In a free market economy, businesses compete with each other to offer the best range of products at the best price. A competitive market leads to better prices, products and choice for everyone.
Competition also drives efficiency and innovation, and directs businesses to meet consumer demands by providing the right products at the right price and quality.
The introduction of a cross-sector competition regime to Hong Kong is an important step in safeguarding our shared value of fair competition. The Competition Ordinance (Ordinance) ensures this by making certain business practices which undermine competition illegal.
The Ordinance prohibits three types of anti-competitive conduct described under the First Conduct Rule, the Second Conduct Rule and the Merger Rule which are collectively known as the "competition rules".
The Competition Commission (Commission) has produced a number of videos which describe simply different types of anti-competitive conduct.
For further information, please refer to the Guideline on the First Conduct Rule. You can also read “The Competition Ordinance and SMEs' brochure to learn more about different type of anti-competitive conduct in an easy-to-understand approach.
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 prevents competitors colluding on key parameters of competition such as price, output or how they bid to harm competition in Hong Kong.
These propositions are embodied in the First Conduct Rule set out 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.”
Examples of conduct which may contravene the First Conduct Rule include:
Under the Ordinance, businesses with a substantial degree of market power are also prohibited from abusing that power to harm competition.
The Second Conduct Rule targets businesses with a substantial degree of market power in abusing that power with a view to protecting or increasing their position of power and profits. Competition law is not concerned with the mere possession of substantial degree of market power. It is only when there is an abuse of such power that raises concerns. Certain conduct (see the 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. This principle is embodied in section 21 of the Ordinance, or the Second Conduct Rule:
(1) An undertaking that has a substantial degree of market power in a market must not abuse that power by engaging in conduct that has as its object or effect the prevention, restriction or distortion of competition in Hong Kong.
(2) For the purpose of subsection (1), 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.”
Only a limited number of large businesses are likely to have substantial market power. Small and medium-sized undertakings may be victims of abusive conduct under the Second Conduct Rule.
Examples of conduct which may contravene the Second Conduct Rule include:
Mergers that have or are likely to have the effect of substantially lessening competition in Hong Kong are prohibited under the Ordinance. 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 (Cap. 106).
The Commission has released easy to follow brochures, a toolkit and videos for trade associations and small and medium enterprises to help them understand the Ordinance. You may also refer to this website and the Commission’s Guidelines.
Details on how to contact the Commission to make a complaint are here.