In the latest cartel case before the Competition Tribunal, the Hong Kong Competition Commission (HKCC) has, for the first time, brought direct action against individuals and sought pecuniary penalties from them.
The HKCC commenced proceedings against three renovation service companies and two individuals on 6 September 2018 for cartel conduct. The HKCC's case is that in or around June to November 2017, the three companies allocated customers and coordinated pricing in relation to the provision of interior renovation services at a subsidised public housing estate in Kowloon. The HKCC considers that this constituted market sharing and price fixing, in contravention of the First Conduct Rule of the Competition Ordinance. According to the HKCC, the two individuals were involved in the contravention as a result of their personal participation in the cartel. The HKCC is also seeking a director disqualification order against one of the individuals.
This is the third case brought by the HKCC to the Tribunal since the Ordinance came into full force in December 2015, and the second case against cartels targeting residents of public housing.
Application to individuals
This case serves as a timely reminder that the Ordinance applies to both individuals and companies, and any person "involved" in a contravention of a competition rule may be held liable. This means a person who:
- attempts to contravene the rule;
- aids, abets, counsels or procures any other person to contravene the rule;
- induces or attempts to induce any other person, whether by threats or promises or otherwise, to contravene the rule;
- is in any way, directly or indirectly, knowingly concerned in or a party to the contravention of the rule; or
- conspires with any other person to contravene the rule.
This broad application raises the question whether any employee in an organisation, no matter how junior, will be held liable. According to the HKCC's enforcement policy, the HKCC will prioritise action against directors and managers of the company concerned (or those who had otherwise directed the cartel conduct). With this approach, the HKCC is likely to target those who make decisions for the company, rather than front line or junior staff who are merely following the directions of management.
Where an individual is involved in a contravention of a competition rule, the HKCC has discretion to agree not to take action against that individual in return for the individual's assistance to the HKCC. It is worth noting that the Ordinance prohibits employers from terminating, threatening to terminate, discriminating, intimidating or harassing an employee, or causing the employee any injury, loss, or damage, because of the employee's assistance to the HKCC.
Penalties and remedies
The Tribunal has broad powers to impose penalties and remedies for contraventions of the competition rules under the Ordinance. These include declarations of contravention of a competition rule, orders imposing pecuniary penalties, injunction orders, interim orders, director disqualification orders and orders to unwind transactions.
Companies can be fined up to 10 percent of the company's (or group's) gross Hong Kong turnover per contravention for up to three years in which the contravention occurred. Individuals may also be fined but the Ordinance prescribes no limit on the amount.
In determining the amount of the pecuniary penalty, the Ordinance mandates the Tribunal to have regard to:
- the nature and extent of the conduct that constitutes the contravention;
- the loss or damage, if any, caused by the conduct;
- the circumstance in which the conduct took place; and
- whether the party has previously been found by the Tribunal to have contravened the Ordinance.
The potential financial consequences do not end there. The Tribunal may order payment of the HKCC's investigation costs, payment of damages to an aggrieved party, or even payment of any profit gained or loss avoided by the contravening party as a result of the contravention.
If the Tribunal has found that a party has breached the Ordinance, or where the party has admitted the contravention in a commitment accepted by the HKCC, the party may also be exposed to private follow-on actions by those that have suffered loss or damage as a result of the contravention.
The current cartel case before the Tribunal sends a clear message that both companies and individuals need to comply with competition law or otherwise risk facing enforcement action and the many consequences that come with investigations and litigation.
The HKCC has made it clear that where actions against individuals are concerned, it will focus on those who are in a management position or those who direct the anti-competitive conduct. That said, given the broad scope of application of the Ordinance to any person involved in a contravention of a competition rule, this does not preclude the HKCC from taking action against regular employees in the right circumstances.