Hong Kong: Asia Pacific Competition Highlights, Q3 2020

HKCC accepts proposed commitments from seaport alliance

The investigation into the alliance was first announced on 10 January 2019. The alliance jointly operate and manage their 23 berths across eight terminals at Kwai Tsing port in Hong Kong. HKCC’s investigation found that the alliance likely gives rise to anti-competitive effects in the market for port terminal services for gateway cargo; in related markets for the provision of overflow services to the operator of Container Terminal 3 at Kwai Tsing; and for the provision of various services at Kwai Tsing to parties other than the shipping lines.

In response, the four terminal operators offered commitments to, among other things, cap their charges for gateway cargo services to the level applicable on 1 April 2019 (subject to indexation); provide a minimum service level for gate access to Kwai Tsing and the turnaround time for truck services at the port; and maintain reciprocal overflow arrangements with the operator of Container Terminal 3. The proposed commitments would last for up to eight years and would be monitored by an independent monitoring trustee. The proposed commitments were published on 12 August 2020 for consultation until 26 August 2020.

HKCC this year has, for the first time, accepted commitments from persons under investigation. To date, HKCC has accepted commitments from four different parties in two cases.

The Tribunal approves first cartel settlement

On 3 June 2020, the Tribunal made its first finding of breach of the First Conduct Rule based on consent orders, i.e. resulting from a settlement between the HKCC and several of the Respondents. The case concerns alleged price fixing/market sharing in the renovation of certain public housing estates (Competition Commission v Kam Kwong Engineering Company Ltd & Ors [2020] HKCT 3,). The Tribunal’s judgment only concerns liability: penalties were held over to be determined at a later hearing.

The Tribunal applied the so-called “Carecraft” procedure, which has been applied for many years in the context of proceedings brought for directors disqualification orders under companies and securities and futures legislation. The Carecraft procedure allows the parties to submit a statement of agreed facts and proposed orders. This allows the Tribunal to dispense with a trial and rely upon the statement of agreed facts when making orders.

The decision clarifies firstly that the Tribunal can make orders by consent to determine liability in competition cases, and also the procedure by which settlement cases will be dealt with.

HKCC publishes policy on calculating fines

On 22 June 2020, the HKCC published a policy on recommended pecuniary penalties. The policy adopts a methodology that is broadly in line with both the approach taken in the first Tribunal case where penalties were imposed, and the approach taken in the EU and UK.

• Step 1: determining a “base amount” taking – as a starting point – the sales to which the infringement directly or indirectly relates in the relevant geographic area within Hong Kong in the financial year in question.
• Step 2: making adjustments for aggravating and mitigating circumstances.
• Step 3: applying the statutory cap; and
• Step 4: applying any cooperation reduction and conducting inability to pay.

Hong Kong follows a judicial model, where it is ultimately the Tribunal that decides an appropriate penalty, not the HKCC. But the Tribunal decided in the CTEA 2/2017 penalties decision dated 29 April 2020 that the HKCC may recommend penalties, and it is expected to do so in cases going forward.