LCQ2: Expanding ambit of Competition Ordinance
Following is a question by the Hon Kenneth Leung and a reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (March 2):
The Competition Ordinance, which has been fully implemented since December 14 last year, aims to provide a legal framework to regulate anti-competitive conduct in various sectors, and to set up the Competition Commission and the Competition Tribunal responsible for the specific enforcement of the legislation. The Ordinance does not bind the Government, and some of its provisions do not apply to over 500 statutory bodies and their specified activities. In this connection, will the Government inform this Council:
(1) whether it has assessed if public policies that affect market operation should conform to the spirit of the Competition Ordinance, i.e. promoting market competition and preventing monopoly; if it has assessed, of the outcome;
(2) whether the authorities, since the enactment of the Competition Ordinance, have studied if the various existing public policies have prevented, restricted or distorted market competition; if they have studied, of the details of the work and the outcome; if not, the reasons for that; and
(3) whether the authorities have plans to review the Competition Ordinance to bring the economic activities engaged by statutory bodies as well as public policies within the ambit of the Ordinance; if they do, of the details and the timetable of such plans; if not, whether the authorities will undertake to conduct such a review shortly?
The Government is committed to promoting a competitive market to enhance market efficiency and facilitate trade and commercial activities, thereby also benefiting the consumers. My reply to the Hon Kenneth Leung's three-part question is as follows:
(1) The Competition Ordinance (the Ordinance) was brought into full operation on December 14, 2015. In formulating public policies and measures, the Government shall consider the competition impact as part of the economic implication of the proposals, in order to ensure that the policies and measures, when implemented, would have on balance taken into account of the competition consideration.
The Ordinance provides a legal framework to prohibit anti-competitive conducts, so that free markets can evolve unimpeded by anti-competitive behaviours. The "first conduct rule" of the Ordinance mainly prohibits the making of anti-competitive agreements among undertakings, which include among others, price-fixing and bid-rigging. The "second conduct rule" prohibits undertakings having a substantial degree of market power from abusing that power to harm competition. However, the Ordinance does not dictate any market structures. Therefore, even when there are only a few undertakings operating in a market, in so far as they do not engage in anti-competitive conducts prohibited by the first or second conduct rule, there is no contravention of the provisions in the Ordinance.
Most of the government conduct is for providing essential public services, or is of non-economic nature. Drawing reference from the experience of other major overseas competition jurisdictions, government conduct usually does not come under the regulatory ambit of competition laws. That notwithstanding, in the event that some public policies and measures may have impact on the economic activities of related sectors or markets, the Government shall also take full account of the policy objectives as well as other factors pertinent to public interest when deciding on such policies and measures. As I have mentioned earlier, the factors would include competition as part of the economic implication.
(2) Back in December 1997, the Government established the Competition Policy Advisory Group (COMPAG) to handle and advise on issues related to competition which have substantial policy or systemic implications to the Government.
Over the years, one of the major functions of COMPAG is to handle competition-related cases or complaints received from various channels, and to advise policy bureaux and departments on the investigations and follow-up actions.
Since the full implementation of the Ordinance on December 14, 2015, competition-related complaints and investigations are handled by the statutory authorities responsible for enforcing the competition rules, i.e. the Competition Commission (the Commission) and the Communications Authority. COMPAG will correspondingly handle complaints that fall outside the jurisdiction of the competition rules of the Ordinance. Examples include complaints against government entities, statutory bodies and other entities or agreements and conducts which have been exempted from the application of the Ordinance. Upon receiving complaints, COMPAG will request the relevant policy bureaux or departments to follow up and deal with the cases, and to report progress to COMPAG.
On the other hand, the Commission, besides enforcing the conduct rules of the Ordinance, has the authority to conduct market studies into matters affecting market competition in Hong Kong, and to advise the Government on competition matters. We will maintain close liaison with the Commission and welcome future views of the Commission on public policies and measures, with a view to jointly eliminating conducts which may have adversely affected market competition.
(3) In the process of scrutinising the Competition Bill from 2010 to 2012, the Bills Committee discussed the exemption arrangement for statutory bodies extensively and thoroughly. It was decided as a result that the provisions of the Ordinance concerning the conduct rules, enforcement powers of the Commission and enforcement before the Competition Tribunal shall not apply to statutory bodies. It was because most statutory bodies do not engage in, or have very little engagement in economic activities, or they perform functions which are related to the execution of policies or provision of key public services. We have already undertaken during the scrutiny of the Competition Bill that the Government will review the scope of exemption for statutory bodies three years after the coming into force of the major prohibitions of the Ordinance.
In fact, while statutory bodies are exempted from the application of the Ordinance, they still have an obligation to comply with the competition principles, and they shall not engage in any anti-competitive activities without reasonable grounds. The Government will demand the relevant bodies to rectify their behaviour in case it is found that such behaviour does not conform with the competition principles. The Government may also consider putting a statutory body under the regulation of the Ordinance if necessary.
Ends/Wednesday, March 2, 2016