When preparing for your real estate licensing exam, you will encounter various regulatory frameworks designed to protect consumers and ensure a fair marketplace. While the term "anti-trust" is widely used in North America, in Hong Kong, these regulations fall under the umbrella of Competition Law. Understanding how these laws apply to daily real estate practices is an absolute necessity for passing the exam and maintaining your future license.
This article breaks down the essential competition laws you need to know. For a broader overview of your exam preparation, be sure to bookmark our Complete Hong Kong Salesperson Exam Exam Guide.
The Regulatory Framework: The Competition Ordinance (Cap. 619)
In Hong Kong, anti-trust behavior is governed by the Competition Ordinance (Chapter 619), which came into full effect in April 2026. The Ordinance is enforced by the Competition Commission, while the Estate Agents Authority (EAA) issues practice circulars to ensure licensees comply with these legal standards.
The core philosophy of the Competition Ordinance is simple: consumers benefit most when businesses compete vigorously and fairly. For estate agents, this means you must never collude with competitors to manipulate the market, artificially inflate commission rates, or restrict consumer choices.
The First Conduct Rule and Real Estate
For the Hong Kong Salesperson Exam, your primary focus should be on the First Conduct Rule. This rule prohibits undertakings (businesses or individuals) from making agreements, decisions, or engaging in concerted practices that have the object or effect of preventing, restricting, or distorting competition in Hong Kong.
In the real estate sector, breaches of the First Conduct Rule generally fall into four categories of "Serious Anti-competitive Conduct" (often referred to as cartel conduct). Let's explore how these appear in practical scenarios.
1. Price Fixing (Commission Rates)
Price fixing is the most frequently tested competition law concept. In Hong Kong, commission rates are strictly negotiable between the agent and the client. There is no "standard," "minimum," or "customary" commission rate mandated by law or the EAA.
Scenario: You and an agent from a rival brokerage are having coffee. You both agree that the current market is tough and promise each other that neither of you will accept a commission rate lower than 1% from property sellers in your district.
Result: This is illegal price fixing. Even informal verbal agreements or "gentlemen's agreements" violate the Competition Ordinance.
Understanding this concept is deeply tied to real estate ethics and standards, as protecting the client's right to negotiate is a fundamental ethical duty.
2. Market Sharing
Market sharing occurs when competitors agree to divide up customers, territories, or types of properties among themselves to avoid competing with one another.
Scenario: Agency A and Agency B are the top two brokerages in Quarry Bay. They agree that Agency A will exclusively handle listings in Taikoo Shing, while Agency B will exclusively handle listings in Kornhill.
Result: This is illegal market sharing. Both agencies must be free to compete for listings in both estates.
3. Group Boycotts
A group boycott happens when two or more competing agencies agree to refuse to do business with a targeted competitor, supplier, or customer.
Scenario: A new "discount" brokerage opens in your district, offering flat-fee services. Several traditional agencies form a WhatsApp group and agree that none of them will co-broke (co-operate) with the new discount brokerage in order to drive them out of business.
Result: This is an illegal group boycott.
Common Competition Law Infractions in Real Estate
To give you an idea of where the Competition Commission focuses its educational and enforcement efforts within the property sector, review the following chart detailing the relative frequency of different types of anti-competitive complaints and investigations:
Types of Competition Law Complaints in HK Real Estate (%)
The Danger of Information Exchange
A critical area that often trips up new agents is the exchange of commercially sensitive information. While you might be busy studying property rights like easements and encumbrances, or practicing your math for proration calculations, you must also remember the rules about what you can and cannot say to competitors.
Sharing future pricing intentions, planned commission discounts, or strategic business plans with competing agents—even casually in a social setting or a private chat group—can be construed as a concerted practice to distort competition.
Rule of Thumb for the Exam: If the information is not publicly available and relates to your agency's future pricing or business strategy, do not discuss it with agents from other companies.
Intra-Company vs. Inter-Company Rules
The exam often uses trick questions to test your understanding of who is making the agreement.
- Inter-company (Between different agencies): Illegal. Two competing agencies cannot agree on minimum commissions.
- Intra-company (Within the same agency): Legal. A single estate agency can legally set internal policies dictating the minimum commission rate its own employees are allowed to accept. This is a standard business practice and does not violate the Competition Ordinance.
Penalties for Non-Compliance
The penalties for violating the Competition Ordinance are severe, reflecting the serious nature of anti-trust offenses. If found guilty by the Competition Tribunal, consequences can include:
- Pecuniary penalties of up to 10% of the undertaking's total gross revenues in Hong Kong for the duration of the contravention (up to a maximum of 3 years).
- Disqualification of directors for up to 5 years.
- Follow-on actions for damages from parties who suffered losses due to the anti-competitive behavior.
Furthermore, the EAA views breaches of the Competition Ordinance as a failure to be a "fit and proper" person, which can lead to the suspension or revocation of your estate agent's or salesperson's license.
Frequently Asked Questions (FAQs)
1. Is it legal for two different agencies to agree on a "standard" 1% commission to protect the industry?
No. This is a classic example of price fixing, which is a serious violation of the First Conduct Rule under the Competition Ordinance. Commission rates must always remain independently determined and negotiable.
2. Can my branch manager set a rule that all agents in our branch cannot accept less than a 1.5% commission?
Yes. Internal policies set by a single company for its own employees do not constitute anti-competitive agreements between competitors. An agency is allowed to dictate its own pricing strategy.
3. What is the difference between the Competition Commission and the Estate Agents Authority (EAA) regarding these laws?
The Competition Commission is the statutory body that enforces the Competition Ordinance across all industries in Hong Kong. The EAA regulates real estate licensees specifically. The EAA issues practice circulars reminding agents of competition laws, and can revoke a license if an agent is found guilty of anti-competitive behavior.
4. I am in a WhatsApp group with friends who work at rival agencies. Can we discuss our companies' upcoming promotional discounts?
No. Exchanging commercially sensitive information, such as future pricing or promotional strategies, with competitors can be viewed as an illegal concerted practice that distorts competition.
5. Does the Hong Kong government set maximum or minimum commission rates for property transactions?
No. The Hong Kong government does not regulate or mandate commission rates. All estate agency commissions are entirely subject to negotiation between the agent and the client.