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Viewing cable 06HONGKONG4730, HONG KONG OPENS PUBLIC CONSULTATION PHASE ON

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Reference ID Created Released Classification Origin
06HONGKONG4730 2006-12-13 09:39 2011-08-23 00:00 UNCLASSIFIED Consulate Hong Kong
VZCZCXRO3701
RR RUEHCN RUEHGH
DE RUEHHK #4730/01 3470939
ZNR UUUUU ZZH
R 130939Z DEC 06
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 9785
RUCPDOC/USDOC WASHDC
INFO RUEHBJ/AMEMBASSY BEIJING 9922
RUEHCN/AMCONSUL CHENGDU 0982
RUEHGZ/AMCONSUL GUANGZHOU 0254
RUEHGH/AMCONSUL SHANGHAI
RUEHSH/AMCONSUL SHENYANG 3451
RUEHGV/USMISSION GENEVA 1083
RUCPDOC/USDOC WASHDC
RUEHIN/AIT TAIPEI 4275
UNCLAS SECTION 01 OF 03 HONG KONG 004730 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/CM 
STATE PASS USTR STRATFORD/WINTERS/CELICO 
USDOC FOR ITA OCEA MACQUEEN 
USMISSION GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ECON ETRD WTO HK
SUBJECT: HONG KONG OPENS PUBLIC CONSULTATION PHASE ON 
COMPETITION LAW 
 
 
1.  SUMMARY.  At a public forum on November 21, Financial 
Secretary Henry Tang encouraged all interested parties to 
 
SIPDIS 
give their views on how best to safeguard competition in Hong 
Kong.  Tang's announcement represents a continuation of the 
Hong Kong Government's (HKG's) step-by-step examination of 
Hong Kong's competition policy and follows a June 2006 report 
issued by Hong Kong's Competition Policy Review Committee 
(CPRC), set up in June of 2005, to review Hong Kong's current 
competition policy.  The CPRC report recommended introducing 
a new cross-sector competition law and a regulatory body to 
enforce it.  Hong Kong's Economic Development and Labor 
Bureau has published a 68-page public discussion document on 
the way forward for competition policy in Hong Kong, 
"Promoting Competition - Maintaining our Economic Drive." 
The document which includes "20 Key Questions" for interested 
parties to consider and respond to  can be found at the 
following website:  www.edlb.gov.hk.  The deadline for 
submission of views is February 5, 2007. USG agencies wishing 
to learn more about the proposed Hong Kong law, or wishing to 
comment can contact Economic Officer Craig Reilly in the U.S. 
Consulate General Hong Kong at ReillyCT@state.gov.  END 
SUMMARY. 
 
 
CPRC Report Issued in June 2006 
------------------------------- 
 
2.  On November 21, Financial Secretary Henry Tang launched 
Hong Kong's three-month public consultation phase "On the Way 
Forward for Hong Kong's Competition Policy."  Tang explained 
that in June 2005 the Hong Kong Government (HKG) had 
appointed a Competition Policy Review Committee (CPRC) to 
review Hong Kong's current competition policy.  The CPRC 
completed its review and issued a report in June 2006.  The 
report's questions and recommendations centered around three 
major subjects: 
 
-Does Hong Kong need a new competition law, and if so, how 
such a law might be framed; 
-The regulatory framework for competition law; 
-Enforcement and other regulatory issues 
 
Does Hong Kong Need a New Competition Law? 
------------------------------------------ 
 
3.  So far Hong Kong's approach to enacting competition law 
has resulted in the development of sector-specifc regulations 
that cover only the broadcasting and telecommunications 
sectors.  These regulations allow for full investigation and, 
where appropriate, the sanctioning of anti-competitive 
conduct, but only in those two sectors.  Hong Kong still has 
no legal framework for the implementation of cross-sector 
competition policy.  In its report on Hong Kong's competitive 
environment, the CPRC acknowledged arguments in support of 
maintaining the current sector-specific approach to 
implementing competition policy, such as:  Introducing a new 
cross-sector law could increase the cost of doing business 
locally, particularly for small to medium-sized enterprises 
(SMEs), and could affect Hong Kong's regional 
competitiveness; Hong Kong is already a free and competitive 
market and there is no need to interfere with normal business 
operations in a market place that already works well; and, 
There are other ways to enhance competition in local markets 
without introducing a new competition law.  While noting that 
a new competition law ought not create significant additional 
burden on local businesses, nor interfere with normal 
business practices or economically efficient market 
structures, the CPRC recommended that the HKG consider 
introducing a cross-sector competition law in Hong Kong. 
 
4.  The CPRC also addressed whether the scope of any new 
competition law should cover only specific types of 
anti-competitive conduct, or should it also include the 
regulation of market structures and mergers and acquisitions. 
 The CPRC recommended that the government take an incremental 
approach.  Legislation should focus on preventing 
anti-competitive conduct - rather than seek to "open up" 
markets to competition; it also recommended against including 
 
HONG KONG 00004730  002 OF 003 
 
 
mergers and acquisitions regulations in the competition law. 
The CPRC proposed that competition law should cover seven 
specific types of conduct:  1.  Price Fixing  2.  Bid Rigging 
 3.  Market Allocation  4.  Sales and Production Quotas  5. 
Joint Boycotts  6.  Unfair or Discriminatory Standards  7. 
Abuse of Dominant Position. 
 
The Regulatory Framework for Competition Law 
------------------------------------------- 
 
5.  The CPRC listed three principal options that could be 
considered as a regulatory framework for the enforcement of 
any new competition law for Hong Kong. 
 
- A single authority with power to investigate and adjudicate. 
- Separate enforcement and adjudication functions. 
- Adjudication by a specialist tribunal. 
 
Whichever option might be adopted, the CPRC recognized that 
the regulatory authority would require full-time staff and 
sufficient resources to enforce the law effectively, as well 
as provide guidance and information to business and consumers 
alike on how the law would apply in practice. 
 
Enforcement and Other Regulatory Issues 
--------------------------------------- 
 
6.  The CPRC also examined a variety of enforcement and 
regulatory issues -- handling complaints, the regulator's 
formal powers of investigation, whether breaches of a new 
competition law be considered civil or criminal infringements 
and what levels of penalties would be suitable -- to mention 
a few. 
 
Business Groups Weigh in on Competition Policy 
--------------------------------------------- - 
 
7.  Following the introductory remarks by Financial Secretary 
Tang, several leading members of the Hong Kong business 
community held a panel discussion on the Competition Law. 
Three major viewpoints emerged from this panel discussion on 
the question of the whether Hong Kong needs a new competition 
law. 
 
- "If It's Not Broke Don't Fix It" - Represented by the Hong 
Kong Federation of Industry.  Hong Kong is one of the most 
free and open economies in the world the Federation averred. 
While supporting open, fair competition is a laudable goal, 
competition legislation could be costly to local businesses 
and would affect Hong Kong businesses' international 
competitiveness.  This point of view holds that passage of a 
cross-sector competition law will add a regulatory layer over 
Hong Kong's businesses and may add to the cost of doing 
business, particularly an increase in legal costs as 
companies strive to abide by the rules and fend off legal 
actions. 
 
- "The Message is Essential" - Represented by the British 
Chamber of Commerce in Hong Kong.  Anti-competitive behavior 
is not a major issue in Hong Kong, but Hong Kong is a small 
market and some sectors are dominated by major players. 
Competition legislation could send a clear message to 
international businesses that there is a level playing field 
in Hong Kong.  However, Hong Kong should take care not to 
implement an overly bureaucratic system that leads to 
unwanted cost increases.  The "small government, open market" 
approach has been effective in Hong Kong and permits 
international competitiveness.  The optics of this 
legislation is important - it sends the message that Hong 
Kong is internationally competitive and protects the consumer. 
 
- "Competition Law is needed to prevent anti-competitive 
behavior" - Represented by Hong Kong's small to medium 
enterprises (SMEs) who are concerned about monopolies and 
anti-competitive behavior.  SMEs support legislation to 
ensure open, competitive markets but do have concerns about 
high legal costs.  SMEs also can be disproportionately 
impacted by malicious complaints.  SMEs are in favor of 
 
HONG KONG 00004730  003 OF 003 
 
 
enacting a cross-sector competition law but also request the 
HKG to support legal defense fund and education for SMEs to 
stay within law. 
 
Cunningham