| The Hong Kong Competition Commission celebrated the sixth full year of the Competition Ordinance in December 2021, after an increase of enforcement activities and policy making efforts during 2021.2022 has started with a flurry of activity. On 18 January 2022, the Commission conducted a joint dawn raid in the building maintenance sector with the Organized Crime and Triad Bureau of the Hong Kong Police.On 20 January 2022, the Commission commenced proceedings in the Competition Tribunal against certain parties involved in a tourist attraction ticket price-fixing cartel: some parties involved in this case had already been issued with infringement notices in 2021.On 27 January 2022, the Commission acknowledged its ongoing investigation into local food delivery apps, Deliveroo and Foodpanda, and invited the restaurant industry to submit information to support the Commission’s investigation.In this e-bulletin, we summarise the key developments of the past 12 months, and look forward at what may be on the horizon for Hong Kong competition law in the Year of the Tiger. |
| 1. 2021 in Review 2. Steady Strides into 2022 3. Looking ahead to the year of the tiger |
| 1. 2021 IN REVIEW |
| 1.1 Enforcement actionsThe Commission continued to flex its enforcement muscles in 2021, exercising the range of enforcement powers granted under the Ordinance. These cases involved a number of ‘firsts’ for the Commission: First action against ‘facilitators’ of a cartel: On 26 January 2021, the Commission issued infringement notices to six hotel groups and a tour counter operator for facilitating a price-fixing arrangement between two competing travel service providers, namely Gray Line Tours of Hong Kong Limited and Tink Labs Limited. The Commission considered the use of infringement notices to be appropriate because of the parties’ role as “facilitator”, and because of their early and active cooperation with the Commission’s investigation1. This was the Commission’s first pursuit of ‘facilitators’ of cartel conduct and stands as a reminder that both cartelists and third parties involved in giving effect to anti-competitive conduct can be subject to the Commission’s enforcement actions. As is discussed in further detail below, a few weeks ago the Commission commenced proceedings against Gray Line and a number of other hotel groups (January 2022). First case fully resolved under the Cooperation Policy: On 25 November 2021, the Commission commenced proceedings in the Tribunal against three undertakings, for their participation in cartel conduct over the sale of mail inserters in Hong Kong. Mail inserter machines automate the folding and inserting of mail into envelopes and the sealing of envelopes for bulk mailings. Given that all the parties involved cooperated with the Commission under the Cooperation and Settlement Policy for Undertakings Engaged in Cartel Conduct, the Commission agreed with each party that it would not pursue current and former officers and employees. The Commission also made a recommendation to the Tribunal that a reduction in each pecuniary penalty was appropriate2. First case involving the obstruction of a Commission search: On 14 December 2021, the Commission commenced proceedings in the Tribunal against two companies and three directors of those companies. The Commission noted in its press release that, while executing its search warrant at the premises of one of the parties, the Commission found that certain employees had attempted to delete shortcuts linking that company’s computers to the servers of the other party, as well as numerous commercial documents that may have been relevant to the Commission’s investigation. The Commission has referred this obstruction of its investigation to the Hong Kong Police for criminal investigation. Under section 54 of the Ordinance, obstruction of the Commission in exercising its powers under the Ordinance is a criminal offence, carrying a maximum penalty of a fine of HK$1,000,000 and imprisonment for two years. Individuals who instruct or assist others to obstruct the Commission are also liable. With these cases, the Commission has deployed a wider range of the enforcement powers in its tool kit. These include, in particular, a range of settlement options, demonstrating that investigations do not inevitably end in contested proceedings before the Tribunal. This is a welcome development for both the Commission and for parties under investigation.At the same time, the Commission has ensured that there is a steady pipeline of proceedings before the Tribunal, with cases from previous years still ongoing. While the Commission has successfully navigated its way through a series of Tribunal proceedings, cases continue to give rise to untested questions of procedure.1.2 Policy makingFollowing the revisions of the Commission’s leniency programme for cartel conduct3 and the publication of the Policy on Recommended Pecuniary Penalties4 in 2020, the Commission published its Policy on Section 60 Commitments5. The Commitments Policy stands alongside other policies6 to provide detailed guidance on the enforcement options available to the Commission under the Ordinance.The commitments procedure under section 60 of the Ordinance allows parties to agree with the Commission to take (or to refrain from taking) any action in order to address the Commission’s concerns about a possible contravention, in return for the Commission agreeing to close its investigation or proceedings before the Tribunal. The party offering the commitment does not necessarily need to admit to an infringement as part of the process. The Commitments Policy provides further details of the process for offering and accepting commitments, as well as the factors relevant to the Commission’s evaluation of the commitments offered in a particular case.In addition, the Commission continued its advocacy efforts, notably issuing an Advisory Bulletin on membership admission rules for trade, sporting, professional and industry associations/bodies7 on 29 July 2021. On 23 September 2021, the Commission further issued a public statement on the decision of the Volleyball Association of Hong Kong to exclude five members from full membership8, an issue that had received widespread media and public attention. |
| 2. STEADY STRIDES INTO 2022 |
| 2.1 Tribunal proceedings in tourist attractions tickets caseOn 20 January 2022, the Commission commenced proceedings in the Tribunal against certain parties involved in the price-fixing cartel between Gray Line and Tink Labs. These include Gray Line and three further hotel groups, as well as the Managing Director of Gray Line. Of these parties, Gray Line and the owner-operator of the InterContinental Grand Stanford Hong Kong hotel (ICGS) have entered into a cooperation agreement with the Commission under its Cooperation and Settlement Policy.Accordingly, these two parties and the Commission will submit joint applications to dispose of the proceedings by consent, in each case requiring an admission of contravention of the Ordinance. Fines will also be imposed (just over HK$4 million against Gray Line, and HK$1.6 million against ICGS), and the parties must pay the Commission’s costs. Finally, a director disqualification order will be made against the Managing Director of Gray Line for a period of three years.The Commission intends to pursue contested proceedings against the remaining two parties for similar remedies, as well as orders requiring these parties to adopt an effective compliance program.2.2 First joint operation between the Commission and the Hong Kong Police’s OCTBOn 18 January 2022, the Commission conducted a joint raid of two office premises with the Hong Kong Police’s Organized Crime and Triad Bureau (OCTB).The property management company investigated is suspected to have engaged in anti-competitive conduct in a tender exercise relating to a maintenance project for an industrial building in Tuen Mun. The police arrested four individuals suspected to have been involved in related criminal acts, including criminal intimidation and criminal damage.The Commission is, in parallel, investigating various other contractors that had submitted bids in the tender exercise for possible involvement in anti-competitive conduct. The police have also been involved in a number of searches of relevant premises.In its press release9, the Commission stated that cartel conduct in the building maintenance market is an enforcement priority of the Commission. Indeed, the Commission has pursued a number of proceedings in the Tribunal related to this sector in the past, including the cases of Competition Commission v W Hing Construction Company Limited and Ors CTEA 1/2017, Competition Commission v Kam Kwong Engineering Company Limited and Ors CTEA 1/2018, and Competition Commission v Fungs E&M Engineering Company and Ors CTEA 1/2019.2.3 Commission reveals ongoing investigation into food delivery appsOn 27 January 2022, the Commission acknowledged its ongoing investigation into local food delivery apps, Deliveroo and Foodpanda. The investigation is understood to focus on certain contractual requirements imposed on partner restaurants.These identified restrictions include: (i) direct or indirect exclusivity restrictions; (ii) requiring partner restaurants to list menu items at the same (or a lower) price than those offered on its own menu, and to allow the food delivery app to adjust prices; and (iii) requiring partner restaurants that wish to acquire food delivery services to also acquire self pick-up or other services.While the Commission’s investigation remains ongoing, the Commission has invited restaurants and other interested parties to submit information via a dedicated online questionnaire. The Commission also stated that it has reached out to a number of restaurant industry associations to invite them to distribute the Commission’s questionnaire to its members.No further details are available as to the status of the investigation or the expected timing of the Commission’s next steps. |
| 3. LOOKING AHEAD TO THE YEAR OF THE TIGER |
Looking ahead to the Year of the Tiger, the Commission stated in December 2021 that it intended to pay particular attention to three areas10. These include:Anti-competitive behaviours that affect people’s livelihoods, especially low income or grass-root groups;Cartels that aim to take advantage of government or public funding, including cartels that target public procurement processes and government funding or subsidy schemes set up to help Hong Kong businesses; andCases involving the digital economy, including taking steps to allow the Commission to better understand the online retail sector in Hong Kong.The Chairman of the Commission, Mr Samuel Chan, said in December 2021 that the Commission was currently conducting an ongoing investigation into auto-fuel suppliers. This follows continued public scrutiny over potential collusion in auto-fuel prices, which the Commission first considered in its market study of 201711.After such an active start to 2022 for the Commission, we expect plenty of enforcement activity to come in the Year of the Tiger. If you have any questions about any of the contents of this e-bulletin, please contact Adelaide Luke and Howard Chan on the details below. For further information, please contact: Adelaide Luke, Partner, Herbert Smith Freehills adelaide.luke@hsf.com |
