Competition Bid-rigging in Hong Kong: tip of the iceberg?

20 May 2019

What is the Hong Kong Competition Tribunal’s Approach in Dealing with Enforcement Actions Concerning Bid-Rigging and Market Sharing and Price Fixing? Find out in two landmark decisions handed down on 17.5.2019 under the new competition regime featuring 3 members from DVC including Catrina Lam, Connie Lee and Tommy Cheung.

The Competition Tribunal ruled that the criminal standard of proof applies in enforcement actions seeking a pecuniary penalty for contravention of competition law. This set aside Hong Kong (from UK, Canada, New Zealand, Singapore, Australia) as the only common law jurisdiction which applies a criminal standard of proof.

In the first case, Competition Commission v. Nutanix Hong Kong Limited & Ors [2019] HKCT 2:-

  1. The Competition Tribunal found all but 1 respondent IT companies liable for contravening the First Conduct Rule by engaging in bid-rigging concerning a tender for supply and installation of new IT system for YWCA in 2016. In gist, 4 dummy bids were arranged to be submitted in order to assist BT Hong Kong Ltd’s bid.

  2. These arrangements fall within the definition of bid-rigging and, hence, within the definition of “serious anti-competitive conduct” under the Competition Ordinance. The Competition Commission was not required to issue a warning notice to any of these respondents before issuing proceedings.

  3. However, the conduct of submitting a dummy bid by a junior rogue employee whose general duties did not include submission of tender or provision of any binding quotation was not attributable to SIS International Limited.

In the second case, Competition Commission v. Wing Hing Construction Company Limited & Ors [2019] HKCT 3:-

  1. The Competition Tribunal found all 10 respondents who were contractors approved by the Hong Kong Housing Authority liable for contravening the First Conduct Rule by engaging in market sharing and price fixing. They were found to have allocated the floors they would work on and used a joint flyer setting out basic packaged prices in providing decoration works in Phase 1 of On Tat Estate between June and November 2016.

  2. These arrangements were properly characterized as an agreement that restricted competition by reason of its very object within the meaning of the First Conduct Rule.

  3. The Competition Tribunal also set out the law and analysis on the efficiency defence and how it should be treated. It was held that the burden rests upon the relevant respondents to establish the defence on the balance of probabilities and they had failed to satisfy the conditions of the efficiency defence.

  4. The Competition Tribunal also examined the concept of “a single economic unit” in the present context which is not comparable to any decided cases e.g. a parent and its subsidiary; a principal and his agent, and a firm and its commercial representatives or its employees. It ruled that the 2 respondents who had let their “sub-contractors” using their respective names for a fee to independently carry out the decoration works, nevertheless, formed part of the same undertakings which also comprised of their sub-contractors. They were thus liable for their sub-contractors’ contravention notwithstanding they had no knowledge and did not participate in the same.

 

Catrina Lam (led by Mr. Mark Hoskins QC and Mr. Peter Duncan SC) represented the Competition Commission in the first case [2019] HKCT 2. Please click here to read the full judgment.

Connie Lee and Tommy Cheung represented the 9th Respondent in the second case [2019] HKCT 3, running the sub-contractor defence. Please click here to read the full judgment.

The Competition Tribunal will schedule another hearing to determine the orders to be made consequent upon its findings and conclusions in both cases.

  

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