According to a police spokeswoman, two brothers who own a shop in the area where filming was set to take place approached Bay and demanded money. The pair claimed the film's production was impeding on their nearby business and wanted compensation for lost revenue.
As the discussion ensued, one of the brothers threatened Bay before assaulting him and then fought three police officers that attempted to intervene.
The younger brother was arrested on "suspicion of blackmail and assault," with the older brother being arrested for "suspicion of assault."
Bay suffered injuries to the right side of his face but reportedly refused treatment and continued filming immediately after the encounter.
UPDATE: Paramount has clarified the above news report from Reuters with the following statement:
"Director Michael Bay and the cast and crew of "Transformers: Age of Extinction" completed their first day of production in Hong Kong today October 17, 2013, after four and a half months of filming in Arizona, Utah, Texas, Michigan, Illinois and Washington state since late May.
Contrary to several erroneous news reports made today, Bay did not get hurt in a fight on set. The production company did have a bizarre encounter with a man (allegedly under the influence of a narcotic substance) who was wielding an air conditioning unit as a weapon. The man, who had earlier accosted several other crew members, rushed onto the set in Quarry Bay and swung the air conditioning unit directly at Bay's head. The director ducked and wrested the air conditioner from his attacker, preventing what could have been a serious accident. The company's security team quickly stepped in and subdued the assault. The police, who also scuffled with the assailant and two of his companions, ultimately arrested the three men. No one on the cast or crew was injured and the production immediately resumed filming without further incident."
UPDATE #2: Michael Bay has now commented on the incident on his official site!
"Hi, itís Michael.
Yes, the story is being passed around is not all true! Yes, some drugged up guys were being belligerent asses to my crew for hours in the morning of our first shoot day in Hong Kong. One guy rolled metal carts into some of my actors trying to shake us down for thousands of dollars to not play his loud music or hit us with bricks.
Every vendor where we shot got paid a fair price for our inconvenience, but he wanted four times that amount. I personally told this man and his friends to forget it we were not going to let him extort us. He didnít like that answer. So an hour later he came by my crew as we were shooting, carrying a long air conditioner unit. He walked right up to me and tried to smack my face, but I ducked threw the air unit on the floor and pushed him away. Thatís when the security jumped on him. But it took seven big guys to subdue him. It was like a Zombie in Brad Pittís movie World War Zóhe lifted seven guys up and tried to bite them. He actually bit into one of the guards Nike shoe, insane. Thank god it was an Air Max, the bubble popped, but the toe was saved.
Then it took fifteen Hong Kong cops in riot gear to deal with these punks. In all, four guys were arrested for assaulting the officers.
After that, we had a great day shooting here in Hong Kong."