06 June 2022
On 2 June 2022, the Hong Kong Court of Appeal handed down the first appeal on penalties for contravention of the First Conduct Rule (the “FCR”) in CTEA 2/2017 (the “W. Hing No. 3”) and CTEA 1/2019 (the “Fungs Sanction Judgment”).
In both cases, the Competition Commission (the “Commission”) brought enforcement action against the contractors who had contravened the FCR in providing renovation services to tenants in new public rental housing estates by engaging in the serious anti-competitive conduct of market sharing and price fixing.
The Appeal In Relation To One-Third Reduction of Base Amount
In W. Hing No. 3, the Tribunal laid down the seminal four-step approach for the determination of the amount of pecuniary penalty. It gave a one-third reduction of the Base Amount (i.e. a base amount linked to the volume of commerce affected by the contravention) in respect of the pecuniary penalties imposed on R1, R4 and R9 who had no direct participation and knowledge in respect of the contravention as they had lent their housing authority licenses to other subcontractors.
The reduction was given on the basis that:-
In the Fungs Sanction Judgment, a one-third reduction was also given to R1 and a one-half reduction was given to R6.
The Commission brought these appeals to overturn the reductions. In addition, the Commission also sought to appeal against the refusal to grant a certificate for 3 counsel (one Queen’s Counsel, one Senior Counsel and one junior counsel) in W. Hing No. 3.
The Court of Appeal allowed the Commission’s appeal in respect of the reduction to the Base Amount but dismissed the appeal on costs. In particular, the Court of Appeal confirmed that:-
The Appeal on Costs
Separately, the Court of Appeal dismissed the Commission’s appeal on costs as it was not satisfied that the Tribunal was plainly wrong in refusing to grant a certificate for three counsel.
The Court of Appeal’s decision therefore brings the Hong Kong regime further in line with that of the European Union, applying European Commission v Siemens AG Österreich  5 CMLR 1 and Sumal SL v Mercedes Benz Trucks España SL  Bus LR 1755.
It confirms that the role which an individual entity or person plays within the undertaking pertaining to the contravention has no impact on the finding of liability as well as the determination of penalty against that individual respondent. In other words, it will not be a mitigating factor simply because an entity had no direct participation in or knowledge of the cartel. It is also not necessary for the Commission to go after every entity which made up the same undertaking.
This will no doubt facilitate enforcement and strengthen the effectiveness of the action taken for recovery of fines.
On the other hand, the decision confirms that certificate for three counsel is still very much exceptional even when a great deal of novelty and complexities are involved in a particular case including enforcement action in this relatively new regime.
Connie Lee (assisted by Joshua Yeung, pupil barrister) appeared for the 9th Respondent in the W Hing No. 3, CACV 143/2020. The judgment is available here.