Newsletters Business Crime & Financial Services 28th Jun 2017

Competition matters exclusively within the jurisdiction of the Competition Tribunal

The Hong Kong Court of First Instance has affirmed that only the Competition Tribunal has jurisdiction to consider whether the decision of a trade association prevents, distorts or restricts competition in Hong Kong: Loyal Profit International Development Ltd v Travel Industry Council of Hong Kong [2016} HCMP 256/2016.

The Defendant is a company limited by guarantee and the only organisation that has been approved to act as a trade association for travel agents in Hong Kong. It issued Directives and established a scheme, the effect of which was to outlaw the practice of tour guides for groups from the mainland relying for their income on commissions received from the shops to which they took their groups.

The Plaintiff sought declarations that the Directives were in contravention of the Companies Ordinance and that the scheme was contrary to the Defendant’s Memorandum of Association partly on the basis that the scheme was contrary to section 6(1) of the Competition Ordinance.

Harris J rejected the argument out of hand. He noted that the Plaintiff was not suggesting that an alleged infringement of section 6 gave it a cause of action before the Court of First Instance. Rather it appeared to be arguing that the Court could determine whether there had been an infringement so as to determine whether or not the Defendant was in breach of the relevant clause of its Memorandum on the basis that an act that infringes section 6 must therefore also result in a breach of the clause. However, only the Competition Tribunal had the jurisdiction to determine whether section 6 had been infringed and then only on receipt of a complaint from the Competition Commission. To do as the Plaintiff suggested would be to subvert the aims and procedures of the Competition Ordinance. Harris J also refused to refer the matter to the Competition Tribunal under section 113 of the Ordinance because on the evidence before him there was no basis to make such a reference.

There is no doubt that Harris J was correct in rejecting what was in effect an attempt to go behind the clear provisions of the Competition Ordinance.

There would have been nothing to prevent the Plaintiff from lodging a complaint with the Commission pursuant to section 37 of the Ordinance. Of course the Plaintiff would have then faced the possibility that the Commission would have refused to investigate the complaint on the basis that it was trivial, frivolous or vexatious, or misconceived or lacking in substance. Harris J pointed to the lack of evidence adduced by the Plaintiff to support its arguments. In order to succeed the Plaintiff had to identify as a minimum, first, the agreement or provision that was said to be anti-competitive and, secondly, the market in which the effect of the agreement or provision could be gauged; finally, the Plaintiff would have to demonstrate harm and what the market would have been like in the absence of the allegedly anti-competitive provision or agreement. There was no such evidence before Harris J and in those circumstances it is most likely that the Commission would have refused to investigate further. It is worth noting that so unimpressed was Harris J with the submissions advanced on behalf of the Plaintiff as to the Competition Ordinance point that he ordered the costs of that part of the case to be paid on an indemnity basis.

This case establishes beyond any doubt that competition issues are exclusively within the jurisdiction of the Competition Tribunal. It also serves as a useful starting point, but perhaps no more than that, for the sort of evidence that the Court of First Instance would expect to see before it considered transferring that part of the case to the Tribunal pursuant to section 113 of the Ordinance.

Chris Gillespie

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