Businesses need to be prepared for what to do if they are subject to an investigation by a regulatory body, and to ensure that their management and staff have appropriate training in this respect. If they put a foot wrong, the result could include substantial financial penalties for companies and individuals, and a criminal offence for the individuals involved.
Two cases in Hong Kong earlier this year graphically demonstrate the potentially serious consequences of not being prepared.
In February, the Competition Commission launched an investigation into a suspected price-fixing cartel among cleaning service companies. During the investigation, the Commission found that a company’s employee had attempted to delete five documents and a number of computer links that were potentially relevant to the investigation. The Competition Ordinance expressly states that destroying or concealing a document which is relevant to an investigation is a criminal offence. The Competition Commission referred the matter to the police. The employee concerned was convicted of the offence and sentenced to two months’ imprisonment.
It is important to note that it is not just physical documents that should not be destroyed, falsified or concealed after an investigation starts. The same applies to electronic communications such as emails and SMS messages. Last year, the European Commission fined a company €15.9 million (around HK$143 million) when it found that one of the company’s employees had deleted potentially relevant WhatsApp messages after it had started an investigation.
In May, the Hong Kong Competition Commission was investigating a potential cartel amongst fish wholesalers in Aberdeen. The Commission required an individual to attend at its offices for an interview, as it is entitled to do under the Competition Ordinance. However, the individual failed to comply with this request. Failure to comply with such a request is a criminal offence under the Ordinance. As a result, the Commission has referred the case to the police for investigation.
The cases referred to above concerned the Competition Commission. But other regulatory authorities in Hong Kong, such as the Customs and Excise Department, the Communications Authority, the Securities and Futures Commission and the Privacy Commissioner for Personal Data also have extensive investigatory powers.
Such cases not only involve potentially serious consequences for the individuals involved but also for their companies, in terms of substantial financial penalties and reputational damage. Businesses are therefore recommended to ensure that their management and staff are well-trained in (a) how to comply with the rules, thereby reducing the risk of being investigated; and (b) how to handle investigations by the authorities, if they do become subject to one.