate about what finally allowed the proponents of a general competition law for Hong Kong to overcome the entrenched resistance.10 While a more detailed analysis of the battles for the CO is beyond the scope of this article, we speculate that a couple of factors were important. First, Singapore—a country of similar economic development and size, and another leading rich country ‘outlier’ not in the competition policy world—adopted its own competition law in 2004. Singapore’s experience has been widely viewed as successful. Secondly, as noted, a series of compromises were found (discussed further below) to address some of the most extreme concerns of opponents. III. THE COMPETITION ORDINANCE OF 2012: BASIC ELEMENTS The key prohibitions of the CO take the form of two ‘Conduct Rules’ modelled on European antitrust law: (i) the First Conduct Rule (‘FCR’) prohibits agreements and concerted practices that restrict competition; and (ii) the Second Conduct Rule (‘SCR’) prohibits an undertaking with substantial market power from abusing that power by engaging in conduct that restricts competition. The CO also contains a ‘Merger Rule’ that—at this time—only applies to the telecommunications sector. The First Conduct Rule The First Conduct Rule seeks to prohibit arrangements between market participants (whether they are competitors or not) which prevent, restrict or distort competition in Hong Kong. For example, it prohibits competitors from cooperating on key parameters of competition such as price, output or bidding strategies. The key provision here is contained in section 6(1) of the Ordinance: ‘An undertaking must not (a) make or give effect to an agreement; (b) engage in a concerted practice; or (c) as a member of an association of undertakings, make or give effect to a decision of the association, if the object or effect of the agreement, concerted practice or decision is to prevent, restrict or distort competition in Hong Kong.’ While there is not a lot of guidance provided in the CO about the full scope of agreements (or concerted practices etc.) that could be subject to the FCR, it does create a subset that it refers to as involving ‘Serious Anti-competitive Conduct’. It defines (in section 2) the following as being serious anti-competitive conduct violating the FCR: (i) fixing, maintaining, increasing or controlling the price for the supply of goods or services; (ii) allocating sales, territories, customers or markets for the production or supply of goods or services; (iii) fixing, maintaining controlling preventing, limiting or eliminating the production or supply of goods or services; and (iv) bid-rigging. Appropriately, these are the typical targets of provisions aimed at collusion, striking particularly at the so-called ‘hard-core cartels’. The Guidelines on the First Conduct Rule, issued by the Hong Kong Competition Commission, tell us a little more about the potential scope of the FCR provisions, pointing out (at Paragraph 1.5) that the section certainly applies to vertical arrangements as well as those between competitors as there is no such limitation in the FCR. The Guidelines also include some hypothetical examples, providing insights as to the set of arrangements to which the Commission sees the potential application of the FCR. Building from these examples and experience with similar provisions in other jurisdictions we can see the FCR being applied in cases including: Cartels (ie agreeing with your competitors to fix prices, share markets, rig bids or restrict output); Exchange of information; Activities of trade associations and industry bodies; Joint Ventures; Vertical price restrictions; Exclusive distribution and exclusive customer allocation; The CO provides for some exemptions and exclusions to the FCR (see section 9(1)) and some of these come up in our discussion below. Exclusions can be provided for agreements that enhance overall economic efficiency (under schedule 1). Exemptions can be allowed for public policy reasons (section 31) or to comply with international obligations (section 32). Importantly, there is a broad exclusion for statutory bodies (under section 3). The Second Conduct Rule The Second Conduct Rule targets businesses with a ‘substantial degree of market power’ that abuse that power with a view to protecting or increasing their position of power and profits. Certain conduct (see examples provided below) engaged in by businesses with substantial market power can have the object or effect of excluding competitors from the market, thereby limiting choices available to consumers. The specific language of section 21(1) provides that: ‘An undertaking that has a substantial degree of market power in a market must not abuse that power by engaging in conduct that has its object or effect the prevention, restriction or distortion of competition in Hong Kong.’ The CO explains, in section 21(2) that conduct ‘may, in particular, constitute such an abuse if it involves: (a) predatory behaviour towards competitors; or (b) limiting production, markets or technical development to the prejudice of consumers.’ The Commission’s Guidelines on the Second Conduct Rule provide a few more examples of what might constitute abusive behaviour, offering the following non-exhaustive list at Paragraph 5.1: predatory pricing tying and bundling margin squeeze conduct refusals to deal; and exclusive dealing. Significantly, some of these items, notably (b) and (e) involve agreements, raising the possibility that some arrangements could be attacked under either the FCR or the SCR, though the latter approach would require that one firm have a substantial degree of market power. Interestingly, the Commission seems to have taken a clear position that resale price maintenance (another kind of vertical agreement) will be attacked only under the FCR, presumably even if forced on small distributors by large and powerful manufacturers.11 The Merger Rule Mergers that have or are likely to have the effect of substantially lessening competition in Hong Kong are prohibited under the Ordinance. While laying out a modern approach to merger review as practiced in other advanced jurisdictions, the scope of application of the Merger Rule is currently limited to mergers relating to undertakings directly or indirectly holding carrier licences issued under the Telecommunications Ordinance. In this sense, they represent an updating of the merger provisions that already existed in the Telecommunications Ordinance. Some of the inconsistencies in the approach to mergers here compared to the conduct rules (see Section V below) could be simply due to the fact that they were adapted from different sources: the conduct rules drawing heavily on the European law and experience and the merger regime adapted from the sectoral legislation which had its own roots. The New Competition Institutions As becomes important for some of the issues we discuss below, the CO provides for a prosecutorial or adversarial enforcement regime. To do this, it created two important new institutions. The Hong Kong Competition Commission (hereafter HKCC) is established in Part 9 of the CO. Its functions are laid out in section 130: The Commission has the following functions— (a) to investigate conduct that may contravene the competition rules and enforce the provisions of this Ordinance; (b) to promote public understanding of the value of competition and how this Ordinance promotes competition; (c) to promote the adoption by undertakings carrying on business in Hong Kong of appropriate internal controls and risk management systems, to ensure their compliance with this Ordinance; (d) to advise the Government on competition matters in Hong Kong and outside Hong Kong; (e) to conduct market studies into matters affecting competition in markets in Hong Kong; and (f) to promote research into and the development of skills in relation to the legal, economic and policy aspects of competition law in Hong Kong. The first appointments to the HKCC were made in April 2013 by the Hong Kong SAR Government, and the first chief executive officer was named in July 2014. To hear the cases brought by the HKCC, Part 10 of the CO created a specialized Competition Tribunal (hereafter Tribunal) as a superior court of record. This is not a lay panel, or even a mixed lay/judicial body as some competition adjudicative bodies are. Section 135(1) provides that: ‘The Tribunal consists of the judges of the Court of First Instance appointed in accordance with section 6 of the High Court Ordinance (Cap 4), by virtue of their appointments as such judges.’12 Section 142(1) lays out the jurisdiction of the Tribunal: The Tribunal has jurisdiction to hear and determine— (a) applications made by the Commission with regard to alleged contraventions, or alleged involvements in contraventions, of the competition rules; (b) applications for the review of reviewable determinations; (c) private actions in respect of contraventions, or involvements in contraventions, of the conduct rules; (d) allegations of contraventions, or involvements in contraventions, of the conduct rules raised as a defence; (e) applications for the disposal of property; (f) applications for the enforcement of commitments; and (g) any matter related to a matter referred to in paragraph (a), (b), (c), (d), (e) or (f) if the matters arise out of the same or substantially the same facts. In fulfilling its responsibilities, the Tribunal can issue a variety of types of orders and can determine the appropriate level of penalties and/or remedies in matters brought before it. The appointments of the first President and Deputy President of the Tribunal took effect on 1 August 2013. IV. A ‘SOFT’ BEGINNING? As noted, among developed economies at least, Hong Kong is a relatively late arrival to the modern world of competition policy and the path to its first law was neither easy nor was its success pre-ordained. Given the resistance to be overcome in securing passage, it is perhaps not surprising that there are elements in the new law that make it ‘softer’ or weaker, in terms of its ability to detect, prosecute, and punish anticompetitive actions, than it might have been. In drafting a modern competition law there are many decisions that need to be made on the various elements—decisions that can range in their effect, in the process making the law tougher or softer. In a large number of cases the drafters of Hong Kong’s CO chose softer options. While taken individually, each is not unlike choices made in certain other jurisdictions; collectively they make the CO a less powerful protector of competition than the laws of many other countries. To be clear, we do not make this point as a criticism of those drafting the law or of the CO itself: such compromises may have been necessary to build enough support to have a law passed at all. However, we do suggest that, as competition policy evolves in Hong Kong, there is a list of elements that may need revisiting to provide for a more robust competition policy regime. In this section we survey a number of the key elements that we view as softer, discuss how they could have been designed differently and compare them to the approaches taken in other jurisdictions. We begin with elements that cut across the various substantive areas of the law, then focus on elements specific to particular areas such as cartels, abuse of dominance and mergers. Our point here is not to review the individual details of elements that have been examined carefully in earlier work, for example by Kwok,13 rather it is to highlight the pattern that emerges from seeing them collectively. At least from an economist’s perspective, the product is a competition law with less bite than might have been desired. Crosscutting Elements Here we wish to draw attention to four aspects of the new law that cut across the various substantive areas and which, in each case, represent approaches that seem to be softer than they could have otherwise been. First, the CO adopts a ‘judicial (or prosecutorial) model of enforcement’, rather than an administrative one.14 Under a judicial model, the adjudication function is separated from the investigative and prosecutorial functions. In Hong Kong, the HKCC has the authority and duty to investigate potential violations of the CO but, should it wish to challenge agreements or conduct, it must do so before the separate Competition Tribunal. This separation of functions is typically viewed as favourable to respondents who get—it is argued—a truly independent third party review of their case. While administrative structures, such as those of the European Commission or the US Federal Trade Commission, in which competition authorities also render decisions usually allow for case decisions to be made by parties different from the case team, the concern has often been expressed that this separation of tasks does not provide the same level of independence.15 Of course, Hong Kong is far from alone adopting a judicial model, for example matters handled by the Antitrust Division of the US Department of Justice and all cases pursued by the Canadian Competition Bureau proceed through judicial processes.16 Secondly, relative to those of other jurisdictions, the ‘maximum level of fines’ for undertakings violating the FCR and SCR is quite low—up to only 10 per cent of turnover in Hong Kong for a maximum of three years for a single contravention (section 93).17 This contrasts with the approach in other jurisdictions that do not limit the number of years (eg USA and Canada) and/or base fines (with a similar percentage rate) on global turnover (eg European Commission, France, Norway). There is a serious question here whether fines of such a level will adequately deter anticompetitive behaviour by, in particular, multinational companies operating in Hong Kong.18 The case for prosecutions targeting individuals could be different. While it is not clear how often the HKCC will pursue penalties for individuals, it is interesting to note that here the CO provides that the Tribunal ‘may order that person to pay to the Government a pecuniary penalty of any amount it considers appropriate’. (section 93(1)).19 Thirdly, the CO provides a very broad ‘exemption for statutory bodies’ (section 3). Such entities will only be brought under the law if explicitly added to a list by the Chief Executive. Out of a large number of bodies that, to at least some extent, engage in commercial activity and could possibly engage in anticompetitive activity, a very small number have (to this point) been put on this list.20 It is common for a new authority to have to devote considerable resources to advocacy within government—persuading other branches of government of the value of competition. This broad exemption will undoubtedly make the HKCC’s task more difficult and means that the coverage of the law is more limited than it might have been. Other jurisdictions, such as the EU have taken a much more case-by-case approach to the question of which statutory bodies should be exempt from competition law.21 Finally, when there is a concern that competition in some market may be compromised but it is not clear what the specific issues or causes may be, many competition laws allow for authorities to undertake ‘market studies’. These can be wide-ranging examinations of the structure and performance of markets, as well as the behaviour of market participants.22 There have been, broadly speaking, three types of market study or market investigation powers granted to competition authorities. The most limited arise when the authority is authorized to conduct the studies but not to compel participation by industry players.23 Other authorities can compel participation, but cannot take any action directly as a result of the study’s findings—a formal case must be initiated to do that.24 In still other jurisdictions, the authority can launch studies, compel participation and take some actions based on the study’s findings.25 While the CO does authorize the conducting of market studies (in section 130(e)), it is with the weakest of powers described here—the Commission cannot compel participation.26 It goes without saying that this limits significantly the Commission’s ability to get at the kind of inside information it may need to accurately assess the state of competition in a market and the causes of any deficiencies.27 Horizontal Agreements The CO does not clearly distinguish between vertical and horizontal agreements in its First Conduct Rule prohibitions, which may be somewhat unfortunate given the significantly different potential for harm the two types of agreements present. This is, however, not an uncommon approach, and the important distinctions may come to be drawn through jurisprudence.28 With respect to the treatment of agreements between competitors—horizontal agreements—we wish to note five features of the law that render it softer than comparator laws. First, while international best practices certainly endorses taking a rule of reason or effects-based approach to most competition matters, there has emerged a relatively strong consensus on the value of per se approaches to naked cartel behaviour. That is, horizontal agreements that are simply about fixing prices, allocating markets and/or cutting output are typically condemned without the need for expensive hearings about effects. As noted, the CO does prohibit anticompetitive agreements, including cartel agreements, if their object or effect is to harm competition. It may have well been the intent of the drafters of the CO—as has emerged under the European Commission working with a similarly worded provision likely the model for this section of the CO—to capture naked collusion on a per se basis by finding such agreements to have an anticompetitive object and presenting an almost impossibly high hurdle for the establishment of offsetting efficiencies. It remains to be seen, of course, whether this is an interpretation the Competition Tribunal will give the CO. It is also the case that even parties to an agreement to fix price have access to an efficiency defence in Schedule 1 (section 1). Should it transpire that the Competition Tribunal is willing to give a hearing to efficiency arguments even in cases of relatively straightforward collusion, the law in Hong Kong will have clearly moved away from standard best-practice.29 Secondly, the CO is ‘not criminal law’—violators are not subject to criminal liability and punishments. While it is generally viewed as desirable to adopt administrative or civil law approaches to most competition matters given the complexity of many cases and the associated difficulty of establishing effects with great certainty, criminal sanctions are available in a number of jurisdictions (eg Canada and the USA) for the most egregious offenses—usually just hard-core cartel conduct. It is argued that the threat of criminal punishments provides a more powerful deterrent, and also a greater incentive to make use of leniency programmes that expose cartels.30 The CO—and again Hong Kong is not alone here—does not provide this powerful weapon.31 In making this observation, we are very aware of the fact that there is a substantial debate in the literature regarding whether criminalizing cartel conduct is a good idea. Questions raised include, for example: whether cartels are morally blameworthy enough to justify such punitive treatment; whether criminalizing collusion really enhances deterrence; whether the higher costs of criminal enforcement and procedure are worth any alleged benefits; and about the challenges of getting international cooperation to fight cartels when some countries apply criminal sanctions and others do not.32 Our point here is just that, despite something of an international trend toward criminalizing cartel, Hong Kong chose not to do so.33 Thirdly, the CO provides for a ‘free pass’ for violators of the first conduct rule, provided their agreement does not constitute serious anticompetitive conduct.34 The Commission must do this by issuing a ‘warning notice’ to the alleged offenders, and if the warning notice is complied with it can take no further action. Only if the warning notice is not heeded and the action continues can the Commission take the matter to the Competition Tribunal and seek some sort of punishment. There are a few objections one might raise about such an approach. While it might not be unusual for competition authorities to use prosecutorial discretion on less serious cases and allow violators in less economically important matters to adjust their behaviour without suffering punishing fines, to take even the threat of punishment away from the Commission could greatly reduce its leverage, raising enforcement costs.35 Given the fact that what constitutes serious anticompetitive conduct is not absolutely clear, this could lead to substantial disputes over what constitutes such conduct. Cases that should turn on the effects of certain conduct will instead be determined by whether or not it meets the definition of serious anticompetitive conduct. The requirement that they provide offenders with a free pass may also reduce the willingness of the Commission to pursue First Conduct Rule cases that do not involve serious anticompetitive conduct. Over the long term, this could prove detrimental to the development of a comprehensive competition policy regime in Hong Kong.36 Fourthly, while the CO does authorize private follow-on actions for damages by harmed parties (section 110), it does not allow for such parties to initiate stand-alone actions. While in other jurisdictions in which private competition law enforcement is permitted, many (and possibly most) such actions do follow successful prosecutions by a competition authority, it is also true that stand-alone actions have their place. Thus, the CO approach represents a missed opportunity to supplement the resources available to the Commission with enforcement resources from private parties.37 And it limits victims’ rights to recover damages from harms suffered in cases the Commission, for whatever reason, chooses not to pursue. While it is beyond the scope of this article to review the development of private enforcement of competition law globally, it is certainly the case that an increasing number of jurisdictions are expanding victims’ rights to seek damages from violators of competition law.38 On the other hand, it could be argued that the lack of a class action legal framework in Hong Kong will be the larger barrier to vigorous private enforcement.39 Finally, there is an exemption from the application of the First Conduct Rule in Schedule 1 for ‘agreements of lesser significance’ which are defined to be agreements between parties that have combined turnover of less than HK$200 million. This exemption is not available if the agreements involve serious anti-competitive conduct.40 While it can certainly make sense not to devote significant enforcement resources to matters involving very small firms, many other jurisdictions would deal with this via the exercise of prosecutorial discretion or possibly using consent-type agreements rather than formal proceedings.41 It is a bit troubling to think that the Commission would be powerless to address some anti-competitive agreements or concerted practices that might have significant effects, albeit in smaller markets.42 Abuse of Dominance We focus here on two features of the abuse of dominance provisions, contained in the Second Conduct Rule, which may soften its application relative to what is observed in some other jurisdictions. First, when the Commission feels that a contravention of the Second Conduct Rule has occurred, rather than launching an action before the Competition Tribunal, it may issue an infringement notice offering not to take action if certain conditions are met.43 While it is important to give enforcement authorities the flexibility to resolve less serious matters with consent-style arrangements, the concern would be that the explicit provision of these formal processes could lead them to become practically required. If it becomes difficult for the Commission to support an action under the Second Conduct Rule without first issuing an infringement notice, then parties again—as with the warning notices—will effectively get a free pass.44 Secondly, similar to those under the First Conduct Rule, the CO provides for exemptions from the application of the Second Conduct Rule for ‘Conduct of lesser significance’ meaning conduct engaged in by a firm with less than HK$40 million of turnover in a year.45 We have the same concern here about a statutory exemption (as opposed to the simple application of prosecutorial discretion), protecting behaviour based simply on the size of a firm, irrespective of its relative size or power in a relevant market. In our view, de minimis exemptions have their place, as they provide comfort and guidance for business. However, in contrast to the approach taken in the CO we would argue that: (i) the de minimis thresholds should be expressed in market shares (which are more closely related to market power) than in turnover; and (ii) they are best included in guidelines rather than in legislation. To put them directly into legislation creates at least two potential problems. First, it invites costly and protracted debates about market definition, as respondents push for wider markets that reduce their shares below the thresholds. Secondly, the effects of agreements and behaviours will always be case specific, and there will be the occasional case in which firms with small shares are taking actions or entering agreements that lessen competition.46 The Commission, in our view, should retain the authority to intervene when competition is being threatened. Mergers This is clearly the most obvious example of where the CO lacks the punch of most other modern competition laws. Under the CO, the only mergers subject to review are those in the telecommunication sector, despite the fact that the merger section as drafted is rather general in its approach. This does present the opportunity to add a more complete merger review regime by simply removing the restriction to that one sector; perhaps this was, in fact, contemplated by the drafters.47 A second concern is that this section of the CO is to be enforced by the sectoral regulator.48 One of the advantages of a general purpose competition law and enforcement regime is that it is less vulnerable to regulatory capture than sectoral regulators might be. Delegating merger review to the sector regulator in this case is another example of how the law is softer than it might have been. Finally, the merger provisions allow for a generous consideration of efficiencies. A merger that lowers competition may be allowed if it generates efficiencies that ‘outweigh the adverse effects caused by any lessening of competition in Hong Kong’.49 This language, similar to that found in the Singapore law, might be read to suggest something close to a total surplus approach to a trade-off between competitive harm and efficiencies. While not unique, this is more weight given to efficiencies than is available in most jurisdictions. In contrast to the tougher ‘price’ or ‘consumer surplus’ standards usually associated with the US and Europe, for example, it would permit mergers that harm buyers to some degree if there were sufficient efficiency benefits. We might ask how an authority, charged with preserving and promoting competition within its own jurisdiction, might adapt its practice in the absence of a merger review power. One possibility would involve using other sections of the competition law—here the FCR and SCR—to craft a limited sort of merger regime. Mergers are, after all, agreements—so could a merger be viewed as a harmful agreement under the FCR if it was felt its object or effect was to restrict competition? This would not be unprecedented—many competition authorities with full merger review powers will choose between rules on agreements and rules on mergers when reviewing strategic alliances, for example. Similarly, acquisitions by large firms of small nascent competitors or vertical mergers involving dominant firms that might seem to raise barriers to entry could, one might think, come under review under the SCR. However, these approaches are in fact not possible in Hong Kong: it would appear that the drafters of the CO anticipated this possibility and wanted to block it. Section 4 of schedule 1 expressly prohibits applying the FCR and SCR to mergers.50 If the FCR and SCR cannot be applied to review mergers, removing ex ante control of competition problems, they may be all the more necessary to control anticompetitive agreements and conduct ex post and thereby to discourage mergers with anticompetitive motives. Even FCR and SCR cases with relatively small effects might be worth pursuing aggressively if the actions discourage a significant number of other anticompetitive mergers by, for example, increasing the costs of collusion.51 As a final observation regarding the implications of having no general merger law, we note that Hong Kong is denied a seat at the table when competition authorities from other jurisdictions review international mergers with implications for Hong Kong consumers and businesses. One recent example comes to mind. In 2019 Cathay Pacific Airways took over Hong Kong Express Airways, leaving Cathay Pacific in control of three of the four airlines in Hong Kong. The carrier said the transaction is expected to generate synergies as the businesses of Cathay Pacific and Hong Kong Express are largely complementary. The acquisition was reviewed and approved by the Taiwan Fair Trade Commission (TFTC). The TFTC was of the view that the transition would likely lead to lower prices for Taiwan passengers for flights connecting Taiwan to Hong Kong, Macao, or Shenzhen airports, due to the synergy effects and benefits of scope economy the transaction would bring about.52 While it was not the responsibility of the TFTC to consider the effects on Hong Kong passengers or businesses,53 it is unfortunate that Hong Kong’s interests could not be represented in a review of the transaction.54 V. OTHER INTERESTING FEATURES OF THE NEW LAW In this section, we draw attention to some particular, to us, noteworthy features of the new law and guidelines that did not receive attention above. Though their relationship to the ‘softness’ or ‘toughness’ of the CO may not be so obvious, they present challenges worthy of consideration in any review of the CO. Efficiencies First, with respect to the incorporation of efficiencies in the evaluation of cases, it is striking that the CO applies different standards with respect to the First Conduct Rule, Second Conduct Rule, and for merger review.55 Under the First Conduct Rule’s efficiency exclusions (Schedule 1, section 1), agreements that otherwise might violate the rule will nevertheless be permitted if they generate efficiencies ‘while allowing consumers a fair share of the resulting benefits’. It is not clear what ‘fair share’ represents here, but similar terms in other jurisdictions (eg Europe) have been interpreted to mean that consumers must not be harmed by the agreement. That is, they suggest a consumer surplus or price standard—any upward pressure on price deriving from the agreement must not be greater than the downward pressure coming from falling (marginal) costs.56 Contrast this with the approach to efficiencies under the Second Conduct Rule: there are no statutory provisions for the consideration of efficiencies under abuse of dominance which is unfortunate given that many of the (especially vertical) practices that a dominant firm might employ will have efficiency advantages even as they might harm competition.57 It is possible that the Competition Tribunal (and higher courts) will read in a ‘business justifications’ defence by carefully limiting the application of the ‘object’ test in favour of an ‘effects’ analysis.58 This has happened to some extent in Europe, but it is far from guaranteed to be the outcome in Hong Kong. Finally, as described above, under the limited merger regulations in Schedule 7 there is an exclusion from the merger rule ‘if the economic efficiencies that arise or may arise from a merger outweigh the adverse effects caused by any lessening of competition in Hong Kong’. (section 8). As noted, this language is similar to that found in Singapore’s law where it has generally been interpreted as applying a total surplus test.59 It is not clear what to make of these different approaches—if they indeed turn out to be different as interpretations are provided and decisions rendered. It is at least worth asking why efficiencies might matter more in some cases than in others. To us the most troubling aspect is the lack of an efficiency exclusion for Second Conduct Rule matters, though as noted there might be judicial work-arounds possible here. It might also not seem so unreasonable to have a more generous treatment of efficiencies in merger cases than in cartel cases (admittedly only a subset of First Conduct Rule cases). Putting more weight on efficiencies is essentially like putting more weight on the profits of the firms being investigated. In a merger case we might be more comfortable treating the surplus accruing to the merging firms as socially valuable in a way we might not view the (‘ill-gotten’) gains of cartel members. Competitive Effects Tests In a similar way, the language of the various competitive effects tests varies across the CO. Under the First and Second Conduct Rules, agreements and conduct are problematic if they have as their object or effect the ‘prevention, restriction or distortion of competition in Hong Kong’.60 The related language in the merger rule in Schedule 7 (section 3) is a little different. It prohibits a merger ‘that has, or is likely to have, the effect of substantially lessening competition’.61 Whether the Tribunal and courts will interpret ‘prevent, restrict, distort’ differently from ‘substantially lessen’ is an open and interesting question. One specific aspect of the difference that could matter relates to the absence of the ‘prevent’ term in the merger rule.62 In Canada where the merger provisions contain both terms, they are generally seen to cover different cases, specifically different types of merger counterfactuals. A merger lessens competition when it reduces the level of competition below the level observed immediately before the merger. A merger prevents competition if, but for the merger, competition was expected to increase (possibly because of entry) but the merger prevents this from happening (eg when an incumbent buys the potential entrant).63 Of course, reducing competition in the future is still ‘lessening’ future competition and the Tribunal may have no trouble being forward-looking this way in the right case. However, it is interesting that the prevent language exists in the CO for the First and Second Conduct Rules, which makes its omission in the merger rule somewhat more troubling.64 Object versus Effect in the Second Conduct Rule As noted, under the First Conduct Rule, agreements can be subject to sanction if their ‘object or effect’ is to harm competition. This language and approach would appear to be borrowed from the European model and Article 101 of the Treaty on the Functioning of the European Union (TFEU). However, whereas the Second Conduct Rule has similar ‘object and effect’ language related to abuses of substantial market power, this is not imported from the European abuse of dominance provisions (Article 102 of the TFEU) which instead simply target any abuse of a dominant position. It is not clear why this difference in approaches exists, but one possibility is that there might be a desire to use the ‘object’ test as a way to create per se prohibitions of certain kinds of practices.65 To be fair, the European Commission has, in the past, come close to establishing per se rules for some actions by dominant firms, however the increasing trend now is to look for effects before taking action.66 Issues with the Second Conduct Rule Guidelines There are two issues with respect to the Guidelines produced for the Second Conduct Rule that we highlight here. The first relates to the Guideline’s discussion of ‘substantial market power’ which is required by section 21 (section 1) to pursue a case under the Rule.67 The Guidelines define (at paragraph 3.2) substantial market power this way: ‘Substantial market power can be thought of as the ability profitably to charge prices above competitive levels, or to restrict output or quality below competitive levels, for a sustained period of time.’ (footnotes omitted). To most economists this would function as a standard definition of (any) market power generally, but not ‘substantial’ market power. To be fair, it is not clear how one should define substantial market power; however, it would seem like the definition should be different from the definition of any market power.68 Secondly, there is little attention paid to the so-called ‘cellophane fallacy’ in the market definition section of the Guidelines, which reads much like market definition guidance from merger guidelines. In cases in which firms already possess market power, it has long been recognized that the market definition techniques appropriate to mergers are not adequate. Those techniques ask whether the merging firms are facing enough competition that they could not profitably raise prices if they acted together. In an abuse of dominance or monopolization case however, the firm is already exploiting its market power—knowing that it cannot raise price further does not tell us that it has no market power now. Admittedly, defining markets in such cases can be very difficult, but here the Guidelines could be more helpful by highlighting the challenges to market definition and providing guidance regarding how the Commission will approach this problem. Unfortunately, the Guidelines barely mention the cellophane fallacy, providing only a brief reference to the issue, in footnote 8.69 VI. EARLY ACTIVITY OF THE HONG KONG COMPETITION COMMISSION In this section we briefly review how the Competition Commission has begun its work enforcing the statute.70 Established under Part 9 of the CO, the Competition Commission serves a number of competition policy functions in Hong Kong, listed in section 130 of the CO and in section III above here. In its relatively short life—it was appointed in May 2013 and began recruiting staff at that point—the Commission has been active.71 This activity has been made possible by the provision of substantial government funding. The overall budget provided to the Commission and the number of funded staff positions have also grown over time. In its last annual report, the Commission reported government subventions of approximately HK$105.3 million and employment of a staff of about 57.72 While it is always difficult to compare the levels of funding provided to different competition authorities by their governments, a comparison with Singapore might be of some interest.73 There are many parallels between Singapore and Hong Kong: Singapore’s competition law is also relatively new (the Commission was established in 2005),74 it is also a high income, free market economy in a relatively small Asian jurisdiction. And Singapore’s early experience with competition policy has been widely viewed as successful.75 For fiscal year 2017 (before the Singapore Competition Commission had consumer protection added to its mandate) the Singapore Commission had a total staff of 70 people and a budget of approximately S$17 million.76 With these levels of agency funding both the Singapore (in its last fiscal year before adding consumer protection) and Hong Kong (most recent year) governments are allocating about 0.03 per cent of total government consumption expenditures to their competition authorities. On its establishment, the Commission immediately began work on a set of guidelines (as required by the CO) and to this point has produced an impressively large set of substantial guidance documents:77 (a) Guidelines on the First Conduct Rule (b) Guidelines on the Second Conduct Rule (c) Guidelines on the Merger Rule (d) Guidelines on Complaints (e) Guidelines on Investigations (f) Guidelines on Applications for a Decision under sections 9 and 24 (Exclusions and Exemptions) and Section 15 Block Exemption Orders It has also produced guidance on certain policies: (g) Enforcement policy guidance (f) Leniency policy guidance. The Commission has also become very active in competition advocacy and outreach both within the Hong Kong business community and toward the public at large. The Commission’s creative public advocacy work has included the production of educational videos and television spots.78 A number of the Commission’s advocacy and outreach programmes have garnered international awards from, among other bodies, the International Competition Network. On the enforcement front, the Commission has been active as well. From the Annual Reports we can see where and how frequently they have made enforcement contacts (many based on complaints). A summary is provided in Table 1. Table 1. Enforcement contacts (14 December 2015–31 March 2019): Total = 3607 First Conduct Rule . Second Conduct Rule . Cartel conduct 1010 Tying and bundling 156 Resale price maintenance 411 Exclusive dealing 131 Exchange of 0information 141 Refusal to deal 73 Exclusive dealing 167 Predation 50 Others 430 Others 293 Others General state of competitiona 441 Not related to a Conduct Rule 1106 First Conduct Rule . Second Conduct Rule . Cartel conduct 1010 Tying and bundling 156 Resale price maintenance 411 Exclusive dealing 131 Exchange of 0information 141 Refusal to deal 73 Exclusive dealing 167 Predation 50 Others 430 Others 293 Others General state of competitiona 441 Not related to a Conduct Rule 1106 a The General State of Competition numbers are only available in the 2016/17, 2017/18 and 2018/19 Annual Reports Source: Each case may involve allegations of multiple types of anticompetitive conduct or agreements Open in new tab Table 1. Enforcement contacts (14 December 2015–31 March 2019): Total = 3607 First Conduct Rule . Second Conduct Rule . Cartel conduct 1010 Tying and bundling 156 Resale price maintenance 411 Exclusive dealing 131 Exchange of 0information 141 Refusal to deal 73 Exclusive dealing 167 Predation 50 Others 430 Others 293 Others General state of competitiona 441 Not related to a Conduct Rule 1106 First Conduct Rule . Second Conduct Rule . Cartel conduct 1010 Tying and bundling 156 Resale price maintenance 411 Exclusive dealing 131 Exchange of 0information 141 Refusal to deal 73 Exclusive dealing 167 Predation 50 Others 430 Others 293 Others General state of competitiona 441 Not related to a Conduct Rule 1106 a The General State of Competition numbers are only available in the 2016/17, 2017/18 and 2018/19 Annual Reports Source: Each case may involve allegations of multiple types of anticompetitive conduct or agreements Open in new tab From this table it is clear that concerns have been raised frequently about many types of potentially anticompetitive conduct or agreements. Particularly noteworthy is the large number of contacts related to cartel activity. The matters that reach the stage of initial assessment are similarly dominated by First Conduct Rule (mostly cartel) issues. This is shown in Table 2. Table 2. Initial assessment and investigation cases (14 December 2015–31 March 2019): 230 First Conduct Rule: Cartel conduct 175 First Conduct Rule: Exchange of information 43 First Conduct Rule: Resale price maintenance 41 First Conduct Rule: Others 40 Second Conduct Rule 49 Others 7 First Conduct Rule: Cartel conduct 175 First Conduct Rule: Exchange of information 43 First Conduct Rule: Resale price maintenance 41 First Conduct Rule: Others 40 Second Conduct Rule 49 Others 7 Source: Initial Assessments are commenced in response to Enforcement Contacts and other intelligence gathered by the Commission. For more information on how the Commission conducts Initial Assessments, see paragraphs 3.1–4.4 of the Commission’s Guideline on Investigations. As above, each case may involve allegations of multiple types of anticompetitive conduct or agreements. Open in new tab Table 2. Initial assessment and investigation cases (14 December 2015–31 March 2019): 230 First Conduct Rule: Cartel conduct 175 First Conduct Rule: Exchange of information 43 First Conduct Rule: Resale price maintenance 41 First Conduct Rule: Others 40 Second Conduct Rule 49 Others 7 First Conduct Rule: Cartel conduct 175 First Conduct Rule: Exchange of information 43 First Conduct Rule: Resale price maintenance 41 First Conduct Rule: Others 40 Second Conduct Rule 49 Others 7 Source: Initial Assessments are commenced in response to Enforcement Contacts and other intelligence gathered by the Commission. For more information on how the Commission conducts Initial Assessments, see paragraphs 3.1–4.4 of the Commission’s Guideline on Investigations. As above, each case may involve allegations of multiple types of anticompetitive conduct or agreements. Open in new tab Another interesting feature of this data is the frequency of resale price maintenance (RPM) contacts and assessments. While consistent with a general sentiment that RPM is common in Hong Kong, it does raise concerns should the Commission choose to take many actions here. The concern would be particularly acute should the Commission try and succeed with the Tribunal in having RPM assessed on an ‘object’ basis, possibly making it effectively per se illegal. RPM could then offer tempting easy wins for the Commission, despite the fact that the economic literature has now provided many explanations for how RPM can be efficiency enhancing and international trends seem to be toward a more effects-based approach to RPM cases.79 In the three years since the law took effect in December 2015, the Commission has taken five cases into formal proceedings before the Competition Tribunal. All five involve allegations of serious anticompetitive conduct violating the First Conduct Rule. On 17 May 2019, the Competition Tribunal handed down decisions in two of these cases. While in both cases the Tribunal found violations of the First Conduct Rule, some of its reasoning is problematic in light of concerns raised above. The first case involved bid-rigging for the provision of IT services to the Hong Kong Young Women’s Christian Association80 and the second involved a price-fixing and market sharing agreement related to the provision of renovation services at a public housing site in Hong Kong.81 On the positive side, the decisions make clear that the Tribunal is prepared to find a violation of the First Conduct Rule by object in cases of price fixing, market allocation and bid-rigging. However, the Tribunal did not go all the way toward establishing these practices as per se violations because it was willing to consider, and did consider, efficiency arguments.82 Though it found the efficiencies insufficient in the renovation services case, the fact that the Tribunal has demonstrated a willingness to consider them suggests that cases alleging these most serious of anti-competitive behaviours will be more difficult and costly to pursue.83 We can expect that many respondents will now try to mount some sort of efficiency defences even if weak and we would consider this not consistent with international best practice.84 Compounding this problem, the Tribunal, in its IT decision indicated that the possibility of significant monetary penalties (among other reasons) meant that respondents in First and Second Conduct Rule cases are owed the protections of normal criminal proceedings. Very importantly, this means that the criminal standard of proof (‘beyond a reasonable doubt’) must be applied. While such a high standard may be appropriate (and is observed in other jurisdictions) for individuals facing truly criminal sanctions for offences that are per se in nature, this is also not consistent with international best practice for cases in which effects need to be established.85 It can be very difficult to prove to such a high level, that, for example, certain behaviours of dominant firms are harmful to competition given that many such actions (eg very low pricing) can have benefits as well as costs. We will undoubtedly learn more as the third, fourth, and fifth cases work their way through the process.86 The third and fourth cases are very similar to the second in the nature of the conduct and the industry (ie decorations and renovations in public housing).87 Importantly, the third and fourth cases include charges against individuals and not just companies. The fifth case is somewhat different. On 22 January 2020 the Commission offered and had accepted its first infringement notice, with Nintex Propriety Limited in an alleged bid-rigging scheme involving IT services. Importantly, the notice was part of a leniency agreement—the first leniency agreement—reached with the Commission in exchange for Nintex’s cooperation.88 As infringement notices cannot include fines for participants, one would hope they would not often be used for FCR violations involving serious anticompetitive conduct. However, they make sense as part of a leniency arrangement under which the cooperating party might already qualify for exemption from monetary punishments, as is the case here. Enforcement actions in this matter continue against the other cartel participant.89 Beyond all this important enforcement activity, the Commission has been engaged in a number of non-contested matters, including conducting a market study into petroleum retailing in Hong Kong,90 granting a block exemption for vessel sharing in the liner shipping industry,91 and evaluating exclusion applications regarding the creation of a code of banking practices92 and to permit the collection and sharing of sales data by members of the Hong Kong Pharmaceutical Industry.93 These were all substantial projects. Taken together then, we believe this represents a high level of activity for a new agency. VII. CONCLUSIONS In summary, we have in this article tried to register and support three key points about the new competition policy regime in Hong Kong. First, while the CO is in general a modern competition law, it does appear to be less aggressive in its approach to anticompetitive agreements, practices and mergers than most professional observers may have wished for.94 We concede that a more tentative approach might have been necessary to build support for any kind of competition law at all—Hong Kong is late adopter of modern competition law after all. However, we hope the CO will be seen as just a first step toward a full ‘best-practices’ system. In particular we would urge: (i) development of an expanded general merger review system; (ii) efforts to make naked cartel agreements clearly per se violations while treating other agreements (particularly vertical agreements, including resale price maintenance) under a rule of reason; (iii) adding provisions for stand-alone private actions for damages, at least from collusion; (iv) a higher maximum for fines (particularly for collusive agreements); (v) the end of warning notices; (vi) the Commission be given the power to compel participation in market studies; and (vii) the replacement of the de minimis statutory exemptions laid out in the CO, with the exercise of prosecutorial discretion, to be explained in Competition Commission guidelines.95 Secondly, early cases and policy work under the current law will help shape this version of the CO in important ways and could even address some of our listed suggestions. For example, they will—and already are—clarifying the extent to which the CO is seen to require criminal law processes and where burdens of proof for pieces such as efficiency exemptions reside. It will also be important to see if the list of statutory bodies subject to the CO will be greatly expanded, and what kinds of cases will earn exemptions from the Chief Executive. Finally, we observe that the Competition Commission has quickly become an active enforcement body. It has been handling large numbers of complaints, undertaken ambitious advocacy campaigns and it has now engaged in litigation on five cases. It has also produced, for such a young agency, an extraordinary number of detailed guidelines. The cases being litigated will are serving as important tests for the Commission, just as they are for the new law. Success here and with the next few cases—which we hope will include second conduct rule issues—will do much to further establish the Commission among the community of modern, skilled competition agencies. The authors gratefully acknowledge very valuable discussions with Dennis Beling, Rasul Butt, Thomas Cheng, Carter Chim, Lilla Csorgo, Jindrich Kloub, Kelvin Kwok, Catrina Lam, Tim Lear, Philip Monaghan, Sharon Pang, Steven Parker, Marcus Pollard, Pierre Regibeau, Derek Ritzmann, Brent Synder, Rose Webb, Anna Wu, and Natalie Yeung, though the views expressed here are solely those of the authors and should not be attributed to these good people. Very valuable comments were received from two referees. The authors would also like to recognize the very capable research assistance provided by Jennifer Ng. Footnotes 1 Hong Kong Special Administrative Region (SAR), Laws of Hong Kong, Chapter 619: Competition Ordinance (2012). 2 We recommend Kelvin Hiu Fai Kwok, ‘The New Hong Kong Competition Law: Anomalies and Challenges’ (2014) World Competition 541 for an early, more law-focused, and highly complementary assessment of the CO. 3 See, eg Kanis Leung, ‘Tightening of Hong Kong’s Competition Laws to Cover Mergers on the Horizon, says Competition Commission chairwoman’ South China Morning Post (17 January 2019). <https://www.scmp.com/news/hong-kong/hong-kong-economy/article/2182425/tightening-hong-kongs-competition-laws-cover>. See also Conventus Law (17 January 2019) <http://www.conventuslaw.com/report/the-hong-kong-competition-ordinance-2018-in-review/> accessed 29 June 2020. 4 Our review of some key elements of the history of competition policy here will be very brief and is intended only to set the stage for our evaluation of the Competition Ordinance and its early enforcement. More detailed information about the history can be found in Thomas Cheng, ‘Trade Associations and Cartel Conduct under the New Hong Kong Competition Law Regime’ in Thomas Cheng, Sandra Marco Colino and Burton Ong (ed), Cartels in Asia: Law & Practice (Wolters Kluwer Hong Kong Limited 2015) 295, Sandra Marco Colino, ‘Punishing Cartel Behaviour: Means to Encourage Compliance with the Hong Kong Competition Ordinance’ in Thomas Cheng, Sandra Marco Colino and Burton Ong (ed), Cartels in Asia: Law & Practice (Wolters Kluwer Hong Kong Limited 2015) 315 and Knut Fournier, ‘A New Competition Agency Learns to Deal with SMEs: The Case of the Hong Kong Competition Commission’ in Michael T Schaper and Cassey Lee (eds), Competition Law, Regulation and SMEs in the Asia-Pacific: Understanding the Small Business Perspective (ISEAS–Yusof Ishak Institute 2016) 345. 5 In particular, sections 7K (anticompetitive practices including agreements), 7L and 7N (both related to abuse of dominance) and 7P (mergers). See Edward KY Chen and Ping Lin, ‘Competition Policy under Laissez-Faireism: Market Power and its Treatment in Hong Kong’ (2002) 21(2) Review of Industrial Organization 145 and Thomas K Cheng, ‘A Tale of Two Competition Law Regimes - The Telecom-Sector Competition Regulation in Hong Kong and Singapore’ (2007) 30 World Competition 501 for discussions of competition regulation in the telecom sector in Hong Kong under this sectoral regime and the historical background of competition policy development in Hong Kong. 6 In particular, sections 13 (on concerted practices and agreements) and 14 (abuse of dominance). A critical review of the success of the competition policy under this sectoral approach, with a particular focus on broadcasting, can be found in Thomas K Cheng, ‘Competition Law Enforcement in the Television Broadcasting Sector in Hong Kong: Past Cases and Recent Controversies’ (2010) 33 World Competition 317. Sandra Marco Colino, ‘A History of Competition: The Impact of Antitrust on Hong Kong’s Telecommunications Markets’ (2109) 29(3) Fordham Intellectual Property, Media & Entertainment Law Journal 931, examines the evolving competition rules for telecommunications sector. 7 See, Competition Policy Review Committee, Report on the Review of Hong Kong’s Competition Policy (2006) <https://www.cedb.gov.hk/citb/doc/en/publication/cprc.pdf> accessed 29 June 2020. 8 The Federation further states that: ‘Contrary to the popular belief that introducing a cross-sector competition law would benefit SMEs, there is evidence that the law would provide a convenient avenue for large corporations to sue their smaller counterparts for anti-competition. Since many SMEs cannot afford to pay the huge legal costs involved, not to mention the time and energy required of management in such lawsuits, large corporations could eliminate competitors in the courtrooms without having to compete with them in the market place.’ See Federation of Hong Kong Industries, ‘Public Consultation on the Way Forward for Competition Policy in Hong Kong’ submission to the Hong Kong Economic Development and Labour Bureau (2007). 9 See, eg Ping Lin and Jingjing Zhao, ‘Recent Amendments to Hong Kong’s Competition Bill’ (2012) 1(6) CPI Asia Antitrust Column <https://www.ln.edu.hk/econ/staff/plin/CPI2012asialinzhao.pdf> accessed 29 June 2020. For much more detailed treatments of the very interesting—and counterintuitive to some—approach taken by SMEs in the debates surrounding a new cross-sector competition policy for Hong Kong, see Cheng (n 4) and Fournier (n 4). 10 The irony of Hong Kong not having a competition law when the much less market-oriented economy of Mainland China had one (the Anti Monopoly Law of 2007), was not lost on observers. 11 Hong Kong Competition Commission, ‘Guideline on the First Conduct Rule’ (July 2015) paras 6.71–6.77. For a detailed discussion of the treatment of RPM in Hong Kong, see Ping Lin, ‘Treatment of Resale Price Maintenance in Hong Kong’ (October 2015) Competition Policy International: Antitrust Chronicle <https://www.competitionpolicyinternational.com/treatment-of-resale-price-maintenance-in-hong-kong/> accessed 29 June 2020. 12 While the CO does not put ‘experts’ (competition economists, experienced business people etc.) on the Tribunal, it does provide that the Tribunal may draw assistance from ‘specially qualified assessors’ (schedule 141(1)) though such assessors will not vote on a matter. 13 Kwok (n 2). 14 On the differences between judicial and administrative approaches to competition policy see, eg Frederic Jenny, ‘The Institutional Design of Competition Authorities: Debates and Trends’ in Frederic Jenny and Yannis Katsoulacos (eds), Competition Law Enforcement in the BRICS and in Developing Countries: Legal and Economic Aspects (Springer International Publishing 2016) 1. 15 Of course, most modern competition jurisdictions that use administrative structures do allow appeals from authority decisions to a higher level (and independent) body. Jenny (n 14) reports that the administrative approach dominates among European member states. 16 Jenny (n 14) also includes Australia, Ireland, Austria, and Sweden as using this model. Early discussions about the design of the proposed law in Hong Kong did contemplate using an administrative model. The move to the judicial model was, in part, due to a decision in a securities case: Koon Wing Yee v Insider Trading Tribunal, (2008) 11 HKCFAR 170. It its decision, the Court of Final Appeal asserted that, when substantial punishments were possible, a respondent in Hong Kong had a right (under the Bill of Rights) to some of the protections afforded defendants in criminal proceedings. These protections could (though the court did not speak to this directly) include the right to a hearing before an independent judicial body. 17 This is similar to the limits under the Singapore law. 18 Information about the maximum fines in many other countries can be found in International Competition Network Cartels Working Group, ‘Setting of Fines for Cartels in ICN Jurisdictions’ in Report to the Seventh International Competition Network Annual Conference (Office for Official Publications of the European Communities 2008) <https://www.internationalcompetitionnetwork.org/wp-content/uploads/2018/05/CWG_SettingFines.pdf> accessed 29 June 2020, particularly in the table at pp 35–38. Kwok (n 2) and Colino (n 4) are among other authors who worry that the level of maximum punishments under the CO may be too low. 19 However, this lack of a cap on penalties to individuals contributed to a potentially problematic finding by the Competition Tribunal (discussed below) that could make prosecuting individuals very difficult. 20 At this writing there are six such bodies listed. See the Competition (Application of Provisions) Regulation, (17 April 2015) <https://www.elegislation.gov.hk/hk/cap619A> accessed 29 June 2020. For an excellent discussion of the ‘generosity’ of this blanket exemption of statutory bodies, see Kwok (n 2) 556–59, where the author indicates that 575 statutory bodies qualify for this exemption (at p 597). Related to this, and also discussed by Kwok (n 2) 559–60 are the broad powers allocated to the Chief Executive in Council to grant exemptions from the CO. 21 See, eg pp 87–90 of Richard Whish and David Bailey, Competition law (OUP 2012). 22 On market studies, including examples of different market study powers by country, see, eg OECD (Organization for Economic Cooperation and Development), The Role of Market Studies as a Tool to Promote Competition: Background Note by the Secretariat, Unclassified DAF/COMP/GF(2016)4, <https://one.oecd.org/document/DAF/COMP/GF(2016)4/en/pdf> accessed 29 June 2020. 23 eg Canada and South Korea, OECD, Methodologies for Conducting Market Studies – Summaries of Contributions, Unclassified DAF/COMP/WP3/WD(2017)30, <https://one.oecd.org/document/DAF/COMP/WP3/WD(2017)30/en/pdf> accessed 29 June 2020. 24 eg Australia [OECD, Methodologies for Conducting Market Studies–Note from Australia, Unclassified DAF/COMP/WP3/WD(2017)1 <https://one.oecd.org/document/DAF/COMP/WP3/WD(2017)1/en/pdf> accessed 29 June 2020], Singapore [OECD, Methodologies for Conducting Market Studies -Note by Singapore, Unclassified DAF/COMP/WP3/WD(2017)1 <https://one.oecd.org/document/DAF/COMP/WP3/WD(2017)24/en/pdf> accessed 29 June 2020] and the US Federal Trade Commission [OECD , Methodologies for Conducting Market Studies -Note by the United States, Unclassified DAF/COMP/WP3/WD(2017)19 <https://one.oecd.org/document/DAF/COMP/WP3/WD(2017)19/en/pdf> accessed 29 June 2020]. 25 eg the UK [OECD (n 23)], Mexico [OECD (n 22)] and Iceland [OECD (n 22)]. When actions can be taken directly following the study, the process is more often referred to as a market investigation, rather than a market study. 26 The Commission noted its lack of powers in its report on Hong Kong’s auto-fuel market: ‘It is important to take note that this market study is not conducted as part of an investigation, and therefore the Commission does not have compulsory information gathering powers at its disposal and has to rely heavily on stakeholders’ willingness to provide information and materials gathered from the public domain’ ( at para 1.4 of Hong Kong Competition Commission, ‘Report on Study into Hong Kong’s Auto-fuel Market’ (2017) <https://www.compcomm.hk/en/media/press/files/Full_Report_Auto_fuel_Market_Study_Report_Eng.pdf> accessed 29 June 2020.). 27 One additional aspect, not discussed above, of the CO that suggests a desire for a softer, slower implementation is the unusual (in a statute) requirement that the HKCC issue guidelines: (i) on its interpretation of the conduct rules (section 35 1(a)); (ii) on its interpretation of the block exemption provisions (section 35 1(a)–(b)); (iii) on the procedures it will adopt for investigations (section. 40); and, (iv) on how it will conduct merger reviews (Schedule 7, section 17)—and that the full implementation of the CO waited until after the required guidelines had been issued. In terms of providing greater certainty to business, this may well have been an excellent idea. (Though drafting guidelines before you have case experience to draw from is a challenge.) 28 As has been the case in Europe under the European Commission. 29 As discussed below, this is not a hypothetical possibility. The Competition Tribunal has found violations of the FCR ‘by object’, however, in its second case the Competition Tribunal did admit evidence on efficiencies in a collusion matter: CTEA2/2017 Case name: Competition Commission v W. Hing Construction Company Limited and Others. This case is discussed briefly below. Our point here is simply that it will take additional cases for us to get a good sense of the Tribunal’s tolerance of efficiency arguments in cartel cases. 30 The relatively low levels of maximum fines, discussed above, further limits the attraction of the leniency programme. 31 As discussed below, there is a question, addressed in a recent judgment from the Competition Tribunal, as to what extent criminal procedures might be required in proceedings under the CO, even if the punishments are not criminal. 32 For a nice collection of articles addressing some of these questions see Caron Beaton-Wells and Ariel Ezrachi (eds), Criminalising Cartels: Critical Studies of an International Regulatory Movement (Hart Publishing 2011). Other significant contributions include Mark Furse, Criminal Law of Competition in the UK and in the US: Failure and Success (Edward Elgar Publishing 2012); Andreas Stephan, ‘Why Morality Should Be Excluded from the Cartel Criminalisation Debate’ (2012) 3(2) New Journal of European Criminal Law 127 and Andreas Stephan, ‘Four Key Challenges to the Successful Criminalization of Cartel Laws’ (2014) 2(2) Journal of Antitrust Enforcement 333; Gregory J Werden, ‘Sanctioning Cartel Activity: Let the Punishment Fit the Crime’ (2009) 5(1) European Competition Journal 19; Peter Whelan, ‘A Principled Argument for Personal Criminal Sanctions as Punishment Under EC Cartel Law’ (2007) 4(1) Competition Law Review 7; Peter Whelan, The Criminalization of European Cartel Enforcement: Theoretical, Legal, and Practical Challenges ( OUP 2014);Peter Whelan, Report Examining the Desirability of Introducing Criminal Sanctions for Cartel Activity (Submitted to the Finnish Competition and Consumer Authority) (2014) <https://www.kkv.fi/globalassets/kkv-suomi/ajankohtaista/tiedotteet/2014/whelan-selvitys-27-5-2014.pdf> and Wouter Wils, ‘Is Criminalization of EU Competition Law the Answer?’ (2005) World Competition 117. 33 We do not want to exaggerate the magnitude of this trend: Gregory C Shaffer, Nathaniel H Nesbitt and Weber Waller Spencer, ‘Criminalizing Cartels: A Global Trend?; Comparative Competition Law’ (2011) 12 Sedona Conference Journal 313, also Chapter 12 in John Duns, Arlen Duke and Brendan Sweeney (eds), Research Handbook on Comparative Competition Law (Edward Elgar Publishing 2015) 301 discuss the movement toward criminalization but point out that in some cases criminal prohibitions have not been actively enforced. 34 Calling this a ‘free pass’ is something of an exaggeration we (and others) use for convenience. Of course, a firm receiving a warning notice will have costs associated with its own legal representation and managerial response—and there is a chance that a firm may suffer some reputational damage. 35 In the reforms that created the Canadian Competition Act in 1986, abuse of dominance cases also offered essentially a ‘free pass’ to violators. Many objected to this free pass, see eg comments by the then Commissioner Sheridan Scott in a presentation to the US Department of Justice in 2006: ‘We are on record, supported by others such as the OECD, that a lack of financial consequences for dominant firms found to have abused their position is a significant shortcoming of the current legislation.’ <https://www.justice.gov/atr/abuse-dominance-under-competition-act>. In March of 2009, an amendment to the Act introduced “Administrative Monetary Penalties (AMPs) to this section. 36 Kwok (n 2) 562 makes this point, as well. 37 Interestingly, the draft bill did allow for stand-alone actions, but this was removed in the final bill. See, eg Lin and Zhao (n 9) and Colino (n 4). This would appear to be another example of a compromise designed to address SME concerns that large firms would launch legal actions against them. Again, see Cheng (n 4). 38 eg on how private enforcement has been spreading among European countries see Luigi Pier Parcu, Giorgio Monti and Marco Botta, ‘Chapter 1: Introduction’ in Pier Luigi Parcu, Giorgio Monti and Marco Botta (ed), Private Enforcement of EU Competition Law : The Impact of the Damages Directive (Edward Elgar Publishing 2018) 1 and Christopher H Bovis and Charles M Clarke, ‘Private Enforcement of EU Competition Law’ (2015) 36(1) Liverpool Law Rev 49. 39 Law Reform Commission of Hong Kong, Report: Class Actions (May 2012)advocated an incremental approach to the development of a class action regime for Hong Kong and specifically did list ‘Antitrust/competition cases’ in a list titled ‘Types of cases that might be suitable for class action proceedings’ in Annex 1 (p 275). <https://www.hkreform.gov.hk/en/docs/rclassactions_e.pdf> accessed 29 June 2020. 40 In debates about the appropriate thresholds to put into the law, the Bills Committee was told that the average annual business turnover of small and medium-sized enterprises in Hong Kong was HK$11 million. (See Hong Kong Legislative Council, Bills Committee on Competition Bill, Minutes of the twenty-fourth meeting held on Tuesday, 15 November 2011, LC Paper No CB(1)1427/11-12, Ref: CB1/BC/12/09 (2011) 9.) Hence, this threshold would be enough to exempt groups of up to 18 firms with this average size from actions that could reduce competition in localized markets, eg in many consumer-facing service industries—as long as the actions do not represent serious anti-competitive conduct. 41 To provide greater guidance, this more informal approach to smaller companies can be spelled out in guidelines, as has been done in Singapore. 42 We note, as well, that turnover is not a satisfactory measure of market power. As described in Lin and Zhao (n 9) and Cheng (n 4) these safe harbours were offered as a compromise to build support for the new law in the face of resistance, particularly from SMEs. Thresholds based on turnover do, however, avoid protracted debates about market definition required if thresholds are to be expressed in terms of market shares. As stated in the text, our preference would simply be to express thresholds as part of enforcement guidelines to be flexibly interpreted in ways consistent with the overall objectives of the Ordinance. 43 Infringement notices may also be issued to resolve concerns about violations of the FCR related to serious anti-competitive conduct. In 22 January 2020 the Commission offered and had accepted its first such infringement notice, with Nintex Propriety Limited. The case is discussed briefly below. 44 A late amendment to the bill removed a provision that would have allowed infringement notices to come with fines, but this was removed. See Lin and Zhao (n 9). 45 Schedule 1, section 6. 46 This second point reinforces the first. If the Commission always has the authority to intervene there is less to be gained by respondents trying to game the system by arguing for wider market definitions that reduce their shares below thresholds. Thresholds inserted into legislation further reinforces the importance of the market definition exercise at a time when some experts are urging a movement away from formal market definition in competition cases. See, eg Louis Kaplow, ‘Why (Ever) Define Markets?’ (2010) 124(2) Harvard Law Rev 437. 47 Kwok (n 2) 549–51 discusses some of the arguments made when the initial version of the CO was submitted for debate in 2010. 48 Strictly speaking, the CO grants concurrent jurisdiction to the Communications Authority and the Competition Commission (at section 159), however the Memorandum of Understanding between the two agencies indicates that the Communications Authority will ‘ordinarily take the role of Lead Authority on matters which fall within the concurrent jurisdiction of the Authorities’. 49 Schedule 7, Part 4, section 8. 50 To be clear, using the FCR and/or SCR for merger review in place of a proper merger review process could be problematic. Challenges to this approach would come from the simple and obvious fact that the conduct rules are not designed for merger review—there is now a fairly well-developed and broadly applied (by advanced competition authorities) approach to merger review that is seen as reasonably fair, transparent and predictable. It is less clear what merger review under the FCR or SCR would look like. 51 To be clear here, we are not advocating that the Commission take FCR or SCR cases that are not meritorious under those rules. eg we do not support actions on excessive pricing (not explicitly covered by the SCR in any case, but see Kwok ( n 2). 545 suggesting they cannot be ruled out completely) simply to discourage anticompetitive mergers. 52 See, TFTC Newsletter, No 134, (in Chinese) <https://www.ftc.gov.tw/upload/1081106-2.pdf> accessed 29 January 2020. 53 It is possible that Hong Kong passengers could be affected differently from Taiwanese passengers even on routes between Taiwan and Hong Kong—for example if the market is somewhat segmented (eg due to loyalty programmes) such that Hong Kong passengers tend to use Hong Kong-based airlines while Taiwanese passengers tend to use Taiwan-based airlines. As the transaction combined Hong Kong airlines, it may have more effect on their prices and services than on those of the Taiwanese airlines. Add to this concern for routes served by the Hong Kong airlines but not protected by competition from Taiwanese carriers and it is clear that Hong Kong passengers may have been harmed even if those from Taiwan are not. 54 Brent Snyder, CEO of the Hong Kong Competition Commission said that the transaction ‘constitutes a merger and places the transaction beyond the scope of the Ordinance. That said, the Commission is actively engaging with the government to encourage a competition assessment of the acquisition to the extent permissible within the relevant regulatory ambit and also to offer the Commission’s services in that regard’. See, Speech by Brent Snyder, at British Chamber of Commerce and Freshfields Breakfast Briefing: The Hong Kong Competition Ordinance 3rd Anniversary 30 April 2019; <https://www.compcomm.hk/en/media/campaigns_events/completed/files/20190430_BritCham_Freshfields_Breakfast_Briefing_Speech.pdf> accessed 29 January 2020. 55 While striking, Hong Kong is not alone in its different treatment of efficiencies; eg the differences between the treatment of efficiencies under the First and Second Conduct Rule here parallel those in Europe. See OECD, Directorate for Financial and Enterprise Affairs, Competition Committee, Roundtable on the Role of Efficiency Claims in Antitrust Proceedings: Note by the Delegation of the European Union, DAF/COMP/WD(2012)81, <http://www.oecd.org/competition/EfficiencyClaims2012.pdf> accessed 29 June 2020. 56 The exclusion does not apply if the agreement eliminates competition; see Schedule 1, section 1(c). 57 Consider, eg the various efficiency reasons a dominant firm might have for using resale price maintenance. See, eg Chapter 6 in Massimo Motta, Competition Policy: Theory and Practice (CUP 2004),or Frank Mathewson and Ralph Winter, ‘The Law and Economics of Resale Price Maintenance’ (1998) 13(1–2) Review of Industrial Organization 57. 58 It is also possible that, if the Commission wanted to allow the parties to make efficiency claims, a vertical agreement by a dominant firm with another firm could be evaluated under the First Conduct Rule. 59 The Canadian Competition Act (at section 96) contains similar language that has been interpreted to mean something close to a total surplus standard: mergers are exempt if the efficiencies ‘are greater than, and will offset’ the harm to competition. See Thomas W Ross and Ralph A Winter, ‘The Efficiency Defense in Merger Law: Economic Foundations and Recent Canadian Developments’ (2005) 72(2) Antitrust Law Journal 471. 60 This is the exact language from the Second Conduct Rule (section 21 (1)). The language for the First Conduct Rule (section 6 (1)) is virtually identical: an undertaking must not participate in an agreement or concerted practice if ‘the object or effect of the agreement, concerted practice or decision is to prevent, restrict or distort competition in Hong Kong’. 61 As indicated above, this language in the Merger Rule of the CO is exactly the same as that in the relevant section of the Hong Kong Telecommunication Ordinance. Specifically, s 7P(1) of the Telecommunication Ordinance (2012) provides that where there is a change in relation to a carrier licensee, the Telecommunication ‘Authority may conduct such investigation as it considers necessary to enable it to form an opinion as to whether or not the change has, or is likely to have, the effect of substantially lessening competition in a telecommunications market;…’ One possibility is that at the time of introducing the Competition Ordinance, the law-makers inserted the language in the existing Telecommunication Ordinance into the Merger Rule which applies to telecommunications sector only, so as to maintain legal continuity. 62 The Canadian Competition Act’s merger provisions (section 92) seek to block mergers that ‘prevent or lessen competitive substantially’. 63 See Thomas W Ross, ‘Competitive Effects and Efficiencies: The Canadian Supreme Court’s Decision in Tervita’ (2016) 2 Competition Law & Policy Debate 54 for a discussion of an important ‘prevent’ case in Canada that raises questions about the ability of an authority to predict future changes in the market. 64 Note, as well, that the merger test requires that the effect on competition be substantial; a term not included in the competitive effects tests under the conduct rules. As with the treatment of efficiencies discussed above, this may reflect a more permissive attitude toward mergers than the other competition matters. 65 Also, recall that there are no efficiency exclusions under the Second Conduct Rule. 66 See, eg Whish and Bailey (n 21). 67 While not a focus for us here, the requirement of ‘substantial degree of market power’ rather than ‘dominance’ (as under art 102 of the TFEU in Europe) is actually an example of an element that is possibly tougher than it could have been—though in practice, the differences may not be material. The ‘substantial’ test appears to be borrowed from the Australian and New Zealand legislation. 68 The Canadian provisions on Abuse of Dominance do not need to get into this exactly. They apply to firms that ‘substantially or completely control .. a class or species of business’ which the Competition Bureau has interpreted to mean that the firm has market power (but no requirement of substantial market power). The Singapore law requires dominance which is presumably more than just some market power. Their Guidelines define market power the standard way (as above) but then add that dominance requires ‘substantial market power’ (paras 3.3 and 3.4). 69 In contrast, the Singapore Guidelines on Market Definition devote three paragraphs to this issue (5.5–5.7). These paragraphs more clearly lay out the challenge posed by pre-existing market power and suggest some approaches toward dealing with the challenges. 70 For a discussion of the Commission’s first year enforcing the Ordinance, see Ping Lin and Thomas W Ross, ‘First Year of Enforcement of the Competition Ordinance in Hong Kong’ (March 2017) Competition Policy International: Antitrust Chronicle <https://www.competitionpolicyinternational.com/first-year-of-enforcement-of-the-competition-ordinance-in-hong-kong> accessed 29 June 2020. 71 And might have been even more active but for the unfortunate passing of its first Chief Executive Officer, Stanley Wong, in April 2016 after less than two years of service. 72 This is from the 2018/19 Annual Report. Compared with fiscal year 2013/14 this represents growth of over 62% in annual funding with employee numbers almost tripling. 73 Comparisons are difficult for a variety of reasons, including potential differences in the agencies’ mandates (eg is the authority also responsible for consumer protection and/or sectoral regulation) and differences in costs of key inputs like skilled labour. 74 The Singapore law is also heavily based on the European model. Importantly, consumer protection responsibilities were added to the renamed Competition and Consumer Commission of Singapore in 2018. 75 See, eg p 3 of Kala Anandarajah and Dominique Lombardi, ‘Competition Law in Singapore’ (August 2015) Competition Policy International: Antitrust Chronicle <https://www.competitionpolicyinternational.com/competition-law-in-singapore/> accessed 29 June 2020; ‘The CCS has clearly established itself as a serious regulator not to be ignored and established Singapore as one of the leading countries in the implementation and enforcement of competition law.’ 76 These numbers for Singapore are from OECD, Annual Report on Competition Policy Developments in Singapore (2017) Unclassified DAF/COMP/AR(2018)27 <https://one.oecd.org/document/DAF/COMP/AR(2018)27/en/pdf> accessed 29 June 2020. 77 Available from the Commission’s website at: <https://www.compcomm.hk/en/legislation_guidance/guidance/guidance.html> accessed 29 June 2020. 78 They are available at: <https://www.compcomm.hk/en/media/advertisements/tv_video.html> accessed 29 June 2020. 79 To be fair, not every jurisdiction has moved to a more effects-based treatment of RPM—Europe’s move has not been smoothly in that direction, for example. However: with its Leegin decision in 2007, the US Supreme Court adopted an effects-based approach to minimum RPM; in amendments to its Competition Act in 2009, Canada moved from a per se criminal treatment of RPM to an effects based civil review approach; Australia and New Zealand have both allowed for authorizations for RPM if there are efficiencies and an authorization was granted in Australia to Tooltechnic in 2014; and Singapore’s relatively new (2004) law does not have any specific provisions related to RPM. 80 CTEA1/2017 [2019] HKCT 2. Case name: Competition Commission v Nutanix Hong Kong Limited, BT Hong Kong Limited, SiS International Limited, Innovix Distribution Limited (trading as Innovix Distribution) and Tech-21 Systems Limited. 81 CTEA2/2017 Case name: [2019] HKCT 3. Competition Commission v W. Hing Construction Company Limited and Others. The third case, not yet decided is similar in many respects: CTEA1/2018, Case name: Competition Commission v Kam Kwong Engineering Company, Goldfield N&W Construction Company Limited, Pacific View Engineering Limited, Chan Kam Shui and Lam Po Wong. 82 The Respondents’ argued, eg that allocating floors to specific firms under the agreement allowed for efficiencies in materials delivery costs, labour time (not as much time spent moving between floors), and in marketing and cleanup costs. The Tribunal was not persuaded that the requirements for a successful efficiency defence were met. See paras 147–281 of the decision. 83 To be fair, the Tribunal set a fairly high bar (and put the onus on defendants) to establish an efficiency defence. For the defence to stand, four conditions must be met: (i) the agreement must generate efficiencies; (ii) it allows consumers a fair share of the resulting benefit; (iii) it does not impose restrictions that are not indispensable to the attainment of the objectives; and (iv) it does not afford the undertakings concerned the possibility of eliminating competition. (at para 153). 84 There is also a danger that the willingness to consider efficiencies will undo the benefit of being willing to find violations ‘by object’. The advantage of labelling some hard-core conduct like price fixing as a violation by object is that it avoids long drawn-out battles over the presence and magnitudes of effects. However, if efficiencies are to be considered, in cases in which they are found to be substantial they will need to be weighed against the harm to competition. It will be difficult to do this without some measure of the anticompetitive effects of the agreement. 85 This would appear to leave Hong Kong occupying an odd middle ground in competition policy targeting hard-core cartel activity—without the deterrent power of true criminal law (eg jail sentences) that has so helped encourage use of leniency programmes, but with a legal process that gives respondents the protections of a criminal law approach. 86 We should also note that there are appeals underway in the first two cases and a decision on the pecuniary penalties in the second case is still pending. Therefore, there is also more information to come from these cases. 87 The third case is: CTEA1/2018, case name: Competition Commission v Kam Kwong Engineering Company, Goldfield N&W Construction Company Limited, Pacific View Engineering Limited, Chan Kam Shui and Lam Po Wong. The fourth case is: CTEA1/2019, case name: Competition Commission v Fungs E & M Engineering Company Limited, Yee Hing Metal Shop, Cheung Min trading as Accord Construction & Decoration Co, Hing Shing Construction Company, Luen Hop Decoration Engineering Company Limited, Dao Kee Construction Company Limited, Wong Wai Chuen, Wong Fu San and Cheung Yun Kam. 88 See the press release at <https://www.compcomm.hk/en/media/press/files/20200122_ENG_PR_Competition_Commission_takes_IT_cartel_conduct_case_to_Competition_Tribunal.pdf> accessed 29 June 2020. 89 This fifth case is: CTEA1/2020, case name: Competition Commission v Quantr Limited and Cheung Man Kit. 90 Hong Kong Competition Commission (n 26). 91 Block exemption granted August 2017. See, eg <https://www.compcomm.hk/en/enforcement/registers/block_exemption/files/Block_Exemption_Order_and_Guidance_Note_final.pdf > accessed 29 June 2020. 92 Decision denying the application for exclusion issued October 2018. See, eg <https://www.compcomm.hk/en/media/press/files/COMMISSION_DECISION_UNDER_SECTION_11.pdf> accessed 29 June 2020. 93 Decision denying the application issued October 2019. See, eg <https://www.compcomm.hk/en/media/press/files/20191022_Competition_Commission_publishes_Decision_in_relation_to_a_proposed_pharmaceutical_sales_survey_eng.pdf> accessed 29 June 2020. 94 To be clear, other authors such as Kwok (n 2) have come to similar conclusions about some of the issues we raise. Our goal here is to combine views (our own and others) on many elements of the current CO to build a case for a more robust competition law for Hong Kong. 95 If the removal of the de minimis exemptions was to meet with too much resistance, a weaker alternative would be to make the exemptions in terms of market shares, and keep the exempted class very small. © The Author(s) 2020. Published by Oxford University Press. All rights reserved. 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Toward a more robust competition policy regime for Hong Kong

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Publisher: Oxford University Press
ISSN: 2050-0688
eISSN: 2050-0696
DOI: 10.1093/jaenfo/jnaa039
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Toward a more robust competition policy regime for Hong Kong

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