Initial Assessment

As mentioned in our previous alert in this series, the Hong Kong Competition Commission’s (the “Commission”) investigative process begins with an Initial Assessment to screen suitable cases for further investigation or other action.

What is the Objective of the Initial Assessment?

The Commission’s objective at the initial stage is to determine  whether  there  is  reasonable  cause  to suspect  that  a  contravention  of  the  competition rules has occurred, and make a determination as to whether further investigation is appropriate. Two basic requirements must be met before the Commission will consider commencing a formal investigation:

First, the Commission must be satisfied there is sufficient evidence to establish a reasonable cause to suspect that a contravention has taken place. All this requires is that the Commission is satisfied beyond mere speculation that there may have been a contravention of a competition rule. This is a fairly low threshold.

Second, the Commission must be satisfied the case is one worth pursuing, having regard to a range of factors including, inter alia, the potential impact of the conduct on competition and consumers, the Commission’s enforcement priorities and objectives, the public benefit that would result from further investigation, and whether the available evidence indicates that the Competition Ordinance may have been contravened.

What Powers Does the Commission Have at this Stage?

During the Initial Assessment phase, all enquiries are made on a voluntary basis. Until a formal investigation is commenced, the Commission does not have power to compel businesses to provide documents, information and give evidence.

Accordingly if you are contacted by the Commission, it is important for you to ascertain the basis upon which the Commission relies to seek your cooperation before you provide the requested information or materials.

Although you are not legally required to cooperate with the Commission during this early stage, you may decide to do so in good faith, as it is generally beneficial to establish a good working relationship with the Commission and to do what you can to persuade the Commission there is no case for  them to pursue. However, before you volunteer any information to the Commission, you should conduct a careful review of the evidence internally to avoid inadvertently providing unhelpful evidence to the Commission to your own detriment.

What are the Outcomes of the Initial Assessment?

At the end of the Initial Assessment, the Commission may commence a formal investigation if it is satisfied there is sufficient evidence and the requirements set out above are met. Due to the need to preserve confidentiality and conduct an effective investigation, the Commission will not necessarily always inform a complainant (where there is one) of internal procedural steps taken. The Commission will nonetheless endeavour to keep the complainant generally informed as the matter progresses when it can.

If the Commission decides not to proceed to a formal investigation, it may:

  1. Take no further action, in which case the complainant, if there is one, will be notified.
  2. Conduct a market study, which may be the appropriate response where the evidence points towards structural problems in the market rather than a specific contravention.
  3. Refer the matter to another agency, e.g., the Communications Authority or the ICAC.