Hong Kong – Competition Tribunal, For The First Time, Sanctioned Relief Sought Against Respondents In Their Absence.
Almost nine years since the inception of the competition law regime in the jurisdiction, for the first time, relief was granted against respondents who failed to file their Response to the Originating Notice of Application (ONA) within the specified time limit pursuant to Rule 76 of the Competition Tribunal Rules (Cap. 619D) in Competition Commission v Multisoft Ltd and Ors [2024] HKCT 2. This is similar to the grant of a default judgment in default of the filing of a defence in ordinary civil proceedings in the High Court.
Background
This is the first set of competition proceedings in Hong Kong involving cartel conduct relating to a government subsidy scheme. The Commission alleges that the respondents engaged in practices including cover bidding when providing quotations for IT solutions in applications for a government subsidy under the Distance Business Programme, which was a funding scheme under the Government’s Anti-Epidemic Fund to support local enterprises to adopt IT solutions to continue their businesses and services during the COVID-19 epidemic.
Amongst the eight respondents, the Commission has reached a settlement with six on both issues of liability and penalty. The remaining two respondents, both being individuals, have never participated in the proceedings, but legal documents were sent to them which were not returned.
Rule 76 Procedures
A respondent who is served with an originating notice of application must within 28 days after the day on which the document is served, file and serve a response. Otherwise, the Commission may apply to the Competition Tribunal (Tribunal) for an order granting the relief sought in the ONA against the respondent. The Tribunal may (i) make an order granting the relief sought, (ii) proceed to hear and determine the application, or (iii) give any directions that the Tribunal thinks fit. This is the so-called Rule 76 Procedures.
The Commission, for the first time, resorted to the Rule 76 Proceduresin Multisoft and sought relief (including a pecuniary penalty) to be entered against the two non-participating respondents, akin to the grant of a default judgment in other civil proceedings in the High Court, without a substantive hearing.
The Commission’s submissions on the Rule 76 Procedures
The Commission justified its application on the following grounds:
(i) Rule 76 confers unfettered discretion upon the Tribunal to make an order granting the relief sought in default of filing of a response.
(ii) The 6th and 7th Respondents defaulted in filing a response, showing their apparent lack of intention to participate in the proceedings. Any directions or adjournment were unlikely to further facilitate disposal of the matter.
(iii) The Commission had a clear case against both the 6th and 7th Respondents, based on the Commission’s pleaded case in its ONA. In particular, both respondents were involved in price fixing, customer allocation, bid-rigging and the exchange of competitively sensitive information between undertakings, in contravention of the First Conduct Rule under the Competition Ordinance (Cap. 619). This was also reflected in the other respondents’ readiness to admit liability and consent to the disposal of the proceedings.
(iv) There is a public interest in effectively allocating the Commission’s and the Tribunal’s time and resources.
(v) There are adequate procedural safeguards and protection to the 6th and 7th Respondents pursuant to Subrules 76(4) and 76(5) of the Competition Tribunal Rules (Cap. 619D), insofar as they wish to take part in the proceedings subsequently.
The Tribunal’s observations in relation to the Rule 76 Procedures
Mr. Justice Harris, President of the Tribunal, held that even where an order granting the relief sought by the Commission is made by the Tribunal, the defaulting respondents are not without recourse, and may make an application for the setting aside of such order, at which any substantive arguments, whether on merits or otherwise, may be ventilated and determined as may be necessary or appropriate.
Furthermore, the President opined that the availability of a “default judgment procedure” is consistent with the observation made in the Report for the Subcommittee to study the Proposed Subsidiary Legislation on the Procedures to be Adopted by the Competition Tribunal, that “given the commercial nature and the importance of competition cases to the relevant industry or the general public, cases before the Tribunal should be dealt with as expeditiously as is reasonably practicable”.
The Tribunal accepted the Commission’s submissions and granted the relief sought by the Commission, including but not limited to a pecuniary penalty of HK$242,000 against the 6th Respondent and HK$160,000 against the 7th Respondent.
Commentary
It is now confirmed that the Rule 76 Procedures are akin to the default judgment mechanism in the context of civil court proceedings. Disregarding enforcement proceedings before the Tribunal does not shield a respondent from a judgment being entered against him or her. More importantly, unlike other respondents, the 6th and 7th Respondents did not receive any cooperation discount on their pecuniary penalty. Therefore, even if a respondent does not intend to contest the proceedings, such respondent should approach the Commission for settlement negotiations sooner rather than later in order to secure some sort of cooperation discount.
On the other hand, the fact that the Tribunal is willing to grant the relief sought without a full hearing, demonstrates the pragmatic approach adopted by the Tribunal, so as to dispose of the enforcement proceedings as expeditiously as is reasonably practicable.
For further information, please contact:
peter.so@deacons.com
