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A Quick Guide to Hong Kong Competition Law’s Three Rules

The Hong Kong government’s competition law is designed to promote competition and to ban anti-competitive conducts. They believe that competition is key to creating better products with better prices, so that citizens have better choices. This competition law of Hong Kong prohibits three types of anti-competitive practices described under the ordinance’s three main rules, namely: First Conduct Rule, the Second Conduct Rule; and the Merger Rule. Here’s what you need to know about these three rules:

First Conduct Rule

The First Conduct Rule prohibits arrangements by market members which may prevent, restrict, or distort competition. For instance, it does not allow competitors from conniving on main competition aspects like price, output, and bidding procedures. Conducts that may violate this rule include cartels, exclusive distribution and exclusive customer allocation, trade/industry association activities, and vertical price restrictions.

The Second Rule

This rule is focused on major businesses abusing their market power to protect their position and increase gains. This includes large businesses that may affect the small and medium-sized business community. Conducts by abusive corporations are believed to deprive competitors of opportunities and deprive customers of choices. Examples of conduct that violate this rule include predatory pricing, margin squeezing, exclusive dealing, and anti-competitive tying and bundling.

The Merger Rule

The Merger Rule is mainly applied mergers that have or likely to cause significant decrease in competition. This ordinance is limited to mergers relating to conducts that are directly or indirectly holding carrier licenses from the Telecommunications Ordinance.

Compliance

The Competition Commission has distributed brochures, toolkits, and videos to inform trade organizations and small and medium businesses about the competition law. Familiarity with this legislation is very important especially if you have a business. To learn more about it, it is a smart step to consult with an expert in competition law. Lawyers specializing on this field are well-versed with these ordinances and they have the necessary skills to help you understand your obligation and rights as prescribed by this law.

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