On 23 March 2017, the Competition Commission ("Commission") commenced enforcement proceedings in the Competition Tribunal ("Tribunal") for the first time since the Competition Ordinance ("Ordinance") came into force in Hong Kong on 14 December 2015.
The proceedings are brought against five information technology companies over an allegation of bid-rigging in a tender related to the supply and installation of a new IT server system based on Nutanix technology. The Commission is seeking remedies including pecuniary penalties and a declaration that each party involved has contravened the Ordinance.
It is alleged that in responding to a tender issued by the Hong Kong Young Women's Christian Association ("YWCA"), the five companies colluded by engaging in bid-rigging, which involved the submission of "dummy" bids by certain parties (i.e., bids that are designated to lose, either unattractive or non-conforming to tender specifications). It has come to the attention of the Commission during the investigation that one of the companies allegedly sent its pricing information and template of its tender application to the other companies for reference via email. YWCA made a report to the Commission upon discovering unusual common errors in the tender applications submitted by the companies, which included spelling mistakes and omission of the same key information. This was actually one of the tips from the Commission to help companies detect bid-rigging.1 The Commission has relied on emails and WhatsApp messages exchanged between the companies to demonstrate the existence of illegal tendering arrangements.
Bid-rigging is considered one of the most serious forms of competition law infringement and has been the enforcement priority of the Commission since the Ordinance came into force (to learn more about bid-rigging, please click here for our previous legal update). It was widely expected that one of the first cases the Commission would bring to the Tribunal would concern bid-rigging, which has long been identified as one of the most damaging practices for consumers, resulting in higher prices. For serious anti-competitive conduct (such as bid-rigging and price fixing) the Commission may directly initiate enforcement proceedings in the Tribunal without the need to first issue a warning notice, which allows parties to cease their practice before the Commission commencing proceedings. The Commission in this case has decided to enforce proceedings in the Tribunal, which indicates the Commission believes it has a fairly strong case. Parties who are found by the Tribunal to have contravened the Ordinance may also face follow-on civil actions for damages.
As of February 2017, the Commission has already received and processed more than 2,000 complaints and enquiries, and has further assessed about 130 of these complaints. The Commission is expected to bring two to three cases to the Tribunal each year. This first case brought by the Commission, represents a milestone in the development of competition law in Hong Kong and sends a strong signal that the Commission has been actively investigating cases since the Ordinance came into force.
1 See "Getting the most from your tender – How to prevent and detect bid-rigging" published by the Commission (May 2016)