Competition law concerns in the employment marketplace

On 9 April 2018, the Hong Kong Competition Commission (“Commission”) published an advisory bulletin to alert businesses of competition law risks relating to employment practices.

The Commission has identified a number of employment-related practices by businesses in Hong Kong that may contravene the rule against anti-competitive agreements and concerted practices of the Competition Ordinance (“First Conduct Rule”).  These practices relate in particular to the hiring of employees and the setting of employment terms and conditions.

Under the First Conduct Rule, businesses are prohibited to enter into agreements or engage in concerted practices with the object or effect of harming competition in Hong Kong.  Businesses must make decisions on competitive parameters, including in relation to competitively sensitive employment practices, independently of each other.

Anti-competitive practices in the employment marketplace can take a number of forms.  These include (but are not limited to):

  • Wage-fixing agreements.  Agreements between businesses in relation to any element of compensation for employees, including salaries, benefits and allowances, may amount to illegal price-fixing- a serious anti-competitive conduct under the Competition Ordinance.
  • Non-poaching agreements.  Agreements between businesses in relation to the solicitation or hiring of each other’s employees may amount to illegal market sharing; a serious anti-competitive conduct under the Competition Ordinance.
  • Exchange of sensitive information.  Sharing of competitively sensitive information between businesses regarding employee compensations or hiring practices, whether done directly or through a third party, unilaterally or reciprocally, may contravene the Competition Ordinance.

This latest bulletin shows that the Commission is actively targeting anti-competitive employment-related practices by businesses in all sectors in Hong Kong.  The Commission has already identified conduct by businesses that may contravene the First Conduct Rule, including coordinated practices related to employment terms and conditions and hiring practices.  It is expected to take enforcement actions, which may include bringing actions to the Competition Tribunal, to rectify such anti-competitive conduct.

A party found to have contravened the First Conduct Rule may face substantial financial penalties (up to 10% of the Hong Kong turnover, for a maximum of three years) and director disqualification orders, among other sanctions, by the Competition Tribunal.

To ensure full compliance with the Competition Ordinance, businesses are advised to carefully review its agreements and practices.