Competition Commission to investigate Hong Kong Seaport Alliance

The Competition Commission recently launched a formal investigation into whether the Hong Kong Seaport Alliance (Seaport Alliance) has contravened the Hong Kong competition rules.

According to the press release of the Competition Commission, the members of the Seaport Alliance have entered into a joint operating agreement to operate and manage their 23 berths across 8 terminals at Kwai Tsing Container Terminals in the New Territories. The Seaport Alliance was formed by container terminal operators Hongkong International Terminals Limited, Modern Terminals Limited, COSCO-HIT Terminals (Hong Kong) Limited and Asia Container Terminals Limited.

The Hong Kong Shippers’ Council and other trade and logistics industry members have voiced concerns about the Seaport Alliance, which is reported to hold a market share of approximately 95% in Hong Kong.

The Competition Commission announced on 10 January that it has an open investigation of the Seaport Alliance, particularly whether the Seaport Alliance may contravene the First Conduct Rule of the Competition Ordinance, which prohibits agreements that have the object or effect of preventing, restricting or distorting competition in Hong Kong. Further, the Competition Commission announced that investigation into the Seaport Alliance will be carried out as a matter of priority. The Competition Commission has broad investigation and enforcement powers, which include issuing notices for businesses to cease anti-competitive practices and bringing legal actions before the specialised competition law court, the Competition Tribunal.

The Competition Tribunal has the power to impose a wide range of sanctions on businesses and individuals found to have contravened, or been involved in the contravention of, the competition rules, including pecuniary penalties and director disqualification orders. Contravening parties are further exposed to private follow-on actions for damages.

Comment

The Competition Commission’s announcement of its investigation into the Seaport Alliance demonstrates its commitment to investigate matters involving conduct that may have widespread impacts on businesses and consumers across multiple sectors in Hong Kong. The investigation marks a remarkable step from the three legal actions the Competition Commission have brought to the Competition Tribunal thus far, the first of which involved a single tender for the provision of an IT system affecting one individual organization (i.e., YWCA), while the other two involved the provision of decorative services each affecting tenants in one specific public housing estate.

Businesses, large or small, are advised to carefully review their relevant agreements and practices to ensure full compliance with the Competition Ordinance.