How Hong Kong’s new competition law will affect HR

Author: Liana Cafolla | Date: 09 Dec 2015

Networking and recruitment will come under increased scrutiny, says specialist consultancy

Hong Kong’s new competition law – the Competition Ordinance – comes into force on 14 December – and it holds clear implications for how HR is conducted in the city, according to McLagan, the performance and reward consulting and benchmarking firm for the financial services industry.
 
In a new paper looking specifically at how HR should respond to the law, McLagan points out that job fairs, networking events and professional seminars will come under the scrutiny of compliance departments. The legislation, it says, restricts four types of anti-competitive behaviour: price fixing, market rigging, bid rigging and output restriction, the first three of which directly affect HR.
 
Price fixing
The ordinance prohibits two or more employers from sharing oral, written, formal or informal information on wages, benefits, allowances, bonuses and other variable terms of employment.
 
“Mere sharing of information is sufficient to be in violation of the ordinance – no proof of actual action or anti-competitive consequences are required,” says Tzeitel Fernandes, head of Hong Kong for McLagan. The ordinance can be violated just by being present at a conversation during which sensitive price information is disclosed by a competitor.
 
Market rigging
Firms are banned from dividing or allocating customers, suppliers or geographies among themselves. For HR, this means a ban on entering into formal or informal no-poaching arrangements with competitors, except in certain circumstances such as mergers or divestitures.
 
Bid rigging
For HR, this may extend to a ban on competing firms colluding on the hiring account of a candidate or group of candidates.
 
HR departments should make sure they are compliant by taking five steps, advises Fernandes.
 
1. Review benchmarking practices
While the Competition Commission notes that market benchmarking is a legitimate reason for firms to share sensitive information, it says the information should be shared with a disinterested third party who would disclose the details to firms in an anonymous, aggregated manner.

2. Review association and networking group memberships
If the purpose of a firm’s membership in industry associations or networks is to share information that the ordinance deems sensitive, HR needs to take action. Firms should review all formal and informal association and networking memberships, examine the charters of formal associations and ensure that networking groups agree on a list of off-limits discussion topics.

3. Review internal wage-determination policies
The ordinance does not apply to collective bargaining between an employer and a group of employees, but it does not give a blanket exemption to collective bargaining agreements. So unions or associations that represent the employees of more than one firm and which negotiate with more than one employer on wages and employment terms may be considered anti-competitive. Firms should take legal advice on their collective bargaining agreements, and audit wages and commissions that are set by industry norms to ensure these norms were not based on anti-competitive behaviour.

4. Examine agreements that restrict hiring
Agreements that restrict hiring from a particular competitor or group of competitors, such as no-poaching agreements, are deemed uncompetitive under the ordinance, and will need to be terminated.

5. Evaluate training and policy formulation needs
HR teams need to be trained on matters arising from the ordinance, including:
  • Identifying sensitive information
  • Guarding against providing such information to competitors
  • Removing themselves from conversations where competitors are disclosing sensitive information
  • Abstaining from comments on ‘market information’ from non-public sources
  • Basing written market information on reliable third-party sources.
Breaches of the ordinance will be dealt with by the Competition Tribunal, which can act against both individuals and companies, and impose penalties including fines, damages, voiding of agreements and director disqualifications.
 
According to the McLagan paper: ‘’The Competition Commission has publicly stated that it will make every effort to partner with trade associations and industry bodies to assist in compliance. The Commission will also inform organisations if they are under investigation and rapid corrective action on the part of the organisation will be viewed in a favourable light.”