The Competition Commission (Commission) may choose to settle alleged breaches of a competition rule under the Competition Ordinance (Cap 619) (the Ordinance) administratively and avoid, or bring to an end, an investigation or costly Tribunal proceedings. The Commission may do this by accepting a 'Commitment' from the parties concerned.
A Commitment generally requires the parties to take steps to stop the contravening conduct, redress any harm caused by the conduct, and/or mitigate the risk of the conduct recurring. No pecuniary penalties are payable but a Commitment can expose the parties to private follow-on actions.
The role and substance of Commitments
Commitments are an important enforcement tool as they allow for a more flexible and less costly approach to compliance with the Ordinance. A Commitment can be offered to and accepted by the Commission at any time, even if an investigation or proceedings have already commenced.
The Ordinance and guidance materials published by the Commission do not prescribe typical elements of a Commitment. Parallel commitment-like processes in other jurisdictions suggest that a commitment will usually deal with the following matters:
- An acknowledgement or admission that alleged conduct contravenes the Ordinance;
- A positive commitment not to engage or re-engage in the conduct;
- Details of corrective action that will be taken by the parties to remedy the harm caused (including possible compensation or reimbursement where consumers have been harmed);
- An obligation to report to the Commission that the undertaking has complied with the Commitment; and
- An obligation to conduct a compulsory compliance training program.
Whether a Commitment is acceptable to remedy the alleged contravention ultimately rests with the Commission. The Commission, in line with other comparative jurisdictions, is unlikely to accept a Commitment that denies the conduct breached or that the Commitment is not an admission for the purposes of follow-on actions.
Commitments can be varied or substituted. The Commission may also agree to release a person from a Commitment upon request or if it has reasonable grounds to believe the alleged contravention no longer arises.
Why offer a Commitment?
If the Commission accepts a Commitment, it cannot open an investigation or must otherwise terminate an investigation that has already commenced. Similarly, the Commission cannot bring proceedings before the Tribunal or must terminate any current proceedings that are the subject of the Commitment. The Commission may continue to investigate or pursue proceedings in the Tribunal for matters that the Commitment does not address.
A Commitment offers a potentially swifter and cheaper resolution for the parties. It may also limit the undertaking's financial exposure, as the Commission cannot impose a penalty as a term of the Commitment or require the parties to pay the Commission's legal costs. If the matter proceeds to the Tribunal, which finds a contravention has occurred, the Tribunal has the power to order a penalty of up to 10% of the undertaking's annual turnover for each year that the contravention occurred.
Why might you not want to offer a Commitment?
A Commitment necessarily involves making a concession that the conduct contravened or was likely to have contravened the Ordinance. A Commitment brings the allegations to rest and does not afford the parties an opportunity to defend themselves (other than indirectly through limiting the terms of the Commitment that is ultimately accepted by the Commission).
Commitments are not confidential and are made publically available on the Commission's website under its 'Commitments Register'. Not only will the publicity be likely to tarnish your business reputation but it could also alert those who have potentially suffered loss or damage as a result of the conduct.
Importantly, while a Commitment might grant immunity from possible penalties, the Commitment may still expose the undertaking to follow-on claims for damages, as an admission under a Commitment provides sufficient grounds for private action. Follow-on claims can otherwise only be brought once the Tribunal or an appeal court has decided that a conduct rule has been breached.
When the Commission might choose to withdraw a Commitment
The Commission may withdraw a Commitment where:
- there is a material change of circumstances;
- it has reasonable grounds to suspect that the person who made the Commitment has failed to comply with it; or
- the information on which the Commission based its decision was materially incomplete, false or misleading.
Before the Commission can officially withdraw the Commitment, it must first give notice to those affected of its intention to do so and is required to consider any responses to its notice to withdraw. The Commission must give written notice of its decision to withdraw the Commitment, which will take effect from the date specified in the notice. The Commission may then conduct an investigation or bring proceedings in the Tribunal.
Failure to comply with a Commitment
Commitments are a legal obligation and must be complied with. If a person fails to comply with a Commitment, the Commission may bring non-compliance proceedings before the Tribunal seeking orders to redress the non-compliance including the payment of damages and penalties.
Next week we will look at another one of the Commission's enforcement tools: infringement notices.