The Hong Kong Competition Ordinance (“Ordinance”) is expected to finally come into full force on 14 December 2015 (barring any last-minute delays when the Commencement Notice for the Ordinance comes before the Hong Kong Legislative Council for negative vetting in October 2015). Therefore, businesses in Hong Kong have just four months to prepare for the arrival of cross-sector competition law in Hong Kong.

One of the key areas for businesses to consider ahead of full implementation of the Ordinance is whether they have adequate procedures in place to deal with potential dawn raids – unannounced inspections by the Hong Kong Competition Commission (“HKCC”) or the Communications Authority (“CA”). A dawn raid is a key tool in a competition authority’s arsenal, combining the element of surprise with very wide powers to obtain documents and information to further the authority’s investigation. A dawn raid inevitably means significant disruption for businesses and is often the start of a very lengthy procedure. Obstructing any aspect of a HKCC dawn raid carries significant penalties for the company and for individual employees, including fines of up to HK$1 million and imprisonment for two years.

Therefore, preparation for a dawn raid is essential to ensure that a company complies with its legal obligations while also protecting its legal rights. This is the second in a series of e-bulletins in the run up to the full implementation of the Ordinance and focuses on how businesses can best prepare themselves and their employees for the possibility of a dawn raid.

1. What is a dawn raid and what might trigger a dawn raid?

A dawn raid is a surprise inspection at a company’s premises (or, potentially, at the homes of officers/employees) by the HKCC or the CA. It is so-called because authorities generally commence their raids first thing in the morning, although the HKCC has indicated that, subject to operational considerations, it will normally arrive at the specified premises during usual office hours. It is important to remember that dawn raids may not be confined to the premises of a company which is under investigation by the HKCC – they can also extend to the premises of the investigated company’s suppliers or customers.

The HKCC is required to obtain a warrant in order to conduct a dawn raid. It can apply to court for a warrant where it has reasonable grounds to suspect that a contravention of the competition rules has taken place. The HKCC may decide to seek a warrant to conduct a dawn raid where it believes that the suspected breach of the competition rules is being carried out in secret (for example, a cartel), where there is a risk that documents or evidence relevant to the investigation may be destroyed or interfered with if the HKCC sought them by other means, or where the HKCC suspects non-compliance with a previous request for documents or information.

2. What powers will the HKCC have?

The HKCC will have significant powers during a dawn raid to gain entry to premises, to obtain information and to remove documents found on the premises.

Once a warrant has been obtained, the HKCC can use reasonable force to gain entry to a premises (or to access evidence on the premises). It can also remove any obstructions to the execution of the warrant, including individuals, and can take necessary steps to preserve any relevant documents. In its final Guideline on Investigations published on 27 July 2015, the HKCC has confirmed that, upon a party’s request and where no in-house lawyer is present, it will wait a reasonable time for external lawyers to arrive before commencing a search, provided that this will not adversely affect the investigation. This confirmation is welcome, as previous iterations of the Guideline had left this decision to the discretion of HKCC officers.

The HKCC’s focus during a dawn raid will likely be on accessing, searching and copying documents. The Ordinance defines a “document” very broadly as including “information recorded in any form”, which likely encompasses all hard copy and electronic documents (including emails, electronic calendars, instant messages, phone recordings etc.). The HKCC has wide powers to take possession of any documents where this is necessary to preserve or prevent interference with them, or where copying of the document is not reasonably practicable. The HKCC also has the power to take possession of “any computer or other thing” that the HKCC has reasonable grounds to believe will, on examination, afford evidence of a competition law infringement. This could include devices used under a "BYOD" policy, mobile phones, hard drives and servers. The HKCC can also seek explanations from individuals present at the premises about any documents that may appear relevant. Therefore, the assistance of the IT team, in particular, will be essential during a raid. Recently, in Europe, the focus of dawn raids has shifted from removing hard copies of documentation to the forensic imaging of electronic data. As such, only limited numbers of hard copy documents are removed by the European Commission from premises under inspection. In this day and age, it seems prudent for Hong Kong businesses to assume that the HKCC will adopt a similar approach.

3. Why do I need to be prepared for a dawn raid?

Avoiding penalties for obstruction

The penalties for obstructing any aspect of a dawn raid under the Ordinance are significant for companies and individual employees and include fines of up to HK$1 million and two years imprisonment. Obstructing a dawn raid includes destroying or falsifying documents, providing false or misleading documents or information to the HKCC or obstructing a search.

Heavy fines have been imposed on a number of occasions in Europe for failure to cooperate with a dawn raid. For example, in 2008 the European Commission fined German energy company E.ON €38 million for breach of a protective seal during a dawn raid and in 2011 levied a fine of €8 million on French-based utility company Suez Environnement for the same offence. In 2012, two Czech power companies were fined €2.5 million for failing to prevent employee access to an email account during a raid and for diverting incoming emails to prevent the European Commission gaining access to such emails. These examples demonstrate that it is very easy for employees to take actions during a dawn raid, whether deliberately or inadvertently, that operate to the company's and to the employee's detriment.

In light of the broad scope of the HKCC’s powers, and the significant penalties for obstruction of a dawn raid, it is very important for Hong Kong businesses to put in place adequate procedures to deal with the prospect of a dawn raid.

Safeguarding rights

In addition to avoiding the sanctions provided by law for failure to cooperate with a dawn raid, businesses should also be in a position to react promptly to a dawn raid to safeguard adequately their rights.

Two areas which are of particular significance in the context of a dawn raid are: (i) disputes relating to claims of legal professional privilege; and (ii) the possibility of immunity or leniency from fines for cooperation with a HKCC investigation. The HKCC’s approach to both of these issues currently remains uncertain, but is expected to be clarified in the coming months.


The Ordinance makes clear that the HKCC's investigative powers do not affect any rights that would otherwise arise on the grounds of legal professional privilege (save for any requirement under the Ordinance to disclose the name and address of a counsel's or solicitor's client). The HKCC has not yet provided guidance on how disputes during a raid regarding the application of privilege to specific documents should be dealt with, but it is planning to publish procedural guidelines shortly. In Europe, where a dispute arises regarding the existence of privilege over a document, the document can be placed in a sealed envelope for review at a later date by lawyers of the business and the regulatory authority. This means that the inspection continues during the intervening period and disputes are dealt with at a later point in time. It remains to be seen whether the HKCC's pending procedure will mirror this approach.

Leniency regime

Like many other jurisdictions, the HKCC plans to adopt a leniency regime. Pursuant to this regime, the HKCC may, in exchange for cooperation in an investigation, enter into a Leniency Agreement not to bring or continue proceedings before the Competition Tribunal for a financial penalty.

In the coming months, the HKCC is planning to release its policy on Leniency Agreements. It is currently unclear whether a Leniency Agreement will be available once a dawn raid has commenced. It is also unclear whether a Leniency Agreement will only be available to the first party to notify the HKCC of the anti-competitive conduct, or whether the HKCC will apply a ‘sliding scale’ of fine reductions for subsequent applicants under a less formal cooperation policy (as is the case in Europe). The strict wording of the Ordinance appears to only permit the HKCC to enter into an agreement not to bring or continue proceedings before the Tribunal. As such, the publication of the HKCC’s policy on Leniency Agreements (and its precise implications in the context of dawn raids) is awaited with interest.

4. What preparations should businesses make?

Companies should ensure that they are well prepared for any potential dawn raids by the HKCC. It is imperative that businesses put in place clear, simple and effective procedures to ensure an efficient and appropriate response to a dawn raid scenario, which are tailored to the relevant business and its circumstances.

Such procedures should include training for key staff such as receptionists, security and the IT team whose assistance during the dawn raid will be both mandatory (from the HKCC's perspective) and invaluable. Businesses should identify in advance key individuals who can act as a point of contact for HKCC officers during the dawn raid and their contact details should be readily available. In addition, simple checklists for relevant business functions (e.g. reception, IT, security) should also be prepared so that employees are aware of the HKCC’s powers and the level of cooperation required.

Implications for business

Businesses in Hong Kong have been subject to unannounced inspections by other authorities such as the Independent Commission against Corruption and the Securities and Futures Commission for a number of years. From mid-December 2015 (barring any last-minute legislative delays) these authorities will be joined by the HKCC and the CA.

It is therefore imperative that businesses and their employees are aware of how to respond to an unannounced inspection by the HKCC or the CA. Even in circumstances where no infringement is ultimately found, businesses should put themselves and their employees in the best position to protect their legal rights and to avoid the stringent penalties for obstruction of an investigation.

Where an infringement has in fact occurred, a prompt and orderly reaction from a business may also place it in the best position to mitigate its financial exposure (although much will depend on the precise terms of the forthcoming HKCC policy on Leniency Agreements). In any event, such a response will enable the business to discover more quickly the scope and nature of the infringement under investigation.

While a dawn raid is never a welcome event for a business, adequate preparation can help to mitigate the practical and legal impact. The best way for a business to prepare for the possibility of a dawn raid is to put in place a bespoke dawn raid response plan and to ensure that employees have been trained on how to react in the event of a dawn raid. Where businesses already have similar processes in place to deal with dawn raids by other authorities, these should be reviewed and updated to ensure readiness for dawn raids by the HKCC and the CA.