20 April 2017

First Hong Kong competition case goes to the Competition Tribunal – what this signals for companies

This article was written by Neil Carabine, Edmund Wan, James Wilkinson and Suraj Sajnani. 

The Hong Kong Competition Commission has taken its first case to the Competition Tribunal, alleging that five IT companies engaged in bid-rigging.

The IT companies allegedly colluded in July 2016 in relation to a tender for the supply and installation of an IT server system to the Hong Kong Young Women’s Christian Association.

The Commission says the companies agreed to submit non-genuine “dummy” bids to satisfy the YWCA’s minimum requirement of five tenders. However, the bids contained a number of unusual features which alerted the YWCA to the bid-rigging behaviour, such as identical responses, identical typographical errors and omission of key information.

After receiving a complaint from the YWCA, the Commission used its investigative powers to gather evidence, including interviewing employees of the IT companies and obtaining documents from the companies.

The Tribunal has been asked by the Commission to impose pecuniary penalties on the IT companies for breaching the Competition Ordinance. The Commission says the arrangements were harmful to competition and had the object of preventing, restricting or distorting competition in Hong Kong. The amount of pecuniary penalty that the Tribunal may impose can be as high as 10% of the annual turnover of the undertaking concerned.

Key takeaways:

  1. The Commission has begun enforcement by focusing on serious or “hardcore” anti-competitive conduct, such as bid-rigging. Commission Chairperson Anna Wong said, “Bid-rigging can occur in any market where tender processes are used. It is one of the most blatant and harmful forms of anti-competitive conduct. The Commission takes this type of conduct very seriously because of its potential to cause significant harm to consumers and the economy as a whole.”
  2. The Commission is looking across sectors. While the present case was in the IT sector, Ms Wong said, “These proceedings drive home the message that market participants in all sectors should steer clear of bid manipulation practices, while those already involved in rigging bids should consider approaching the Commission for leniency.”
  3. The Commission will use its investigative powers to compel companies to produce documents and attend for questioning.

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