Author
Gary Chu  
Solicitor

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Lisa Huett  
Partner
T +61 3 9643 4163

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Sydney
Sharon Henrick  
  Trish Henry  
  Tony O'Malley  
 

Melbourne
Amanda Bodger  
  Caroline Coops  
  Andrew Monotti  
  Roger Featherston    

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Generic competition laws recommended for Hong Kong

Hong Kong currently has no generic competition law, but rather has a general competition policy and sectoral competition laws notably for the telecommunications sector.

In June 2005, a Competition Policy Review Committee was appointed by the Hong Kong Government's Competition Advisory Group to review the effectiveness of Hong Kong's competition policy. On 4 July 2006, the Committee completed its review and published its final report.

The report recommends that generic competition legislation should be enacted in Hong Kong to guard against anti-competitive conduct that would have an adverse effect on economic efficiency and free trade in Hong Kong.

The proposed competition regime does not include a merger regime or a generic rule-of-reason competition prohibition, but would rather comprise specific provisions directed at the worst types of anti-competitive behaviour. The proposed list of conduct to be regulated currently includes price-fixing, bid-rigging, market allocation, sales and production quotas, joint boycotts, unfair standards, and abuse of a dominant market position. The report recommends that these provisions would require evidence of an intent to distort the market or evidence of having the effect of distorting normal market operation and lessening competition.

To support the new competition regime, the report recommends that a new regulatory authority, to be known as the Competition Commission, be established in Hong Kong. The Competition Commission would have sufficient powers to investigate any suspected anti-competitive conduct prohibited by the new legislation. The report recommends that the Government should also consider the establishment of a Competition Tribunal to hear cases brought by the Competition Commission, issue cease and desist orders and to hand down sanctions in the form of civil penalties.

The report is likely to provide a basis for further public consultation in Hong Kong in the coming months.

Air New Zealand fined NZ$600,000 for misleading advertising and undertakes to use all-inclusive pricing

Air New Zealand has agreed to pay NZ$600,000 in fines and nearly NZ$65,000 in legal costs for misleading customers about the true cost of airfares.

In a joint submission with the New Zealand Commerce Commission (NZCC) to the Auckland District Court on 16 June 2006, Air New Zealand also undertook to use all-inclusive pricing for all its international and domestic airfares. Airport departure taxes will remain the only additional charge as they can vary depending on a passenger’s itinerary.

In November 2005, Air New Zealand was found to have engaged in 112 counts of misleading or deceptive conduct under New Zealand’s Fair Trading Act 1986, mainly for airfares advertised in national newspapers between October 2001 and June 2004. In many of the advertisements, an asterisk appeared alongside a “headline price” to refer to additional charges including insurance, fuel surcharges and Civil Aviation Authority levies which were listed in fine print. The Court found that it was false or misleading to disclose “operating costs”, such as fuel, separately from the headline price. It also found in relation to the other additional charges that the fine print was not sufficiently prominent to overcome the misleading impression made by the headline price.

European Commission revises guidelines for setting fines in antitrust cases

On 28 June 2006, the European Commission adopted revised Guidelines on the Method of Setting Fines (Guidelines) for companies that breach Articles 81 or 82 of the EC Treaty. Those articles prohibit cartels, abuse of dominant position and other anti-competitive conduct in the European Economic Area. The Guidelines were first adopted in 1998.

European Commissioner for Competition, Neelie Kroes, has commented that the Guidelines send a “clear signal” of deterrence to companies. Under the revised policy, the Commission may impose a “basic amount” of up to 30% of the company’s total annual sales in the previous year to which the infringement relates, with the amount set “at the higher end of the scale” for grave conduct such as cartels. This contrasts with the previous approach of setting basic amounts based on the nature of the conduct within set monetary bands - “minor” (€1000 to €1 million), “serious” (€1 million to €20 million) or “very serious” (above €20 million).

United States Congress investigates Visa and MasterCard interchange fee fixing claims

The United States Senate Judiciary Committee has held a hearing into claims by various retailers that the setting of interchange fees by Visa and MasterCard for their payment card networks constitutes price fixing in violation of United States antitrust laws.

Interchange fees are amounts that businesses pay in order to accept and process customers’ credit card or debit card transactions. The fees currently average about 2.2% of each payment card transaction cost. According to the Merchant Payments Coalition, an association representing about 2.7 million store locations, interchange fees cost United States consumers nearly US$30 billion each year. At the hearing on 19 July 2006, representatives of Visa and MasterCard denied that their setting of interchange fees has any net anti-competitive effect and argued that interchange fees should not be subject to governmental price controls.

The Senate Committee’s official statement on the hearing acknowledged a need to “bring more transparency” to the system for setting interchange fees, but did not indicate whether it will take any action regarding the retailers’ claims. On the other side of the Atlantic, the European Commission has issued a preliminary opinion that MasterCard’s interchange fee setting practices are contrary to EC antitrust laws and that the company may face legal action.

ACCC / NZCC in-principle agreement on trans-Tasman mergers review protocol

The ACCC and NZCC have signed a protocol for dealing with the review of trans-Tasman mergers.

The Cooperation Protocol for Merger Review, which came into effect on 7 August 2006, is intended to increase the overall transparency of merger review processes and to lessen possible differences of views by the two agencies. The protocol codifies a number of existing practices and sets out further mechanisms for cooperation between the agencies. Among other things, it provides that:

• subject to confidentiality issues, each agency will endeavour to notify the other when it becomes aware of a proposed merger or acquisition that may affect competition in the other jurisdiction’s markets
• where a proposed transaction is likely to affect both Australia and New Zealand, the agencies will consider undertaking a dual review, and
• in undertaking a dual review, the agencies will endeavour to synchronise the timing of key review stages, hold joint meetings with merging parties, share information and competition analyses consistently with confidentiality obligations, and facilitate compatible remedies where appropriate.

The protocol follows a memorandum of understanding reached in February 2006 between the Australian and New Zealand Treasury and Finance Ministers to further promote closer economic ties and reduce regulatory burden in the two countries, as reported in our May 2006 Competition law update.