HKCC may find legal basis for early acceptance of block exemption applications

31 January 2017 9:54am

9 March 2015. By Yonnex Li.

Hong Kong’s Competition Commission, or HKCC, may find a legal basis for early acceptance of applications for block exemption orders, which would provide successful applicants with immunity from the city’s newly established antitrust regime, observers say.

They say the competition regulator may refer to Chapter 1 of the Laws of Hong Kong, which specifies how statutory powers conferred by an ordinance could be exercised between enactment and commencement of that ordinance.

Such provisions could be a reference for the HKCC in its consideration of requests from industries — such as the shipping sector — for early review of application materials. Global shipping liners are concerned that, without being granted with quick exemption, they would be violating antitrust rules as soon as
the Competition Ordinance takes effect in the third or fourth quarter of this year.

It is understood that the government considers the reference to the Chapter 1 provisions as applicable. The Competition Ordinance was enacted in June 2012, pending a notice from the government for its official commencement later this year.

Section 32 of the Interpretation and General Clauses Ordinance stipulates that “where an Ordinance is to come into operation on a day other than the day of its publication in the Gazette, a power to do anything under the Ordinance may be exercised at any time after its publication in the Gazette.”

“An exercise of a power…is not effective until the provision in the Ordinance to which it relates comes into operation unless the exercise of the power is necessary to bring the Ordinance into operation,” the interpretation statute said.

In the context of the block exemption applications, given that the Competition Ordinance is already published in the gazette, the HKCC should already have the power to accept block exemption applications, but any decisions on approval or rejection would only become effective after the Competition Ordinance takes effect.

Observers say the regulator, for the moment, isn’t expected to go beyond receipt of the applications. For example, it is unlikely to take steps such as publishing notice of the proposed block exemption order or consider any representations about the proposed order, because this would subject the HKCC to legal uncertainty.

The Hong Kong Liner Shipping Association, or HKLSA, is in talks with the regulator over block exemption issues, MLex has learned.

In a Dec. 1 submission, the HKLSA urged the regulator to establish a procedure so that it could accept block exemption applications before the ordinance takes effect.

Early acceptance would allow the HKCC to review and decide on those applications soon after the Competition Ordinance comes into force, it said.

The HKLSA plans to apply for block exemption in Hong Kong, but is seeking more regulatory certainty before the agency comes up with a decision on the application.

The association represents some of the world’s largest liners, including Denmark’s Maersk, France’s CMA CGM, and Germany’s Hamburg Sud.

Competition Commission spokeswoman Rita Ho told MLex on March 4 that the regulator is “considering the matters raised by the Hong Kong Liner Shipping Association,” but she declined to comment on its “possible response to any issue while these matters are still under consideration.”

As a capital-intensive industry, shipping companies rely on the ability to provide shared services to offset investments. It is common for competitors to cooperate under two sets of agreements known as voluntary discussion agreements, or VDA, and vessel sharing agreements, or VSA.

While VDAs allow member carriers to study trade data and discuss charges, rate levels and supply and demand trends, VSAs enable carriers to coordinate vessel space and operations.

These activities, if not exempted, may run afoul of the Competition Ordinance, which prohibits anti-competitive agreements under the so-called first conduct rule.

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