Hong Kong’s Competition Commission calls on trade groups to avoid opaque, onerous membership policies
- Commission CEO Rasul Butt says recent cases have raised concerns about the admission criteria and procedures of certain associations
- Membership in trade bodies is, in some cases, essential to entering a market, so unreasonable admission practices can hurt competition
Hong Kong’s Competition Commission on Thursday urged the city’s trade associations to review their membership admission practices and ensure they were following the regulator’s guidelines to avoid breaching antitrust laws.
In a statement, the commission noted that membership in an association was, in some cases, an essential precondition for participating in a market, so unreasonable and unjustifiably strict admission criteria and procedures could be harmful to companies looking to enter a given industry.
Exclusion from membership, it added, could also deprive a business or individual of accreditation, government subsidies and other advantages that were only available to members.
Commission CEO Rasul Butt said his colleagues had recently encountered some cases that raised concerns about the admission criteria and procedures of certain associations.
He also warned that when facilitating interactions between competitors, authorities had to take care to avoid giving rise to anticompetitive arrangements.
“It is also important to note that where members of a trade association … make or give effect to an anticompetitive decision of the trade association, both the members and the association may incur liability under the ordinance,” Butt said in the statement.
The commission said that although some trade groups were exempt from the rules because they were also statutory bodies, any of their members implementing anticompetitive moves were still at risk of running afoul of the law.
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Under the commission’s guidelines, member admission practices should be transparent, proportionate and non-discriminatory. They must also be based on objective standards and subject to appeal in cases in which an application is rejected.
The commission said that declining to inform unsuccessful applicants of the reasons for their rejection was an example of procedural opacity, and contributed to discriminatory treatment.
Associations seeking to assess applicants’ character could require them to show that they had no prior criminal convictions, or ask them for a reference from a third party, the commission suggested.
If a character requirement was left entirely up to the discretion of those reviewing the application, it could not be considered an objective criterion, it added.
The commission also said admission fees should reflect the actual costs incurred in processing applications, and not be prohibitively high.
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Simon Wong Ka-wo, president of the Federation of Restaurants and Related Trades, welcomed the commission’s message, saying his group would review its guidelines.
With around 1,500 company members in his trade group, Wong said those in the association could exchange industry information and enjoy the body’s help on operational regulations.
Wong said only management staff, restaurant owners and workers endorsed by their bosses could join the federation after screening. But the federation’s website does not delve into details, and the group had not set up an appeal mechanism.
Wong vowed to make adjustments if necessary.
“When there are standardised practices on admission rules, they help industry groups to act better,” he said.
