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11 May, 2018
On 14 March 2018, the Competition Tribunal ("Tribunal") handed down its latest decision in Hong Kong's first "bid-rigging" proceedings under its new comprehensive competition regime, in force since December 2015.
The decision provides the first insight into how the Tribunal addresses disclosure issues in competition claims, covering new ground, as the usual court rules of disclosure do not automatically apply. The Tribunal rejected the regulator's attempt to simply assert privilege wholesale over vast quantities of documents without justifying the legal basis for doing so. Instead, the Tribunal undertook a robust and rigorous analysis of the issues surrounding orders for disclosure.
In particular, the Tribunal's ruling protecting the regulator's communications with the other respondents in relation to its leniency policy, on the grounds of informer privilege and without prejudice privilege, should be reassuring to those considering self-reporting and making use of the leniency policy. On the other hand, by requiring the regulator to submit detailed justifications for its other claims for public interest immunity, the Tribunal has shown that it will fairly scrutinize the regulator's conduct.
BACKGROUND
This was an interlocutory application in the case filed by the Hong Kong Competition Commission ("Commission") against Nutanix Hong Kong Limited ("Nutanix"), BT Hong Kong Limited ("BT"), SiS International Limited ('"SiS"), Innovix Distribution Limited ("Innovix"), and Tech-21 Systems limited ("Tech-21") (jointly, "Respondents").
This case is the first lawsuit brought under the Competition Ordinance (Cap. 619) ("Ordinance"), which came into force on 14 December 2015. The Commission's claim is that the Respondents contravened the first conduct rule under the Ordinance by engaging in "bid- rigging" in a tender conducted by the Hong Kong Young Women's Christian Association in July 2016 for the supply and installation of an IT server system.
Nutanix is a supplier of IT hardware and software solutions. BT, SiS, Innovix and Tech-21 are distributors of Nutanix products who sell directly to final customers such as YWCA. In the first round of tenders, YWCA only received one bid from BT, while YWCA's procurement policy required a minimum of five tenders. The Commission alleges that Nutanix agreed to help BT to win the YWCA tender by obtaining four "dummy" bids and orchestrating a series of "vertical" arrangements.
THE PRESENT APPLICATION
This application was brought by only one of the Respondents, SiS. SiS requested orders of discovery against the Commission.
The application raised questions in relation to the Commission’s obligations of discovery and principles of public interest immunity and without prejudice privilege.
Although the usual court provisions for automatic general discovery (O 24 r 2 of the Rules of the High Court) do not apply to enforcement actions before the Tribunal, an order for discovery by the Commission was made at the first case management conference on 26 May 2017. The terms of the order directed that the Commission had to file and serve:
"a list of documents … separating (a) those sought to be relied upon and used by the Applicant in these proceedings and (b) unused materials, with the origination of each of the documents identified (eg ‘From R2’)".
The Commission subsequently provided the Respondents with two lists of documents in June and August 2017, respectively. Each list contained the following statement:
"The Applicant objects to produce the documents enumerated in Part 2 of [Schedule 1 hereto] on the ground that they are by their nature privileged from production or subject to public interest immunity."
Part 2 of Schedule 1 set out the following categories of document:
- Class 1: Any without prejudice correspondence and records of without prejudice communication between the Commission and respondents in relation to the Commission's Leniency Policy.
- Class 2: Affirmations of Wong Kam Hung (together with exhibits), and drafts thereof, for the purpose of applying for search warrants in HCCM 261/2016.
- Class 3: The Complainant's original electronic complaint form which was submitted to the Commission on 21 July 2016.
- Class 4: Correspondence, reports, and other documents passing between the Commission and its solicitors for the purpose of this action, instructions to Counsel, advice, opinions and drafts; correspondence, reports and other documents passing between the Commission and its solicitors and other parties written or prepared for the purpose of obtaining evidence or furnishing to the Commission's solicitors information which might lead to the obtaining of evidence to be used in legal proceedings, statements, notes, memoranda, and other documents prepared by or for the use of the Commission's solicitors for the purpose of legal proceedings.
- Class 5: All without prejudice correspondence and records of without prejudice communications between the Commission and any Respondent where an agreement has not been reached.
- Class 6: All confidential internal reports, minutes and correspondence relating to the Commission’s investigation and present proceedings. This includes any records of communication between Commission staff during the execution of search warrants under section 48 of the Competition Ordinance.
SiS' application sought an order that the Commission file and serve a list of documents, to include all documents in Classes 1, 3, 5 and 6 and all documents passing between SiS and "other parties" under Class 4, with each of the documents identified individually and the author/originator specified.
In relation to Class 4, SiS accepted that the Commission was entitled to claim legal advice privilege for communications between itself and its lawyers but that privilege did not cover communications with "other parties". This was initially opposed by the Commission on the grounds of litigation privilege but, at the hearing, the Commission confirmed that it would no longer claim litigation privilege in this respect and would file a further list. It was therefore unnecessary to deal with Class 4 or the question of litigation privilege.
The Commission opposed discovery of the documents in Classes 1, 3, 5 and 6 on various grounds including: (i) public interest immunity; (ii) without prejudice privilege; (iii) the factors referred to in Competition Tribunal Rules ("CTR") r 24 (3), and (iv) lack of relevance.
CTR r 24(3), a special provision found only in the CTR, specifically provides:
“The Tribunal may make or refuse to make an order for discovery and production of a document having regard to all the circumstances of the case, including —
(a) the need to secure the furtherance of the purposes of the Ordinance as a whole;
(b) whether the information contained in the document sought to be discovered or produced is confidential;
(c) the balance between the interests of the parties and other persons; and
(d) the extent to which the document sought to be discovered or produced is necessary for the fair disposal of the proceedings."
THE DECISION
After a comprehensive review of the relevant authorities and the test of relevance, the Tribunal ordered the following:
Classes 1 & 5: Correspondence and communications between the Commission and respondents in relation to the Commission's Leniency Policy and those where an agreement has not yet been reached are covered by informer privilege and without prejudice privilege.
Class 3: The Tribunal accepted that usually a complainant's original electronic complaint form would be confidential and covered by informer privilege, yet in the current case, it should be disclosed within a confidentiality ring because the identity of the complainant has already been disclosed and deployed.
Class 6: Class 6 documents cannot as a whole be said to be irrelevant simply because they were internally created. Instead, relevance has to be judged by content. Also, the Class 6 documents could not be wholesale protected by public interest immunity.
The Tribunal felt that two categories of documents (namely: (i) reports to and minutes of the Commission concerning the results of the investigation and the enforcement steps to be taken; and (ii) certain internal communications and notes relating to the execution of the search warrants showing the methods, procedures and tactics of the Commission) would be covered by public interest immunity, but immunity for the rest of Class 6, if claimed, would have to be justified by serving an affidavit setting out the Commission's claim for public interest immunity in respect of the documents.
PRACTICAL POINTS
The decision provides us with an interesting insight into how the Tribunal aims to address discovery issues in claims brought under the Ordinance.
Using the Tribunal's approach to SiS' application as the yardstick, it is clear that the Tribunal will undertake a robust and rigorous analysis in relation to issues of discovery. Further, it appears that the Commission will not be permitted to simply assert privilege wholesale over vast quantities of documents within a certain category or class, without justifying the legal basis for doing so.
This decision follows hot on the heels of the Tribunal's decision in the same case in October 2017 clarifying the scope of the 'direct use prohibition' which restricts the use of statements made under compulsion (see our alert here).
The trial in the main proceedings is fixed to take place in June 2018.
