What's changed

The Hong Kong Competition Commission (HKCC) has issued a so-called Advisory Bulletin (AB), warning businesses not to discuss or agree terms and conditions in employment contracts, such as salaries or bonuses, with competitors. It also warns businesses not to discuss or agree with competitors matters relating to hiring employees, such as agreeing not to “poach” each other’s employees. The AB states that such discussions can violate competition law, even where the businesses involved are not competitors in the traditional sense. There is no mention in Hong Kong’s competition law (the Competition Ordinance), or HKCC’s existing guidelines, that such practices might violate the Ordinance. However, we have seen other competition law/antitrust agencies taking an increasing interest in HR issues. The US antitrust agencies published detailed guidance on HR issues in October 2016, which suggest that these agencies will prosecute no poaching and wage fixing agreements as criminal violations of US antitrust law. There has been a spike in interest in non-solicitation agreements in other jurisdictions, as this heatmap shows.

Following the US antitrust agency guidance directed to HR professionals, the US DOJ is actively engaged in no-poach investigations. In April 2018, DOJ filed a civil enforcement action and settlement concerning alleged no-poach conduct in the rail manufacturing sector.*

What it means for you

The AB states that the Commission will treat these practices as having the "object" of harming competition, and (implicitly) as Serious Anti-Competitive Conduct under the Ordinance. This has three main consequences:

  • The Commission is likely to investigate these sorts of behaviours if they come to its attention.
  • The Commission will seek to proceed directly to the Tribunal to establish an infringement and ask the Tribunal to impose a penalty. It will not consider it necessary to first issue a warning notice giving the business a chance to rectify the alleged infringement.
  • To the extent that such conduct is regarded as ‘cartel’ conduct within the meaning in HKCC’s Leniency Policy, businesses involved in such conduct will be able to come forward and self-report, and thereby obtain immunity from a penalty, by agreeing to co-operate in the investigation and any Tribunal enforcement action (a so-called "leniency application"). The first to confess and cooperate will in principle receive the immunity. This significantly increases the detection risk for businesses.
  • The AB is focused on agreements between employers (and not on agreements between an employer and its employees). Non-solicitation clauses in employment contracts are not apparently affected. Nor does the AB impact on collective bargaining by employees, which the HKCC has previously stated falls outside competition law.

Actions to take

  • Review any HR related contacts you have with your competitors, whether in the context of a trade or professional body or directly, and take legal advice (if you have not done so already) to ensure they comply with the Ordinance.
  • In particular, review with your HR department the extent to which they have discussions with other organisations, to make sure the discussions are within permissible bounds. A sample Q&A provided with the AB suggests that, in line with international practice, surveys conducted by a third party, based on historic salary data that is presented in an aggregated format are unlikely to raise concerns.

And finally…

  • The Hong Kong courts (the Competition Tribunal, which is a division of the High Court, and the Court of Appeal and Court of Final Appeal) will have the final say on whether the Commission's views are consistent with the Ordinance (unlike some other jurisdictions like the EU, the Commission is not the decision-maker). There are certainly issues as to whether the Commission’s approach is consistent with the objectives of the Ordinance, the Ordinance itself, and the Commission's own guidelines. But in the meantime the above "Actions to take" are recommended.

* Baker McKenzie’s Washington DC office represented one of the defendants in this action.

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