A fine of up to HK$10 million and disqualification of holding a directorship may be imposed on companies which adopt anti-competition practices, the government proposed yesterday.

In a consultation paper on the introduction of a new competition law released yesterday, the government proposed that a competition commission and tribunal be established to investigate companies' malpractice.

Secretary for Commerce and Economic Development Frederick Ma displays the consultation paper on a new competition law proposed by the government. The document was released yesterday. Edmond Tang

A report released by the Competition Policy Review Committee in 2006 listed seven anti-competition behaviors, including price-fixing, bid-rigging, market allocation, imposing sales and production quotas, joint boycotts, unfair or discriminatory standards, and the abuse of a dominant market position.

The consultation document released yesterday, however, only targets four behaviors for all industries - price-fixing, bid-rigging, imposing production quotas and market allocation.

Under the proposal, the competition commission will launch investigation on its own initiative or upon receiving complaints against companies.

The commission, comprising at least seven members, will include experts who have experience in small and medium enterprises. The chairman will be appointed by the Chief Executive.

The commission can impose a fine of up to HK$10 million on companies with anti-competition practices.

A competition tribunal will also be established to review the commission's decisions. The tribunal can impose a higher fine and disqualification from holding a directorship for up to five years.

Private parties are allowed to take their cases to the tribunal.

The document proposed that the commission should focus on horizontal agreement, which is reached between competitors who provide similar products or services in the market.

It also proposed a general prohibition on undertakings that involve market shares of 40 percent or more in their respective trades from substantially lessening competition.

But the proposed law did not include examples of anti-competition agreements.

Secretary for Commerce and Economic Development Frederick Ma declined to say whether supermarkets and oil companies, which were under fire for adjusting prices at the same time, were in breach of the law.

Exemptions will be granted to undertakings on public interest grounds, including those providing public services such as medical care and serving general economic interest.

Government departments and statutory bodies will also be exempted from the law.

The law is also inapplicable to agreement reached between competitors whose economic benefits outweigh the potential anti-competitive harm.

The law will not specify how much economic benefits will be required for an exemption.

Ma said the law will be effective in curbing anti-competition behaviors.

"Individual community members can lodge a complaint with the commission if they believe there are price-fixing activities," he said. "The commission has sufficient statutory power. It has the rights to examine companies' books, access email correspondents and phone conservation recordings."

Business sectors have reservations on the report.

"The new law will get companies worried," said Stanley Lau, deputy chairman of the Federation of Hong Kong Industries.

Lau added that the federation will seek views from its members and convey them to the government.

Chinese Manufacturers' Association of Hong Kong vice-chairman David Wong said the proposed law should be written more clearly and its enforcement should be conducted in an open, fair and transparent manner.

Chinese University marketing professor Leo Sin questioned the efficiency of the competition law as he believes the HK$10 million fine is too lenient.

Sin also pointed out that there could be loopholes in the law given the unclear definition of how much economic benefits should be considered enough for an exemption.

The consultation will end on August 5.

(HK Edition 05/07/2008 page1)