2020 Review & 2021 Outlook Anti-Competition Laws in Hong Kong

“And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department.”

--Andrew Carnege

INTRODUCTION

It is trite that the purpose of antitrust law, also known as anti-competition laws, is to protect the everyday consumer from predatory business practices. The main target of these laws is therefore market allocation, bid rigging, price-fixing, and monopolies.

You don’t have to run faster than the bear to get away. You just have to run faster than the guy next to you.

- Jim Butcher

To illustrate just how detrimental to a society that predatory business practices/anti-competition behaviour can cause a society, all one needs to refer to is the bear analogy provided by Jim Butcher. Say that everyone is trying to run away from a bear but because of anti-competition practices, everyone agreed to run at the same slow speed. Naturally, that will spell disaster for everyone involved.

ANTI-COMPETITION LAWS REVIEW OF 2020

Whilst 2020 has seen unprecedented market downturns, the same cannot be said in the field of competition laws in Hong Kong.

  1. On 22 January 2020, the Hong Kong Competition Commission (“Commission”) in Competition Commission v. Quantr Limited and Cheung Man Kit [2020] HKCT 10 took an IT cartel to the Competition Tribunal (“Tribunal”) where the conduct of exchanging competitively sensitive information with a co-tenderer relating to Ocean Park’s request for quotation was placed under scrutiny. In the ensuing judgment handed down on 3 November 2020, it was notable in that:
  1. This is the first infringement notice issued by the Commission; and
  2. This is also the first case where infringing companies successfully settled with the Commission by way of:
  1. committing to comply with the infringement notice and
  2. a successful leniency application

No doubt, the settlement method of conducting this case will set a precedent in dealing with trespasses in the future by parties in Hong Kong.

  1. On 29 April 2020, the Tribunal in Competition Commission v W Hing Construction Company & Others [2020] HKCT 1 handed down the first judgment which deployed pecuniary penalties against trespassers under the Hong Kong competition law regime. In this case, a structured and methodological four-step approach was set out for assessing pecuniary penalties which had notably been missing from the Ordinance. As a way to provide the decision with the proper foundation, it was based very closely on European Union and United Kingdom approaches (via various case authorities/persuasive authorities).

This precedent sets the foundation for practitioners to draw inspiration from EU and UK authorities going forward.

  1. On 17 July 2020, the Tribunal in Competition Commission v Kam Kwong Engineering Company Limited & Others [2020] HKCT 3 made history again by endorsing for the first time the use of Carecraft procedure in competition law proceedings.

In summary, this adopted approach provides the Tribunal with a mechanism to expeditiously dispose of enforcement proceedings against respondents who admit to liability at the outset (saving parties’ time and costs in the process).

  1. On 30 October 2020, continuing the year of historical progress, the Tribunal made its first director disqualification order against a director in the case of Competition Commission v Fungs E&M Engineering Company Limited and Others.

In this case, six (6) decorating contractors and three individuals were participating in a price-fixing/price rigging and market sharing agreement practices in connection with the provision of decoration works to tenants in a newly built public housing estate in 2017 were penalized and sanctioned.

  1. Lastly, on 21 December 2020, the Commission filed the first abuse of substantial market power case against Linde HKO Limited and Linde GmbH under the Second Conduct Rule in the downstream medical gas pipeline systems maintenance market for public hospitals.

All in all, whilst COVID has led to market slow-down all across Hong Kong, 2020 was in fact a year in which Hong Kong competition law made great strides.

ANTI-COMPETITION LAWS OUTLOOK FOR 2021

Accordingly, we are likely to see continued momentum in the development of anti-competition laws in Hong Kong in the new year. Whilst the core of the Tribunal cases in 2020 appears to revolve mainly around cartel cases, and expansion is likely to be seen (as is the trend globally) where mega-corporation is likely to see more scrutiny from abuse of power situation.

The following are a few projections that we can expect as Hong Kong’s Competition Ordinance marches into its 6th anniversary:

  1. A revised leniency policy for undertakings involved in cartel conduct (“Leniency Policy for Undertakings”) was issued by the Commission on 16 April 2020. The effects are likely to be observed and understood as we enter into the policy’s first anniversary;
  2. A new leniency policy for individuals involved in cartel conduct (“Leniency Policy for Individuals”) was similarly issued by the Commission on 16 April 2020 where the public is likely to pay closer attention to its effect as we approach the policy’s first anniversary;
  3. Cooperation and Settlement Policy for Undertakings Engaged in Cartel Conduct issued in 2019 for undertakings that do not benefit from leniency under the Leniency Policy is the trend that we will likely see continued into this new year;
  4. The Policy which Recommended Pecuniary Penalties issued by the Commission in June 2020, which sets out a 4-step approach to the formulation of recommended pecuniary penalties for undertakings and associations of undertakings will continue and market reaction is to be seen in the coming year; and
  5. The Enforcement Policy issued in 2015 which supplements the Competition Ordinance and the six Guidelines the Commission has issued to provide guidance on how the Commission intends to exercise its enforcement function in investigating possible contraventions of the First Conduct Rule and the Second Conduct Rule will continue to be implemented and executed via various proactive steps by the Commission.

CONCLUSION

With ever-increasing enforcement action by the Commission, all businesses in Hong Kong should expect that the anti-competition landscape will only continue to mature. It is therefore crucial for businesses (both large and small) to:

  1. Review Existing Practices: Failure to comply with the Competition Ordinance (as illustrated by the year of 2020 enforcement) will have real life consequences;
  2. Competition Laws still exists: Even in the midst of a global pandemic laws still applies. Coordinating a crisis response is a fine line; and
  3. Abusive behaviour will attract claims: companies in position of great market powers need to be mindful of social responsibilities.
Jurisdictions

Solicitor, ONC Lawyers

Joshua Chu is a Litigation Solicitor qualified to practice in Hong Kong. Before becoming a lawyer, Joshua worked in the healthcare industry serving as the IT department head at a private hospital as well as overseeing their procurement operations.

Since embarking upon his legal career, his past legal experience includes representing the successful party in one of Hong Kong’s first cryptocurrency litigation cases as well as appearing before the Review Body on Bid Challenges under the World Trade Organization Government Procurement Agreement concerning a health care industry related tender.

Today, Joshua’s practice is mainly focused in the field of dispute resolution and technology law.

Aside from his legal practice, Joshua is currently also a Senior Consultant with a regulatory consulting firm which had been founded by ex-SFC Regulators as well as being a management consultant for the Korean Blockchain Centre.

Partner, Ravenscroft & Schmierer, Hong Kong

Anna is a Hong Kong qualified lawyer and is responsible as a partner at Ravenscroft & Schmierer for the commercial litigation department. Aside from her legal background, Anna is also an advisor to the Ohkims Blockchain Centre in South Korea and Hong Kong qualified lawyer and a regulatory consultant specialized in IT control and compliance.  

Before starting her practice as a lawyer, Anna worked closely with the United States Patent and Trademark Office (USPTO) and US Food and Drug Administration (FDA) on intellectual property and FDA regulatory matters. 

​Since embarking on her legal career, Anna was part of the team that defended a party in Hong Kong High Court proceedings involving the jurisdiction’s first cryptocurrency cases where she leveraged her science and engineering skills extensively to help improve her client’s case’s position. This feat was repeated again shortly after when Anna again leveraged her science background in a healthcare-related tender dispute. 

​Today, Anna is proactively working on various Distributed Ledger Technology related projects where she combines her love for science and technology together with the logic behind regulatory framework.