This month’s editors: Maxime Vanhollebeke, Julienne Chang, Zhao Jingjing and Lydia Fung.
Below is an excerpt from our monthly Competition Report. More detailed commentary on these issues and other recent competition law developments in the Asian region is to be found in this month’s edition of our report available on a free subscription basis (see further below).
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Hong Kong Competition Bill nears final vote
There were many signs this month at the Legislative Council’s Bills Committee meetings that the Committee was nearing completion of its review of the proposed Hong Kong Competition Bill. The Administration submitted an updated draft of the Bill, reflecting all of the amendments agreed by Committee members to date. Attendance at the meetings was low, and the reading of the last few technical clauses proceeded quickly without causing much debate. The Committee’s Chairman tentatively agreed to shorten the review timetable, cancelling six meetings to allow the Committee to complete the first reading on 8 May instead of 19 June as originally planned, with the second reading of the Bill set to resume in the plenary Legislative Council on 30 May. This will leave the legislature with more than one month to consider any further amendments before proceeding to a final vote on the Bill, ahead of the lapse of the current legislature in mid-July.
The Bill as it stands today is different from the original Government proposal in several respects. The statutory maximum for fines is lower (while still significant); stand-alone private rights of action are limited; small- and medium-sized enterprises benefit from broad exemptions; the Competition Commission can no longer apply pecuniary penalties without the involvement of the judiciary; and the conditions for obtaining an “economic efficiency” exemption are more stringent as they now clearly require parties to show that benefits accrue to consumers.
The Administration has however been steadfast in its defence of the Bill’s core policy choices. These include a comparatively low standard for market power, with a differentiated approach between the telecommunications and other sectors; a blanket exemption for most statutory bodies; far-reaching sanctions, including the confiscation of profits, the award of damages and the disqualification of directors; and broad discretionary powers for the Competition Commission to decide on competition policy.
Some of these choices remain controversial and there may be room for further debate and challenges during the plenary review by the Legislative Council. The deadline for adoption is now nearing, and we will know within the next three months whether Hong Kong chooses to introduce its first cross-sector competition law or if the next Administration will have to re-introduce a new Competition Bill.
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Abuse of dominance probe into China Telecom and China Unicom likely to end with settlement
Six months after the National Development and Reform Commission (NDRC) announced its investigation into allegations that China Telecom and China Unicom had abuse of their dominance through the application of discriminatory broadband interconnection fees, the deputy director of the NDRC’s Price Supervision, Inspection and Antimonopoly Bureau reportedly revealed at a forum on 18 April that, since the two State-owned telecoms operators had improved their interconnection efficiency by 40 per cent and promised to significantly reduce broadband fees within three to five years, “the investigation may not necessarily result in heavy penalties as the ultimate goal of our enforcement is to ensure rectification”.
Last December, China Telecom and China Unicom announced that they had submitted settlement applications to the NDRC under Article 45 of the Antimonopoly Law, with commitments to enhance interconnection among backbone networks, adjust interconnection fees according to market principles, increase broadband coverage and speed while reducing fees charged on public users. The press reported that at the time, the NDRC found the commitments vague and unmeasurable, and requested the two companies to submit more specific remedial plans. It is not clear whether new proposals have been made and if so whether the NDRC has now formally decided to close its investigation.
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