The Cartels and Leniency Review: Hong Kong
Enforcement policies and guidance
i Features of Hong Kong's competition regime
Enacted in June 2012, the long-awaited Competition Ordinance (the Ordinance)2 came into full force in Hong Kong on 14 December 2015. The significance of the Ordinance lies in the fact that it establishes the first cross-sector competition law regime in Hong Kong. In the past, only the telecommunications and broadcasting sectors were subject to competition law. Hailed as an encouraging development for the international business and financial hub, this is still a much belated initiative compared to its counterparts in the Asia-Pacific region. For instance, Australia's earliest competition legislation dates back to the 1970s, Singapore adopted a full competition regime in 2006 and the Anti-Monopoly Law took effect in mainland China in 2008.
The Ordinance draws international influence from the competition legislations of the European Union, the United Kingdom, Australia and Singapore. In terms of enforcement structure, Hong Kong adopts a prosecutorial model akin to that of the United States, Canada and Australia. This means that while the Competition Commission of Hong Kong has the powers to investigate and prosecute, it must bring enforcement actions before an independent competition tribunal to seek pecuniary penalties and other sanctions. This is in stark contrast with the administrative model adopted by the European Union and most of the Asian jurisdictions, where the competition authorities assume both prosecutorial and adjudicative functions.
Another remarkable feature is that Hong Kong has not criminalised cartel offences unlike the United States and the United Kingdom.
ii Statutory framework
The Ordinance prohibits three major forms of anticompetitive practices.
The First Conduct Rule prohibits anticompetitive agreements and cartel activities.3
The Second Conduct Rule regulates the abuse of a substantial degree of market power.4
The Merger Rule concerns the control of any merger that has or is likely to have the effect of substantially lessening competition. Unlike other major jurisdictions, this is not an economy-wide merger control regime, and the application of the Merger Rule is limited to the telecommunications sector only.5
Cartel conduct falls within the realm of the First Conduct Rule, which is the subject matter of discussion in this chapter.
iii The First Conduct Rule
The First Conduct Rule prohibits any agreement, concerted practice or decision between undertakings in which the object or effect is to prevent, restrict or distort competition in Hong Kong. This provision is largely similar to the equivalent prohibition in the European Union, namely Article 101 of the Treaty on the Functioning of the European Union. The First Conduct Rule comprises the following key concepts.
Broadly speaking, all forms of written or oral agreements, arrangements, informal agreements and 'gentlemen's agreements' are caught by the First Conduct Rule.6 In addition to horizontal agreements between competitors, the First Conduct Rule covers vertical agreements (i.e., agreements between undertakings at different levels of the supply chain).
Collusion falling short of an actual agreement may be regarded as a concerted practice,7 which effectively provides the Commission with a fall-back option to combat the more surreptitious and connived form of anticompetitive conduct.
Serious anticompetitive conduct
The Ordinance further defines certain hardcore activities as 'serious anticompetitive conduct' within the First Conduct Rule, which consist of classic cartel conduct between competitors such as price-fixing, bid rigging, market allocation and output control.8 These are considered more serious violations and will be subject to stricter enforcement action. For instance, the de minimis exclusion9 is not applicable to serious anticompetitive conduct.
Both corporations and individuals could be liable for anticompetitive conduct under the Ordinance. The term 'undertaking' effectively covers limited companies, partnerships and small and medium-sized enterprises as well as sole proprietorship.10
iv Enforcement regime
The Ordinance established two specialist bodies for competition enforcement, namely the Competition Commission (the Commission) and the Competition Tribunal (the Tribunal).
The Commission is vested with a broad range of powers to investigate and prosecute suspected breaches, which include the power to require production of documents and information,11 to require individuals to attend interviews before the Commission12 and to enter and search premises with warrants issued by the Court of First Instance.13 The Commission also has the power to commence enforcement action and apply to the Tribunal for pecuniary penalty if it has reasonable cause to believe that the First Conduct Rule has been contravened.14
While the Commission is the principal competition authority responsible for enforcing the Ordinance, the Communications Authority has concurrent jurisdiction with the Commission in regulating undertakings licensed in the telecommunications and broadcasting sectors.15 Both authorities have signed a memorandum of understanding to coordinate their functions and enforcement actions.
The Tribunal is an independent adjudicating body that hears competition matters, including:
- applications made by the Commission regarding any alleged contravention of the Ordinance;
- applications for the review of determinations by the Commission, including decisions relating to exemptions, exclusions, commitments and leniency;
- follow-on private actions after a violation of the Ordinance is established; and
- appeals against any interlocutory decisions, determinations or orders.
Decisions made by the Tribunal may be appealed to the Court of Appeal.16
While the Ordinance is silent on the burden of proof in competition proceedings, the Tribunal held in May 2019 that the standard of proof to be applied must be beyond reasonable doubt. However, it is not necessary for every item of evidence produced to satisfy this standard. It is sufficient if the body of evidence relied on, viewed as a whole, satisfies the burden.17
v Guidelines, policies and enforcement focus
To date, the Commission and the Communications Authority have issued six guidelines relating to substantive and procedural matters of each of the Conduct Rules (the Conduct Rules Guidelines), which provide guidance on how these authorities intend to interpret and apply the provisions of the Ordinance.
The Commission has also published four policy documents to elaborate its enforcement policies (the Enforcement Policy and the Recommended Pecuniary Penalties Policy) and leniency applications (the Leniency Policies and the Cooperation Policy), as well as guidance notes concerning the investigation powers of the Commission, legal professional privilege.
The Commission currently prioritises enforcement against conduct that is clearly harmful to competition and consumers in Hong Kong. In the context of the First Conduct Rule, this includes cartel conduct and other agreements causing significant harm to competition, such as retail price maintenance.
Cooperation with other jurisdictions
The Ordinance does not contain any express provisions on cooperation with competition authorities in other jurisdictions. Nevertheless, the Commission has indicated that it will consider the competition precedents of other jurisdictions, especially in the early days of enforcement. The Commission has also started to establish working relationships with many overseas competition agencies, both bilaterally and through intergovernmental bodies.
In December 2016, the Commission signed a memorandum of understanding with the Competition Bureau of Canada18 with the purpose of enhancing cooperation, coordination and information sharing between the two agencies on competition issues of mutual concern. This is the Commission's first bilateral cooperation instrument on competition law and policy and more international exchange with overseas agencies is expected in the future.
Jurisdictional limitations, affirmative defences and exemptions
Section 8 of the Ordinance provides a far-reaching extraterritorial application of the First Conduct Rule – so long as the anticompetitive conduct may affect competition in Hong Kong, it could be caught by the Ordinance regardless of where the conduct takes place, where the agreement is entered into, and where the undertakings are located or incorporated.
ii Exclusions and exemptions
The Ordinance provides for a range of exclusions and exemptions, which are designed to screen out market conduct that would benefit consumers and the community as a whole, activities that are unlikely to have a material adverse effect on competition, or where legal or policy considerations outweigh the relevant anticompetitive effects. The more important of these are as now described.
Economic efficiency exclusion
The Ordinance excludes agreements that can enhance overall economic efficiency, such as those that would contribute to improving production or distribution or promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit.19
De minimis exclusion
The Ordinance also contains a general exclusion for 'agreement of lesser significance', which excludes application of the First Conduct Rule from agreements between undertakings with a combined worldwide turnover not exceeding HK$200 million in the preceding financial year. It should be noted that this exclusion is not applicable to serious anticompetitive conduct.20
Statutory body exclusions and other general exclusions
The blanket exclusion afforded to statutory bodies21 is one of the most controversial features of the Ordinance. The exclusion means that statutory bodies such as the Airport Authority, the Housing Authority and the Trade Development Council in Hong Kong are not subject to the Conduct Rules or other enforcement provisions of the Ordinance, even if their activities would cause harm to competition.
Furthermore, the Commission has the authority to grant block exemption orders to exclude a particular category of agreements from the application of the First Conduct Rule because of the economic efficiencies and policy considerations involved.22
On 8 August 2017, the Commission issued its first block exemption order for vessel sharing agreements (VSAs) between liner shipping companies, on the condition that the parties to a VSA do not collectively exceed a market share of 40 per cent.23 VSAs are made between carriers within a shipping consortium to operate a liner service along a specified route using a specified number of vessels. The Commission is of the view that the economic efficiencies generated by a VSA outweigh the potential restriction of competition. The block exemption order is effective for five years and will be reviewed by the Commission before its expiry.
Cartel activities are economically harmful yet difficult to detect due to their secretive and organised nature. A leniency programme is a key investigative tool used by competition authorities around the world to combat cartel conduct and to encourage cooperation in investigations.
Section 80 of the Ordinance empowers the Commission, in exchange for a person's cooperation in an investigation or in proceedings, to enter into a leniency agreement with the person that it will not bring or continue proceedings in the Tribunal for a pecuniary penalty. However, a leniency agreement does not preclude follow-on private actions by persons who have suffered loss or damage as a result of the cartel.
i Key elements of the leniency programmes
The mechanics of the leniency programmes adopted by the Commission are detailed in its revised Leniency Policy for Undertakings Engaged in Cartel Conduct (the Leniency Policy for Undertakings) and its new Leniency Policy for Individuals Involved in Cartel Conduct (the Leniency Policy for Individuals).24
Leniency is available only in respect of cartel conduct that contravenes the First Conduct Rule. The essential elements are as follows.
Leniency is available only for the first undertaking that reports the cartel conduct to the Commission and meets all the requirements for leniency, but not for the ringleader of the cartel conduct.
Two types of leniency can be granted:
- Type 1: leniency for an undertaking that discloses its participation in a cartel in which the Commission has not started an investigation; and
- Type 2: leniency for an undertaking that can provide substantial assistance to the Commission's investigation and enforcement action of a cartel it is already assessing or investigating.25
If the undertaking meets the conditions for leniency, the Commission will enter into an agreement with the undertaking not to take proceedings against it for a pecuniary penalty in exchange for cooperation in the investigation of the cartel conduct. However, Type 2 leniency applicants might be issued with an infringement notice if victims of the anticompetitive conduct initiate follow-on actions against them.26
Leniency ordinarily extends to any current officer or employee of the undertaking cooperating with the Commission, as well as any former officer or employee or partner and any current or former agents of the undertaking specifically named in the leniency agreement.
The undertaking receiving leniency will, to the satisfaction of the Commission, agree to and sign a statement of agreed facts admitting to its participation in the cartel.27 On this basis, the Tribunal may make an order under Section 94 of the Ordinance declaring that the applicant has contravened the First Conduct Rule by engaging in the cartel.
The Leniency Policy for Individuals was implemented in April 2020. Except where leniency has been granted to an undertaking, the first individual who terminates his or her participation in the cartel conduct, reports it to the Commission and cooperates in bringing proceedings against other participants of the cartel will be granted leniency.
First to report
Since leniency is available only for the first cartel member who reports the cartel conduct to the Commission and satisfies all the stipulated requirements, there is, therefore, a strong incentive for a cartel member to be the first leniency applicant under the Commission's marker system (discussed below).
ii Leniency application procedures
The procedures for both undertakings and individuals28 are essentially the same, except that there is an additional element in step 4 below for undertakings.
Step 1: application for marker
Under the leniency policies, the only way to apply for leniency is to call the leniency hotline provided by the Commission. The Commission adopts a marker system to record the date and time of the communication so as to establish a queue for determining the priority of a particular leniency application.
To obtain a marker, an applicant is required to provide sufficient information to identify the cartel conduct, including:
- the identity of the undertaking applying for the marker;
- general information about the suspected cartel;
- the participants in the cartel conduct; and
- the contact details of the caller.
If the above conditions are satisfied, the Commission will grant a marker for the applicant to perfect it.
Step 2: perfection of the marker
The applicant has to perfect a marker by providing the following information to the Commission:
- a detailed description of the cartel conduct and its operation;
- the entities, services or products involved;
- the role of the applicant;
- documentary evidence; and
- witnesses to be interviewed.
The proffer will be made on a 'without prejudice' basis, either orally or in writing within a specific period, ordinarily within 30 calendar days. The applicant cannot perfect a marker on hypothetical terms.
Should the undertaking fail to submit its proffer within the specified period, or any extension to it as might be agreed by the Commission, its marker will automatically lapse and the next undertaking in the marker queue will be invited by the Commission to make an application for leniency.
Step 3: entering into a leniency agreement
If the applicant satisfies the conditions of leniency, the Commission will invite the applicant to enter into a leniency agreement to confirm that it:
- has provided and will continue to provide full and truthful disclosure to the Commission;
- has not coerced others to engage in the cartel conduct or acted as the single ringleader of the cartel conduct;
- has taken prompt and effective action to terminate its involvement in the cartel conduct;
- will keep the leniency application and process confidential unless with the Commission's prior consent or the disclosure is required by law;
- will provide continuing full and truthful cooperation, at its own cost, to the Commission, including in proceedings against other undertakings; and
- is prepared to continue with, or adopt and implement, at its own cost, an effective corporate compliance programme to the satisfaction of the Commission.
Step 4: continuing compliance with the terms of the leniency agreement
So long as the applicant and its current officers continue to cooperate with the Commission in the investigation and enforcement process, no proceedings will be commenced against the applicant in respect of the cartel conduct.
For undertaking applicants, the Commission will not issue an infringement notice against them unless and until victims have commenced follow-on action against other undertakings that had participated in the cartel conduct covered by the leniency agreement.
Step 5: issuance of a final letter
At the end of any proceedings before the Tribunal or other courts, the Commission will issue a final letter to confirm that the applicant has fulfilled all the conditions under the leniency agreement.
iii Subsequent leniency applicants (for undertakings only)
In April 2019, the Commission published a Cooperation and Settlement Policy for Undertakings Engaged in Cartel Conduct (the Cooperation Policy), which supplements the Leniency Policy for Undertakings. The Cooperation Policy states the following.
Undertakings who are not eligible for leniency may choose to admit their wrongdoings and cooperate with the Commission in the investigation.29
The Commission may grant a discount of up to 50 per cent of the pecuniary penalty to be recommended to the Tribunal.30
Alternatively, the Commission may agree not to initiate proceedings against the individuals of the cooperating undertaking if they cooperate fully.31
The Cooperation Policy also provides a Leniency Plus programme: if an undertaking comes forward to disclose existence of another cartel, it can receive an additional discount of up to 10 per cent of the recommended pecuniary penalty for the first cartel it was involved in.32
iv Cooperation application procedure33
Step 1: application for marker
Under the Cooperation Policy, an undertaking subject to investigation may indicate their willingness to cooperate with the Commission. The Commission has full discretion to determine whether it will engage in cooperation with the undertaking.
Step 2: cooperation in the investigation
The undertaking is required to provide documents and information through a proffer process on a 'without prejudice basis'. This includes detailed description of the cartel conduct and its functioning as well as the provision of access to evidence.
Step 3: entering into a cooperation agreement with an agreed factual summary
If the undertaking and the Commission are able to reach an agreement on the draft agreed factual summary and the draft cooperation agreement, the Commission will indicate the maximum recommended pecuniary penalty it would be willing to recommend to the Tribunal, as well as any other orders sought.
Step 4: ongoing compliance and issuance of the final letter
The undertaking is required to ensure continued compliance with the terms of the Cooperation Agreement.
v Confidentiality issues concerning leniency applications
The Ordinance imposes a general obligation on the Commission to preserve confidentiality of information provided to the Commission, including those submitted by unsuccessful leniency applicants.34
In a decision handed down on 14 March 2018,35 the Tribunal confirmed that communications between the Commission and parties who unsuccessfully seek leniency are privileged and need not be disclosed in later proceedings, bearing in mind the public interest considerations of encouraging leniency applicants. Mr Justice Godfrey Lam of the Tribunal held that the public interest in non-disclosure of communications between the Commission and unsuccessful leniency applicants outweighs the contrary interest in disclosure. Any other approach would place unsuccessful leniency applicants in a 'worse position than those who have not applied for leniency at all'.
The above ruling on preservation of secrecy is particularly crucial since private litigants may wish to seek discovery of materials surrendered as part of a leniency program for pursuing follow-on private actions against cartel members.
vi Cooperation with overseas authorities
Since cartels may operate in multiple jurisdictions, leniency applicants in Hong Kong are expected to provide the Commission with details of other leniency applications that they have submitted to competition authorities in other jurisdictions. In appropriate cases, the Commission may require a leniency applicant to authorise the Commission to exchange confidential information with those overseas authorities.
i The Commission – warning notices and infringement notices
Following an investigation, if the alleged contravention of the First Conduct Rule does not amount to 'serious anticompetitive conduct', the Commission must issue a warning notice requesting the undertaking to cease the conduct in question within a specified period. Should the undertaking fail to comply with the warning notice or repeat the anticompetitive conduct, the Commission may commence Tribunal proceedings against the undertaking.36
If the conduct concerns 'serious anticompetitive conduct', no warning notice can be issued. This was recently confirmed in a judgment where the Tribunal found that when the agreements in question constituted bid rigging and, thus, serious anticompetitive conduct, no warning notice was required before the commencement of Tribunal proceedings.37 The Commission has the option of directly bringing proceedings in the Tribunal, or issuing an infringement notice describing the infringing conduct, setting out the evidence gathered by the Commission and stipulating the terms on which the Commission would be willing to settle the matter without resorting to Tribunal proceedings.38
ii The Tribunal – pecuniary and non-pecuniary sanctions
Under the Ordinance, the Tribunal may impose a wide array of pecuniary and non-pecuniary penalties for cartel activities or other infringements of the First Conduct Rule.
Unlike jurisdictions such as the United Kingdom and the United States, these penalties are civil in nature and no criminal sanctions are provided for with respect to cartel infringement.
The Commission can apply to the Tribunal to impose a financial penalty of up to 10 per cent of the Hong Kong turnover of the undertaking concerned for each year in which the contravention took place, for a maximum of three years.39
The Tribunal can order a person to pay damages to aggrieved parties who have suffered loss or damage as a result of a contravention of the competition rules.40
Disgorgement of profits
The Tribunal can order any person to pay to the government, or to any other specified person, the illicit profit gained, or loss avoided, by that person as a result of the contravention.41
Order to pay the Commission's investigation costs
In addition, an offender may be liable to pay to the government the investigation costs reasonably incurred by the Commission in connection with proceedings for the contravention.42
Contractual and behavioural sanctions
In addition to financial penalties, the Tribunal has powers to impose a series of contractual and behavioural sanctions to restore healthy competition in the market. These sanctions are set out in Schedule 3 of the Ordinance and include:
- a declaration that a person has contravened a competition rule;
- an injunction restraining or prohibiting a person from engaging in conduct that contravenes the Ordinance;
- restoring parties to the position they were in prior to the contravention;
- restraining or prohibiting from dealing with property; and
- declaring the whole or part of the agreement void or voidable.
Director disqualification orders
The Tribunal may also, upon application by the Commission, impose a director's disqualification order against a person for up to five years.43
iii Sentencing principles
The Tribunal first ruled on the methodology for determining the amount of pecuniary penalties in Competition Commission v. W Hing Construction Company Limited & Others,44 where the judge considered the frameworks adopted in overseas jurisdictions and outlined a four-step approach to deal with this matter in Hong Kong.
In June 2020, the Commission issued a Policy on Recommended Pecuniary Penalties to provide guidelines on the four-step approach in formulating the recommended penalties for undertakings and associations of undertakings. The steps include:
- determining the base amount: value of sales x gravity percentage x duration multiplier;
- making adjustments for aggravating, mitigating and other factors;
- applying the statutory cap; and
- applying any cooperation reduction and considering the respondent's inability to pay.45
'day one' response
i Investigative powers of the Commission
As mentioned in Section I.iv, the Commission has extensive powers to investigate suspected cartel activities and other suspected breaches of the Ordinance, including:
- issuing written notices requiring the production of documents or specific information46 (commonly referred to by the Commission as a Section 41 Notice);
- compelling individuals to attend interviews to answer questions and to give a declaration confirming the accuracy of the answers (a Section 42 Notice);47 and
- conducting 'dawn raids' (i.e., entering and searching premises upon obtaining search warrants from the Court of First Instance to seize evidence and documents relevant to the investigation).48
The Commission has indicated in its Guideline on Investigations that it does not need to exercise the powers of issuing Section 41 and Section 42 Notices before applying for a search warrant for dawn raid purposes.49
ii Right against self-incrimination
Under the Ordinance and the Guideline on Investigations, a person cannot remain silent at investigation interviews or refuse to produce documents or offer explanations based on the right against self-incrimination.
Nonetheless, the evidence obtained by the Commission under compulsion by Section 41 and Section 42 Notices is not admissible against that person in any criminal proceedings, or proceedings concerning financial or pecuniary penalties.50
iii Legal professional privilege
A search warrant issued by the courts empowers the Commission to seize and copy relevant documents, computers and other electronic devices found on the premises. Both the Ordinance51 and the Commission's Guideline on Investigations52 contain provisions on the protection of legal professional privilege (LPP) enshrined in the laws of Hong Kong.53 The Commission has also published Guidance Notes on the Investigation Powers of the Competition Commission and Legal Professional Privilege (the LPP Guidance Notes) with respect to handling privilege claims during dawn raids.
Definition of LPP
LPP applies to confidential communications between lawyers and clients made for the dominant purpose of obtaining legal advice. Privilege extends to communications with in-house counsel where they are providing independent legal services.
Privilege also applies to communications between a lawyer and a third party that come into existence after litigation is contemplated or commenced and made with a view to the litigation. This is commonly known as litigation privilege.
Procedures for claiming LPP
An investigated party may assert a claim for LPP during the execution of a search warrant, and the Commission is not allowed to review such materials unless and until the issue is resolved in the manner detailed below.
If the Commission agrees that a document is privileged, and the privileged document can be separated from non-privileged materials, the Commission will not copy or seize the document. If the Commission disputes the privilege claim, or if the document is only partly privileged, the Commission will seal the document in an envelope or other container and remove it from the premises.
The investigated party must then, within seven days, prepare an index of the materials and provide a supporting statement setting out the basis for its privilege claim in relation to each item.
The Commission will return an item if satisfied that the item is privileged, based on the supporting statement. If only part of a document is privileged, arrangements will be made for privileged information to be redacted.
If a dispute on the privilege claim remains, the Commission will confer with the party claiming privilege on a mutually agreeable approach, for instance, instructing an independent third-party lawyer to review the LPP claim. If the dispute cannot be resolved, either party may apply to the court for the matter to be determined.
iv Handling a dawn raid
The key to handling a dawn raid is to have trained staff on the premises to assist with the investigations, and to expeditiously engage external legal counsel, particularly on contentious matters such as LPP claims. It is crucial to appoint an in-house counsel or a compliance officer ready to act as a dawn raid coordinator and to train key employees, who may include the receptionist, heads of various departments, information technology staff and the in-house legal team.
v Criminal sanctions in relation to Commission investigations
Individuals and corporations are under a duty to cooperate with the Commission in competition investigations, failing which they may be liable to criminal sanctions.
The Ordinance stipulates criminal offences for providing false and misleading information, destroying or falsifying documents, obstructing a search or disclosing confidential information provided by the Commission, which are punishable by fines of up to HK$1 million and imprisonment for up to two years.54
i No stand-alone private action
Unlike many other jurisdictions, the Ordinance does not permit private stand-alone actions for contravention of competition rules. In other words, absent a Tribunal determination on an alleged infringement of the Ordinance, victims cannot commence court actions to pursue damages for the offenders' breaches. This position was confirmed by a judgment handed down by the Court of First Instance in April 2017.55 In this case, the court dismissed the claim on grounds that stand-alone or private litigation is not envisaged by the Ordinance, and the only court that can make a ruling on contravention of the Ordinance is the Tribunal.
The implications of this judgment are that parties suffering loss or damage from a breach of the Ordinance only have one realistic remedy – lodging a complaint before the Commission. Once a contravention is established by the Tribunal, the victim can bring a follow-on action under the Ordinance against the offender or any party involved in that contravention.56
ii No class action available
At present, no class action procedure is available in Hong Kong generally and with respect to competition claims.
iii Liability, quantum and limitation period
The Tribunal's ruling as to liability will be binding in any follow-on actions57 and the claimant is only required to prove causation and quantum. Further, the limitation period for such actions is three years from the expiry of the appeal period following a Tribunal decision that the Ordinance has been contravened.58
iv Leniency provides no immunity
A leniency agreement does not provide immunity from follow-on actions. The signed statement of agreed facts and declaration of contravention made by the Tribunal during the leniency application process could provide the evidential basis for victims to pursue follow-on actions.
In January 2020, the Commission commenced Tribunal proceedings against Quantr Ltd and its director for exchanging future price information in an IT services bidding exercise. This is the first enforcement proceedings following a successful leniency application by a co-bidder of Quantr. This is also the first case in which a software company participating in cartel conduct had chosen to cooperate with the Commission and accepted an infringement notice in exchange for the Commission not commencing proceedings against it.
In April 2020, the Commission signed a memorandum of understanding with the Securities and Futures Commission59 to enhance cooperation and facilitate the exchange of information. The agencies have agreed to inform and consult each other on competition-related matters that may have a significant implication for the other agency. Where appropriate and permissible by law, they will exchange information pertaining to the other agency's functions or objectives regarding relevant market participants in the securities and futures industry.
In July 2020, the Tribunal handed down a judgment related to the adoption of the Carecraft procedure (i.e., in cases where the parties have agreed to dispose of the proceedings, the court will make orders based on the factual matters set out in a schedule of agreed facts only, so as to dispense with a full hearing on all factual allegations).60 The requirements for declaratory reliefs to be granted are also explained in this decision.
Finally, with the Ordinance in force for five years, the Commission has yet to decide whether further aspects of the Ordinance need to be reviewed. It is expected that more controversial issues would form the subject matter for review, such as introducing an economy-wide merger control scheme, establishing the right to bring stand-alone litigation under the Ordinance, removing the exemption for statutory bodies and expanding the leniency protection to cover subsequent applicants.
1 Felix K H Ng is a partner, Olivia M T Fung is a consultant and Christina H K Ma and Able Y K Au are associates at Haldanes.
2 Cap 619, Laws of Hong Kong.
3 Section 6, Competition Ordinance.
4 Section 21, Competition Ordinance.
5 Paragraphs 3 and 4, Schedule 7, the Ordinance; 'carrier licence' and 'carrier licensee' as defined in Section 2, Telecommunications Ordinance (Cap 106).
6 Section 2(1), Competition Ordinance.
7 Although not defined in the Ordinance itself, a 'concerted practice' means 'a form of co-operation, falling short of an agreement, where undertakings knowingly substitute practical co-operation for the risks of competition', according to Paragraph 2.27 of Commission's Guideline on the First Conduct Rule.
8 Section 2(1), Competition Ordinance.
9 Paragraph 5, Schedule 1, the Ordinance; see analysis in Section III of this chapter.
10 Under Section 2 of the Ordinance, 'undertaking' is defined as 'any entity, regardless of its legal status or the way in which it is financed, engaged in economic activity, and includes a natural person engaged in economic activity'.
11 Section 41, Competition Ordinance.
12 Section 42, Competition Ordinance.
13 Section 48, Competition Ordinance.
14 Section 92, Competition Ordinance.
15 Section 159, Competition Ordinance.
16 Sections 154 and 155, Competition Ordinance.
17 Competition Commission v. Nutanix Hong Kong Limited & Others, CTEA 1/2017 and  HKCT2, 17 May 2019.
18 Memorandum of understanding between the Competition Commission of the Hong Kong Special Administrative Region of the People's Republic of China and the Commissioner of Competition of the Competition Bureau of the Government of Canada regarding the Application of Competition Laws and the Sharing of Information, dated 2 December 2016.
19 Paragraph 1, Schedule 1, Competition Ordinance.
20 Paragraph 5, Schedule 1, Competition Ordinance.
21 Section 3, Competition Ordinance.
22 Section 15, Competition Ordinance.
23 Competition (Block Exemption for Vessel Sharing Agreements) Order 2017.
24 Published on 16 April 2020.
25 Paragraph 1.3(d), Leniency Policy for Undertakings.
26 Paragraph 2.17, Leniency Policy for Undertakings.
27 See Statement of Agreed Facts between the Competition Commission and the 1st and 4th Respondents annexed to the Reasons for Decision in CTEA 1/2018.
28 Paragraphs 2.1 to 2.18, Leniency Policy for Undertakings and Paragraphs 2.1 to 2.17, Leniency Policy for Individuals.
29 Paragraph 1.1, Cooperation Policy.
30 Paragraphs 3.1 to 3.7, Cooperation Policy.
31 Paragraph 3.2, Cooperation Policy.
32 Paragraphs 4.1 to 4.4, Cooperation Policy.
33 Paragraphs 2.1 to 2.12, Cooperation Policy.
34 Section 125, Competition Ordinance.
35 Competition Commission v. Nutanix Hong Kong Limited and others, CTEA 1/2017, 14 March 2018.
36 Section 82, Competition Ordinance.
37 Competition Commission v. Nutanix Hong Kong Limited and others, CTEA 1/2017 and  HKCT2, 17 May 2019.
38 Sections 67 and 69, Competition Ordinance.
39 Section 93, Competition Ordinance.
40 Paragraph 1(k), Schedule 3, Competition Ordinance.
41 Paragraph 1(p), Schedule 3, Competition Ordinance.
42 Section 96, Competition Ordinance.
43 Section 101(2), Competition Ordinance.
44 CTEA 2/2017 dated 29 April 2020.
45 Paragraphs 2.2 to 2.23 of the Policy.
46 Section 41, Competition Ordinance.
47 Section 42, Competition Ordinance.
48 Section 48, Competition Ordinance.
49 Paragraph 5.26, Guideline on Investigations.
50 Section 45, Competition Ordinance; Paragraphs 5.41 and 5.42, Guideline on Investigations.
51 Section 58, Competition Ordinance.
52 Paragraph 5.38, Guideline on Investigations.
53 Article 35, Basic Law of Hong Kong; Citic Pacific Ltd v. Secretary for Justice and Another  4 HKLRD 20.
54 Sections 52 to 55, Competition Ordinance.
55 Loyal Profit International Development Ltd v. Travel Industry Council of Hong Kong (HCMP 256/2016), 27 April 2017.
56 Section 110, Competition Ordinance.
57 Section 119, Competition Ordinance.
58 Section 111, Competition Ordinance.
59 Memorandum of understanding between the Securities and Futures Commission and the Competition Commission, dated 16 April 2020.
60 Competition Commission v. Kam Kwong Engineering Company Ltd & Others, CTEA 1/2018, 17 July 2020.