Sustainability and Competition Global Practice Guide |
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Hong Kong |
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(Asia Pacific)
Firm
Deacons
Contributors
Machiuanna Chu |
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| Are ESG measures/sustainability agreements included in your jurisdictional competition regime? | ESG measures/sustainability agreements are not explicitly included in Hong Kong’s competition regime at present. |
| If ESG measures/sustainability agreements are not included in your jurisdictional competition regime, do you foresee any new regulations coming into place in 2022? | We do not foresee any new regulations specifically addressing antitrust issues related to ESG measures/sustainability agreements coming into place in 2022. |
| Has your Authority issued any guidance on the role, if any, of ESG in the competition law analysis applied to mergers or other conduct? | The Hong Kong Competition Commission (“HKCC”), the competition law enforcement agency in Hong Kong, has not issued any guidance on the role of ESG in relation to merger analysis to date. In fact, the Merger Rule under the Hong Kong Competition Ordinance (“Competition Ordinance”) is applicable to undertakings in the telecommunications and broadcasting sectors only. |
| Has your jurisdiction issued guidance regarding competitor collaborations or participating in industry working groups, and if so, do they specifically address ESG? | The HKCC has not issued any guidance specifically related to competitor collaborations or participation in industry working groups. However, under the Competition Ordinance, agreements or arrangements among competitors may be excluded in respect of the First Conduct Rule (which prohibits anti-competitive agreements or arrangements), if the agreement or arrangement “contributes to improving production or distribution”, or “promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit” (Competition Ordinance, Section 1 of Schedule 1, “Agreements enhancing over economic efficiency” (“efficiency exclusion”). In particular, the following consideration regarding efficiency exclusion, noted in the First Conduct Rule Guideline published by the HKCC, is pertinent to agreements among competitors in connection with ESG or sustainability initiatives (including competitor collaborations or industry working group participation): Section 2.10 of the Annex to the First Conduct Rule Guideline recognizes that efficiencies in the form of quality improvements or innovation, including “technical and technological advances brought about when firms cooperate on research and development leading to improved or new products” that benefit consumers may be excluded from the prohibitions under the First Conduct Rule. |
| Can parties seek specific guidance from authorities on proposed ESG initiatives? | Parties may seek guidance from the HKCC on proposed ESG initiatives. In general, when an undertaking seeks guidance from the HKCC regarding a specific arrangement or initiative, the HKCC typically will provide only general, broad and non-committal guidance to the undertaking. If the firm would like to seek clear and/or conclusive guidance from the HKCC respective to a specific proposed ESG initiative, the HKCC will most likely advise the undertaking to formally apply for a decision from the HKCC (under sections 9 and/or section 24 of the Competition Ordinance) for an exclusion (under section 11) or exemption (under 26) regarding whether or not the proposed ESG initiative would be excluded or exempted from the prohibitions under the First Conduct Rule or Second Conduct Rule (which prohibits abuse of substantial market power by an undertaking). |
| How, if at all, does your jurisdiction quantify or calculate the ESG effects? | To date, there have not been any cases that involve the quantification or calculation of the ESG/sustainability effects. Neither has the HKCC provided any guideline on how such effects would be measured. |
| What does your legal authority currently permit even if your agency is not yet active on this topic? | Currently, the HKCC has not explicitly permitted any specific arrangement or conduct involving or related to ESG or sustainability matters. However, as explained in our response to Question 4 above, an arrangement involving ESG or sustainability matters may be excluded from the prohibitions under the First Conduct Rule if the parties can successfully demonstrate that the arrangement enhances overall economic efficiencies (under section 1 of Schedule 1 of the Competition Ordinance). Further, section 2 of Schedule 1 of the Competition Ordinance provides that an agreement (or conduct) is excluded from the First Conduct Rule and Second Conduct Rule if it is entered into (or engaged in) for the purpose of complying with a legal requirement under Hong Kong law (e.g., an environmental protection regulation in the case of matters involving ESG or sustainability issues). |
| Are there precedents that involved ESG/sustainability matters in your country? If so please provide a short description. | There are no precedents that involve ESG/sustainability matters in Hong Kong to date. |
| Is there specific antitrust regulation in your jurisdiction to be aware of which might give rise to private or class action ESG litigation? | The Competition Ordinance does not provide for standalone private or class actions. |
Sustainability and Competition Global Practice Guide
ESG measures/sustainability agreements are not explicitly included in Hong Kong’s competition regime at present.
We do not foresee any new regulations specifically addressing antitrust issues related to ESG measures/sustainability agreements coming into place in 2022.
The Hong Kong Competition Commission (“HKCC”), the competition law enforcement agency in Hong Kong, has not issued any guidance on the role of ESG in relation to merger analysis to date. In fact, the Merger Rule under the Hong Kong Competition Ordinance (“Competition Ordinance”) is applicable to undertakings in the telecommunications and broadcasting sectors only.
The HKCC has not issued any guidance specifically related to competitor collaborations or participation in industry working groups.
However, under the Competition Ordinance, agreements or arrangements among competitors may be excluded in respect of the First Conduct Rule (which prohibits anti-competitive agreements or arrangements), if the agreement or arrangement “contributes to improving production or distribution”, or “promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit” (Competition Ordinance, Section 1 of Schedule 1, “Agreements enhancing over economic efficiency” (“efficiency exclusion”).
In particular, the following consideration regarding efficiency exclusion, noted in the First Conduct Rule Guideline published by the HKCC, is pertinent to agreements among competitors in connection with ESG or sustainability initiatives (including competitor collaborations or industry working group participation): Section 2.10 of the Annex to the First Conduct Rule Guideline recognizes that efficiencies in the form of quality improvements or innovation, including “technical and technological advances brought about when firms cooperate on research and development leading to improved or new products” that benefit consumers may be excluded from the prohibitions under the First Conduct Rule.
Parties may seek guidance from the HKCC on proposed ESG initiatives. In general, when an undertaking seeks guidance from the HKCC regarding a specific arrangement or initiative, the HKCC typically will provide only general, broad and non-committal guidance to the undertaking.
If the firm would like to seek clear and/or conclusive guidance from the HKCC respective to a specific proposed ESG initiative, the HKCC will most likely advise the undertaking to formally apply for a decision from the HKCC (under sections 9 and/or section 24 of the Competition Ordinance) for an exclusion (under section 11) or exemption (under 26) regarding whether or not the proposed ESG initiative would be excluded or exempted from the prohibitions under the First Conduct Rule or Second Conduct Rule (which prohibits abuse of substantial market power by an undertaking).
To date, there have not been any cases that involve the quantification or calculation of the ESG/sustainability effects. Neither has the HKCC provided any guideline on how such effects would be measured.
Currently, the HKCC has not explicitly permitted any specific arrangement or conduct involving or related to ESG or sustainability matters. However, as explained in our response to Question 4 above, an arrangement involving ESG or sustainability matters may be excluded from the prohibitions under the First Conduct Rule if the parties can successfully demonstrate that the arrangement enhances overall economic efficiencies (under section 1 of Schedule 1 of the Competition Ordinance).
Further, section 2 of Schedule 1 of the Competition Ordinance provides that an agreement (or conduct) is excluded from the First Conduct Rule and Second Conduct Rule if it is entered into (or engaged in) for the purpose of complying with a legal requirement under Hong Kong law (e.g., an environmental protection regulation in the case of matters involving ESG or sustainability issues).
There are no precedents that involve ESG/sustainability matters in Hong Kong to date.
The Competition Ordinance does not provide for standalone private or class actions.