The Competition Tribunal (Tribunal) sanctioned penalties against two cleaning services companies and their three directors-cum-shareholders, with director disqualification orders also imposed against the latter, after all respondents reached a settlement with the Competition Commission (Commission).
Background
The city’s competition watchdog found that, during the period between May 2016 and August 2018, R1 (HKC) and R2 (MS), which shared common offices and IT resources, exchanged commercially sensitive information in relation to tenders submitted to the Hong Kong Housing Authority (HA) for the procurement of cleaning services for public housing estates and other buildings under the HA’s management, with a total contract amount of around HK$180 million. There were instances where the same person handled the already completed financial proposals and tendering documents on behalf of both companies. R1 and R2 quoted identical and/or inexplicably similar prices. Furthermore, there were common inexplicable mistakes at least on one occasion. The Commission considered such conduct as price fixing, in contravention of the First Conduct Rule of the Competition Ordinance (Cap. 619) and instituted these enforcement proceedings before the Tribunal in December 2021.
Subsequently, each of the two camps reached a settlement with the Commission respectively. On 14 February 2025, the Tribunal handed down its written decision sanctioning all relief sought: see Competition Commission v Hong Kong Commercial Cleaning Services Ltd. and Ors [2025] HKCT 1.
Determination of Pecuniary Penalties of the Two Companies
The Tribunal adopted the 4-step methodology laid down in Competition Commission v W Hing Construction Company Ltd and Ors [2020] 2 HKLRD 1229 in determining the pecuniary penalties for the two companies.
Step 1: Determine the Base Amount
The respective Base Amount was computed upon multiplying the three following components:
| Component | Particulars | HKC | MS |
|---|---|---|---|
| (i) Value of Sales | Inclusive of revenue generated from cleaning service contracts with the HA in the relevant financial years. | Around HK$13 million | Around HK$21 million |
| (ii) Gravity Percentage | Price-fixing conduct is serious anti-competitive conduct, which would normally attract a gravity percentage between 15% to 30%. A moderate percentage was imposed to reflect the seriousness of the subject conduct. | 20% | |
| (iii) Duration Multiplier | The contraventions took place across a total of 27 months. | 2.25 years | |
| Base Amount: | HK$5.9 million | HK$9.5 million | |
Step 2: Aggravating and Mitigating Factors
The aggravating factors rendering an uplift of the respective Base Amount are listed in the table below.
| Aggravating Factors | HKC | MS |
|---|---|---|
| 1st factor | Uplift of 25% for falsely representing to the HA that the tenderer had not colluded with any other undertakings in its preparation and submission of the relevant tender by submitting “Non-collusion Tendering Certificates” | |
| 2nd factor | Uplift of 30% due to participation of its directors | Uplift of 50% due to participation of its director |
| 3rd factor | Uplift of 50% for obstruction by HKC’s staff to the Commission’s investigation | – |
| Total: | Uplift of 105% | Uplift of 75% |
There was no mitigating factor warranting reduction of the Base Amount.
Step 3: Statutory Cap
Neither of the post-adjusted Base Amounts exceeded the statutory cap, being 10% of the turnover.
Step 4: Cooperation Discounts and MS’s Inability to Pay
Details of the cooperation discounts are set out in the table below.
| HKC | MS | |
|---|---|---|
| Timing of admission of liability | When the trial was less than 5 months away | At early stage of the proceedings |
| Cooperation Discount | 9% | 15% |
The Tribunal gave an additional 20% discount to the penalty imposed on MS, since the Tribunal was satisfied that MS’s viability would be undermined by the penalty.
Summary
Upon going through the aforesaid steps, pecuniary penalties of around HK$10.9 million and HK$11.3 million were imposed on HKC and MS respectively.
Determination of Pecuniary Penalties of the Three Individuals
The Commission adopted a global assessment approach instead in determining the pecuniary penalties of the three individuals. As they agreed to guarantee payment by either HKC or MS, a nominal penalty of HK$10,000 was imposed against each of them.
Commentary
While the three individuals were not subject to a hefty fine, being directors-cum-shareholders, they were required to guarantee payment by the two companies. Such measure addresses the risk of non-payment by any attempt to dissolve the two companies.
The range of aggravating factors which caused the uplift of the Base Amount includes false representation of non-collusion, director’s participation and obstruction to investigation.
Also worthy of note is that the Base Amount in relation to HKC was doubled and around half of that uplift was caused by obstruction to investigation by HKC, including an attempt to delete computer documents. It is of paramount importance that no person obstructs the Commission’s investigation, as that may not only result in a higher penalty, but also lead to criminal consequences. The HKC staff member who attempted to delete documents from computers was charged for such conduct, which is subject to a maximum sentence of 2 years imprisonment and a fine of HK$1 million.
For Further information, please contact:
Peter So, Partner, Deacons
peter.so@deacons.com
