Uncovering the Enforcement Toolkit of the Hong Kong Competition Commission

In 2020, the Hong Kong Competition Commission (the “Commission”) has had an eventful year trying out many “firsts” from its enforcement toolkit. Important precedents are being set by the Commission and the Competition Tribunal (the “Tribunal”) and this is significant for businesses and the development of local jurisprudence as to the application of the Competition Ordinance (Cap. 619) (the “Ordinance”).

  • In January 2020, the Commission announced the commencement of enforcement proceedings against Quantr Ltd and its director, which concerned cartel conduct in relation to a bidding exercise for the supply of IT services. These proceedings were the result of the first ever successful leniency application and the first after an infringement notice. The cartel had been brought to the Commission’s attention by Quantr’s co-bidder, who was the first successful leniency applicant under the Commission’s Leniency Policy for Undertakings Engaged in Cartel Conduct. It is also the first time that the Commission made use of an infringement notice. The software supplier, Nintex Proprietary Limited, was not named as a respondent in the proceedings because it made commitments in response to the Commission’s infringement notice under section 67 of the Ordinance. This highlights leniency and commitments as ways to avoid or have terminated competition investigations and proceedings.
  • On 29 April 2020, the Tribunal handed down its first decision on pecuniary penalties in Competition Commission v W Hing Construction Company & Others [2020] HKCT 1 and imposed a total fine of HK$3.97 million on ten contractors for making and giving effect to market sharing and price fixing arrangements. The decision set down a structured and methodological four-step approach for assessing pecuniary penalties, missing from the Ordinance, which is based very closely on EU and UK approaches. Subsequently on 22 June 2020, the Commission published a Policy on Recommended Pecuniary Penalties (“Penalties Policy”) in line with the Tribunal’s decision. This has offered some certainty and transparency regarding the assessment of pecuniary penalties in Tribunal proceedings.
  • On 30 October 2020, in Competition Commission v Fungs E&M Engineering Company Limited and Others  [2020] HKCT 9, the Tribunal made its first disqualification order against a director finding him unfit to be concerned in the management of a company. The case concerned allocation of services and coordinated pricing for renovation services at a public housing estate. The director had not directly known (though he had reasonable grounds to suspect) of the contravention and took no steps to prevent it. The gravity of the case was medium/low and the two-year starting point was reduced by two months because of the admission of liability from the beginning and delay in proceedings in part due to COVID-19.
  • In May 2020, the Commission accepted the first commitments under section 60 of the Ordinance by three online travel agents (“OTAs”) (namely, Booking.com, Expedia.com and Trip.com). The commitments aimed to address the Commission’s concerns around clauses in contracts between the OTAs and accommodation providers in Hong Kong that require accommodation providers to always give the OTA the same or better terms as those they offer in other sales channels.
  • On 17 July 2020, the Tribunal endorsed for the first time the use of Carecraft procedure in competition law proceedings in Competition Commission v Kam Kwong Engineering Company Limited & Others [2020] HKCT 3. The Carecraft procedure provides the Tribunal with a mechanism to expeditiously dispose of enforcement proceedings against respondents who admit liability. A statement of agreed facts is submitted on the basis of which the Tribunal scrutinises the proposed terms of agreement and makes the order in question.
  • On 21 December 2020, the Commission commenced its first case on abuse of substantial market power against Linde HKO Limited and Linde GmbH (collectively “Linde” ), for abusing Linde’s substantial degree of market power in the medical gases supply market in Hong Kong to the detriment of competition in the downstream medical gas pipeline system (“MGPS”) maintenance market. It is alleged that, among other things, between October 2015 and January 2018, Linde ceased or limited the supply of medical gases to the only other potential MGPS maintenance service provider for public hospitals.

Eyes are now set on how the local competition law regime is going to evolve further. Notably, the trial of the first proceedings in which a competition law defence was raised in civil litigation is scheduled to take place in July to August 2021, at which the Tribunal will hear the allegations concerning price fixing and exchange of price information raised by Meyer Aluminium Limited against its two diesel suppliers. Whilst standalone private actions are not available in Hong Kong, this case will provide a taste as to how competition law issues may be resolved between private parties in the context of a defence.

In view of the increased pace of enforcement by the Commission, it is important for businesses to ensure that they have in place an effective competition compliance programme. Its importance is highlighted by the fact that it was featured in the first infringement notice issued by the Commission and sought as part of the relief requested by the Commission in its first abuse of substantial market power proceedings. Importantly, implementation of a compliance programme is a mitigating factor under the Commission’s Penalties Policy.

Jurisdictions: 

Consultant, Clifford Chance