Hong Kong’s Competition
Commission published a consultation draft of its leniency policy on 23
September. The draft policy is in
anticipation of the full implementation of Hong Kong’s new competition law under
the Competition Ordinance 2012 which is scheduled for 14 December.
The Commission has also
published draft guidance explaining its proposed policy whereby the Commission
may make a leniency agreement with a person to the effect that it will not
bring or continue proceedings in the Tribunal for a financial penalty in
exchange for the person’s cooperation in an investigation or in proceedings
under the Ordinance.
The draft policy resembles
many of the features of other leniency regimes internationally and applies only
to serious cartel conduct under the Ordinance (i.e. price fixing, market
sharing, output limitation and bid rigging).
Notable points are the
following:
- The
policy will apply only to the first cartel member who reports the cartel. The Commission will not grant reductions in
the potential penalty for other (second, third or later applicants).
- The
Commission states, however, that “favourable treatment” may be afforded to
parties who do not qualify for leniency including through the possibility of
making joint submissions with the cooperating undertaking to the Tribunal on
the pecuniary penalty. It remains to be seen
how this would work in practice having regard to the timing, nature and extent
of the cooperation required.
- The
Commission will not exclude through the operation of the leniency policy the
possibility of private actions for damages being brought against a successful
leniency applicant. No apparent
protection will be provided for protection against disclosure of leniency
documents in such follow-on proceedings.
- Currently
the Communications Authority (which has concurrent jurisdiction with the
Commission to apply the Ordinance in the telecommunications and broadcasting
sectors) has an open mind as whether it will adopt a leniency policy and
whether on its own or jointly with the Commission.
The majority of the
Asia-Pacific jurisdictions offer some form of immunity or reduced penalties in
return for cooperation by the company concerned with a competition law
investigation. Exceptions are Thailand
and Vietnam. Indonesia has a proposal to
introduce a leniency policy.
At this stage and against the
specific jurisdictional system operating in Hong Kong where only the Tribunal
may impose a penalty in cases under the Ordinance and the Commission is not a
final decision-maker, there is no published guidance on the level of penalty. Leniency will only be attractive to
business if the net benefit to the company exceeds the real and likely penalty
to be imposed. The lack of decisional
practice or guidance on the likely level of penalty or the potential size of
the reduction for cooperation by later applicants can seriously undermine a
country’s leniency policy and with it the ability to root out and successfully
prosecute cartels. If the Commission’s
policy is going to be effective, it is likely that parties seeking leniency will
need greater reassurance than is set out in the draft policy as to what
information they will need to provide and at what stage in the Commission’s investigation
of a possible infringement in order to qualify for the once and for all
leniency currently on offer.
By way of comparative example,
although Indian competition law allows for leniency there are no detailed
guidelines on the circumstances in which leniency will be available. There is a lack of clarity in terms of nature
and quality of evidence that is required for the applicant to qualify for
leniency. There is no guidance on the
extent to which the Competition Commission of India (CCI) will permit
disclosure of leniency documents to private litigants and third parties in
private damages actions in India or elsewhere.
Over six years into the life of the CCI’s enforcement there is no
published case of a company being granted a leniency reduction.
By contrast, in a landmark
decision in April 2012, Pakistan’s Competition Commission (CCP) granted Siemens
total immunity from fines for its cooperation in a cartel investigation
relating to bid rigging in supplies to power companies. This case is reportedly the first time that
the new authority has received and granted a request for leniency
A culture against
whistleblowing may also undermine the leniency regime, although guidance on
leniency will reinforce the message that the authority’s work is to
be taken seriously and may encourage other businesses to come forward with
evidence of a cartel.
The Commission has invited
comments on its draft leniency policy by 23 October 2015.
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