Enforcement proceedings in dominance in Hong Kong

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The CC is the principal authority responsible for enforcing the SCR. The CC may do all such things as appear to it to be necessary, advantageous or expedient for, or in connection with, the performance of its functions. Specifically, the CC has power under the CO to:

• require any person to produce relevant documents;
• require any person to attend to answer questions; and
• conduct unannounced inspections under warrant.

Section 159 of the CO provides that the CA may perform the functions, powers and duties of the CC insofar as they relate to the conduct of undertakings that are licensees, or persons whose activities require them to be licensed under, or persons who have been specifically exempted from, the TO or the BO.

The CC and CA do not have the power to reach a finding of infringement of the SCR, or to impose sanctions under the CO. Instead, where they have reasonable cause to believe that a person has contravened or been involved in a contravention of, the SCR, they may initiate proceedings in the Competition Tribunal for a pecuniary penalty to be imposed.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

If, having heard a case, the Competition Tribunal is satisfied that a person has contravened or been involved in a contravention of the SCR it may order that person to pay a fine of up to 10 per cent of the turnover of the undertaking concerned for each year in which the contravention occurred (up to a maximum of three years).

In addition, the Competition Tribunal may make an order:

• prohibiting a person from engaging in the infringing conduct;
• prohibiting the withholding from any person of any goods or services;
• requiring a person to pay damages to any person who has suffered loss or damage as a result of the contravention;
• requiring any person be given access to or the right to use specified goods, facilities or services;
• requiring an account of profits; and
• disqualifying a director of a company.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The CC and CA do not have the power to reach a finding of infringement of the SCR, or to impose sanctions under the CO. Instead, where they have reasonable cause to believe that a person has contravened or been involved in a contravention of the SCR, they may initiate proceedings in the Competition Tribunal for a pecuniary penalty to be imposed.

Section 60 of the CO provides that the CC may accept from a person a commitment to take or to refrain from taking any action if it considers appropriate to address its concerns about a possible contravention of a competition rule.

What is the recent enforcement record in your jurisdiction?

As at the date of writing, the CC had initiated proceedings in the Competition Tribunal in three cases. To date, the CC is still yet to bring a prosecution under the SCR . However, in its 2017/2018 Annual Report (published in December 2018), the CC stressed it would not shy away from bringing cases under the SCR where the facts supported them. Around 16 per cent of the total number of 789 enforcement contacts in the period between 1 April 2017 and 31 March 2018 related to the SCR, with the largest number of abuse-related complaints relating to tying and bundling and exclusive dealing. During this period, the CC referred a total of 36 cases to the initial assessment phase, five of which related to the SCR. It is not known what proportion of these cases have proceeded to formal investigation stage.

Of the prosecutions brought to date, the first two cases (relating to alleged (i) bid rigging and (ii) price fixing/market sharing, respectively) have been heard and judgment is awaited. The judgments are expected to address a number of issues that will have a bearing on how future cases under both the FCR and SCR will be decided - including the applicable burden and standard of proof. In addition, in its third case, relating to price fixing and market sharing, the CC has for the first time brought proceedings against individuals involved in the alleged conduct.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

If the Competition Tribunal makes a finding that the making or the effect of a clause in a contract constitutes a contravention of the SCR, it may make any or all of the orders specified in Schedule 3 to the CO in terms it considers appropriate. For instance, it may make an order declaring that the contract to be void or voidable to the extent specified in the order, or an order requiring the parties to modify or terminate the agreement.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Section 110 of the CO provides that a person who has suffered loss or damage as a result of any act that has been determined to be a contravention of the SCR may bring follow-on actions before the Competition Tribunal. Following a finding of infringement, the Competition Tribunal may make any one or more of the orders specified in Schedule 3 to the CO it considers appropriate (outlined in the answer to question 30). However, the CO prohibits any enforcement of the SCR other than by the CC and CA.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

See question 31. At the time of writing there are no precedents or guidance as to calculation of damages.

To what court may authority decisions finding an abuse be appealed?

Under section 154 of the CO, an appeal lies as of right to the Court of Appeal against any decision, determination or order of the Competition Tribunal made under the CO.

Under section 32N of the TO, the CA’s decisions in relation to the exploitative conduct of a licensee in a dominant position in the telecommunications market under section 7Q of the TO may be appealed to the Telecommunications (Competition Provisions) Appeal Board. Section 32Q provides that the Appeal Board’s decision will be final.