22 November, 2015
The Hong Kong Competition Commission ("HKCC") issued its Enforcement Policy and the final version of its Leniency Policy.
The Enforcement Policy provides guidance on how HKCC intends to prioritise its investigation resources and choose enforcement tools.
The Leniency Policy summarizes HKCC's approach to leniency in exchange for cooperation in a cartel investigation. A draft was published on 23 September (read our note here) and we highlight below some of the key changes made in response to submissions by stakeholders.
The Enforcement Policy
HKCC does not have the resources to conduct detailed investigations into every complaint or competition issue it becomes aware of. It will thus need to focus on investigations and enforcement of matters providing the greatest overall benefit to competition and consumers in Hong Kong.
HKCC will focus on three key issues, in addition to the specific facts of a case:
Compliance focus
The focus will be on encouraging compliance in the Hong Kong economy as a whole. The following categories of cases will receive priority:
- cartel conduct, including price-fixing, market sharing, output restriction and bid-rigging
- other agreements contravening the First Conduct Rule causing significant harm to competition in Hong Kong
- abuses of substantial market power involving exclusionary behaviour by incumbents operating in markets in Hong Kong
In relation to cartel conduct, HKCC also states it may prioritise taking action against associations of companies and/or officers, including directors of companies involved in the cartel conduct.
Severity factors
HKCC will also consider the following "severity factors":
- blatant disregard for the law
- deliberate conduct, including deliberate steps to avoid detection
- involvement of senior management of a company
- whether the person engaged or involved in the conduct has been notified of HKCC's concerns but failed to alter its conduct
Effective and appropriate remedies
HKCC will generally favour remedies that will achieve the following remedial goals:
- stopping the unlawful conduct speedily
- undoing the harm caused by the contravening conduct
- imposing sufficient economic sanction to encourage compliance
- setting an appropriate standard for similar future cases
Cooperation and settlement
HKCC will take into account any cooperation in its investigations when considering the proportionate enforcement response. Persons seeking to settle a matter may approach HKCC on a "without prejudice" basis.
Where the cooperation relates to cartel conduct, the Leniency Policy will be applicable.
Compliance efforts
The Enforcement Policy states that genuine efforts to comply with the law will be taken into consideration in HKCC investigations.
The Leniency Policy
The final version of the Leniency Policy is in substance the same as the draft version issued on 25 September. We highlight some of the changes:
Availability of leniency
Leniency may be available even if HKCC has already begun an investigation or even, under exceptional circumstances, if HKCC has decided to issue an infringement notice.
Parties who are not first in
Instead of the draft's vague "favourable treatment", parties who cooperate with HKCC but do not qualify for leniency may expect "a lower level of enforcement action". This may include HKCC recommending to the Tribunal a reduced pecuniary penalty or other order, such as a declaration or injunction.
The Leniency Policy sets out a range of factors it will consider in assessing the extent and value of the cooperation provided by a company who has engaged in cartel conduct, including whether the company:
- approached HKCC in a timely manner
- provided significant evidence
- provided full and truthful disclosure, and full and expeditious cooperation
- coerced any other person to participate in the cartel
- acted in good faith in dealings with HKCC.
Information to be provided during leniency process
An anonymous enquiry may be made to ascertain whether a marker is available for particular cartel conduct but a marker will not be granted on the basis of an anonymous enquiry.
The Leniency Policy sets out the minimum information required to obtain a marker and to make a proffer (ie the third step, when the company is invited to apply for leniency by providing more detailed information). For a marker, this includes the identity of the company applying for the marker, information on the nature of the cartel (such as the product(s) / service(s) involved), the main participants in the cartel conduct and the caller’s details. For a proffer, this includes the entities involved, the role of the applicant, a timeline of the conduct, evidence available and an estimate of sales value/volume affected.
Use of information provided under the Leniency Policy
Information provided at the proffer stage will not be used as evidence in proceedings for a finding of a contravention of the First Conduct Rule against the applicant or any other person. However, once an applicant enters into a leniency agreement with HKCC, it will be required to make all non-privileged information and evidence available to HKCC.
Further, although information obtained during the proffer stage will be returned to the party if a leniency agreement is not entered into, HKCC can still subsequently request that same information.
Equally, where a leniency agreement has been terminated, any information obtained by HKCC may be retained and used as evidence against that company and other cartel members.
HKCC reaffirms its policy not to disclose material (whether or not it is confidential) provided in relation to a leniency application unless the applicant consents or disclosure is compelled by a court order or otherwise by law. The final version of the Leniency Policy further provides that HKCC will use its "best endeavours" to protect leniency materials and "firmly resist" requests for such materials where such requests are made, for example in connection with private civil proceedings in Hong Kong or other jurisdictions.
Hotline
The leniency hotline number has now been provided and will be making an earlier start, opening from 8am on 14 December.
Conclusion
The Enforcement Policy is not as specific as some businesses may have hoped and does not clearly indicate in which sectors or types of anti-competitive conduct HKCC will be concentrating its efforts.
The Leniency Policy in its final form is more comprehensive and highlights an important overlap with the Enforcement Policy in relation to cooperation with HKCC on a "without prejudice" basis, the extent to which it may use information when leniency is sought and the factors it will apply in assessing the value of information and cooperation provided.
With the imminent commencement of the new law on 14 December, these policies will be useful in assessing risk and help to ensure a smooth introduction of a fair competition regime in Hong Kong.
For further information, please contact:
Patrick Sherrington, Partner, Hogan Lovells
patrick.sherrington@hoganlovells.com
