Trade Association Survey Subject To Hong Kong Competition Ordinance

Author:Mr Philip Monaghan, Scott Schaeffer and Charles Paillard
Profession:O'Melveny & Myers LLP
 
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In January 2019, the Hong Kong Association of the Pharmaceutical Industry, a trade group made up of the world's largest pharmaceutical companies, asked the Hong Kong Competition Commission to exempt its quarterly sales survey from the territory's Competition Ordinance.1 On September 26, 2019, the Commission rejected the application.2 It explained that the trade group failed to provide convincing evidence that the survey would achieve greater efficiencies, be they better products, marketing, or distribution. The Commission specifically noted that the contemplated exchange of product-level sales data could independently constitute a restraint on competition, allowing the companies to remove inherent uncertainty about how their competitors behave.

  1. Background

    The trade group suspended its long-running survey—which aimed to collect and distribute product-level data regarding prescription and over-the-counter (OTC) drug sales in Hong Kong and Macau—when the Competition Ordinance took effect in December 2015. In seeking an exemption, the group argued that reinstating the survey would enhance economic efficiency, making it easier to allocate stock and introduce new products, among other benefits.

    Specifically, the trade association argued that its survey was as an "agreement enhancing overall efficiencies," contributing to (1) improved production, distribution, and marketing, as well as (2) greater technical and economic progress. The association further argued that the survey would not eliminate competition related to the relevant products.

    The Consumer Council, Hong Kong's consumer watchdog, raised concerns about the request, suggesting that the survey would result in the exchange of competitively sensitive information. It argued that data regarding sales value should be treated as competitively sensitive information unless the trade group can show concrete and quantifiable consumer benefits arising from the survey.

  2. The Decision

    The Competition Commission denied the trade association's request, making clear that the proposed survey would be subject to scrutiny under the Competition Ordinance. The Commission's principal concern was that the survey "could permit the exchange of potentially competitively sensitive information between competing manufacturers of pharmaceutical products," (Decision ¶ 3.30) thereby removing the ordinary uncertainty between competitors. Indeed, the survey would have permitted "product-specific data to be...

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