Hong Kong's Competition Commission yesterday published a draft leniency policy for companies engaged in cartel conduct. The draft policy outlines the Commission's approach to leniency.

Why Introduce a Leniency Policy for Cartel Conduct?

As set out in its Guideline on the First Conduct Rule, the Commission considers cartels a form of serious anticompetitive conduct under the Competition Ordinance. The draft policy is designed to provide a strong incentive for cartel participants to break from and report any cartel activity.

Overview and Scope of the Leniency Policy

Under the draft policy, the Commission will agree not to bring proceedings in the Competition Tribunal for a pecuniary penalty against the cartel member who reports the cartel conduct to the commission and meets all the requirements for receiving leniency under the policy. These requirements include fully co-operating with the Commission's investigation. The cooperation with the Commission provides that the existence and the content of the leniency application cannot be disclosed to any other company and be kept confidential.

The Commission will however remain free to terminate the leniency agreement should it deem the information provided incomplete, false or misleading or if the applicant failed to comply with the terms of its leniency agreement.

To ensure effectiveness, the draft policy makes it clear that the leniency policy will only be available for the first undertaking to report a cartel conduct and will only apply to the most serious anti-competitive practices under the First Conduct Rule of the Competition Ordinance, i.e., price fixing, output limitation, market sharing and – last but not least – bid-rigging.

The draft policy also specifies that undertakings which will not have qualified for leniency may nonetheless cooperate with the Commission and benefit from a more favourable treatment, such as a reduction of fines, albeit at the sole discretion of the Commission and ultimately of the Tribunal.

The Leniency Policy and Follow-on Damages Actions

Successful leniency applicants will however not be protected from the possibility of follow-on actions brought before the Competition Tribunal by private parties affected by the cartel conduct. The draft policy notably leaves the door open to the possibility of a third party request for disclosure of leniency materials as part of court proceedings, notwithstanding the confidential handling of leniency applications.

Next Steps

Comments on the draft policy are now sought from interested parties who are invited to submit comments by 23 October 2015. The final leniency policy is expected to be adopted before full implementation of the Competition Ordinance on 14 December 2015.