For a business that has contravened the Competition Ordinance (whether inadvertently or intentionally), litigation against it by the Competition Commission in the Competition Tribunal is invariably a long, protracted and expensive process. 

However, there are a number of ways to avoid such proceedings, which this article summarises.

On 25 November last year, the Commission announced that it had reached a deal with three businesses – which it found to have engaged in a cartel – not to take full proceedings against them or their officers in the Tribunal, provided that they: 

– admitted the contravention;

– agreed to pay penalties (of an amount lower than what the Commission would normally have sought); 

– paid the Commission’s costs to date; and 

– enhanced their competition law compliance programmes. 

The agreement would be put to the Tribunal for its endorsement by way of a “consent order.”

This was the first case to be resolved under the Commission’s Cooperation and Settlement Policy, which was introduced in 2019 for cartels – which are agreements between competing businesses whereby they fix prices, share markets, rig bids or limit output. 

If you find that your business is involved in a cartel, you may also be able to avoid not only proceedings in the Tribunal, but also any financial penalties, if you are the first member of the cartel to report it to the Commission. This is the Commission’s so-called Leniency Policy.

Although cartels are generally considered to be the most egregious type of anti-competitive conduct, there are degrees of culpability even within this category which the Commission is prepared to recognise. For parties who are considered less blameworthy, the Commission might be prepared to issue an “infringement notice” under the Ordinance, instead of taking proceedings in the Tribunal. 

This has happened so far in two cases. In 2020, the Commission issued an infringement notice against an IT services company for discussing pricing intentions with a competitor about a proposed contract bid. And in February last year, the Commission issued infringement notices against six hotel groups and a tour counter operator for facilitating a price-fixing agreement between two competing travel service providers. 

In both cases the businesses concerned were required to admit the contravention, and put in place more effective compliance programmes, in return for the Commission not taking action in the Tribunal.

What about non-cartel conduct that may contravene the Ordinance? In the case of agreements between competitors which fall into this category, the Commission may be prepared to accept commitments from the parties concerned to change their agreements to address the Commission’s concerns, without requiring them to admit any contravention. 

This happened in two cases in 2020. In the first case, three online travel agents agreed to remove price parity clauses (otherwise known as “most-favoured nation” or MFN clauses) in their agreements with hotels, which obliged the hotels not to offer more favourable terms to other retail channels. 

In the second, the Commission accepted commitments from the members of a group of Hong Kong container terminal operators to cap their prices and maintain service levels for certain services, in return for not taking further action regarding an alliance between them. 

Another tool that the Commission has at its disposal to deal with non-cartel agreements is the Warning Notice. Under this process, the Commission will not take proceedings to the Tribunal unless it has first issued a Warning Notice. This gives the parties concerned the opportunity to rectify their agreement within a certain period. 

So far, no Warning Notices have been issued, although this may be because the Commission (and the parties involved) prefer to deal with the concerns through commitments.

This leaves the Competition Ordinance’s prohibition against abuse of substantial market power – the so-called Second Conduct Rule (SCR). In December 2020, the Commission announced that it had brought its first, and so far only, action under SCR before the Competition Tribunal, against a supplier of industrial gases. It remains to be seen whether, in any future SCR cases, the Commission may be prepared to accept commitments from the business concerned in lieu of Tribunal proceedings.

With this array of tools available to avoid proceedings in the Tribunal, it is vital that businesses obtain prompt legal advice, if and when they receive an unwelcome “knock on the door” or enquiry letter from the Commission.