Exclusions and Exemptions Under the Hong Kong Competition Ordinance

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Clara Ingen-Housz, Anna Mitchell, Knut Fournier, Sep 30, 2015

After years of intense political debate and rounds of public consultations, the Hong Kong Competition Ordinance is finally due to come into force on December 14, 2015. Much of the controversy to which this first cross-sector antitrust regime in Hong Kong gives rise turns on the exclusions and exemptions that will be available to certain persons, activities, and conduct, including possibly categories of agreements covering entire sectors of the economy.

Under the Ordinance, exclusions and exemptions can take different legal forms and can be based on a variety of grounds. Some are highly circumstantial and Hong Kong-specific (e.g., the statutory bodies exemption), while others appear to be based on established EU competition law principles (e.g., the exclusion for economic efficiency). However, in a notable departure from the post-modernization EU regime, the Hong Kong legislator has stopped short of a system relying on pure self-assessment to determine the availability of an exclusion or exemption, introducing instead a mixed regime enabling undertakings either to self-assess, or to apply to the Competition Commission for a decision in this regard.

Highlighting the intrinsic political nature of some of these exclusions and exemptions, a feature of the Hong Kong regime is the fact that exemptions and exclusions are not left to the exclusive discretion of the HKCC. Rather, the Hong Kong Chief Executive has retained some degree of oversight through the power to grant exemptions and exclusions notably in relation to “special situations” or wider public interest grounds. This is not dissimilar to the U.K. rules, which provide that the Secretary of State can exclude the application of the rules prohibiting anticompetitive agreements where there are “exceptional and compelling reasons of public policy for doing so.”

Another notable feature of the Hong Kong regime is that, while the HKCC acknowledges that vertical agreements are less likely to harm competition than horizontal ones, it has provided no indication that it intends at this time to introduce a general vertical block exemption, as exists in Europe. While it is understandable that the HKCC may not wish to act precipitously, the current position is disappointing, as many stakeholders had called for such exemption during public consultations, drawing from the Singaporean example and highlighting the need for legal certainty particularly in the first years of enforcement.

This article explores these themes in more depth, looking at the different types of exclusions and exemptions under the Hong Kong regime, the application process, and the practical issues businesses need to consider before considering an exemption.