Clifford Chance

On 17 May 2019, the Competition Tribunal (Tribunal) handed down its judgments in Hong Kong's first two competition cases involving bid-rigging, market sharing and price fixing.

Competition Commission v. Nutanix Hong Kong Ltd and Others [2019] HKCT 2 concerns a tender issued by the Hong Kong Young Women's Christian Association (YWCA) relating to the installation of a Nutanix server system. Nutanix agreed with BT Hong Kong Limited (BT) that it would assist BT by obtaining dummy bids from other IT companies, so as to satisfy YWCA's procurement policy which required a minimum of five bids for a tender. As a result, SiS, Innovix and Tech-21 each submitted a bid with substantially higher bid prices than BT's. The Tribunal found that all respondents (with the exception of SiS) acted in contravention of the First Conduct Rule under the Competition Ordinance (Cap. 619) (Ordinance). Further, the agreements among them fell within the definition of bid-rigging and constituted "serious anti-competitive conduct". Accordingly, the Commission was not required to issue a warning notice to any of the respondents before issuing the proceedings. At the time of writing, Nutanix, BT and Innovix have filed their appeals against the Tribunal's decision.

Competition Commission v. W. Hing Construction Co Ltd and Others [2019] HKCT 3 concerns decoration works undertaken in a public housing estate. Ten companies, which were decoration contractors approved by the Hong Kong Housing Authority (HKHA), allocated among themselves designated floors in the buildings and jointly produced a flyer setting out the package prices offered. The Tribunal found that the conduct of the respondents consisted of allocation of market for the supply of services and price-fixing, and accordingly they acted in contravention of the First Conduct Rule, notwithstanding the respondents' arguments that this conduct was justifiable on efficiency grounds. One of the respondents filed an appeal against the Tribunal's decision, arguing that two individual members of a partnership should not be liable for the acts of their co-partner.

The six key takeaways are:

• The criminal standard, i.e. proof beyond reasonable doubt, is to be applied to Tribunal proceedings where the Commission seeks to impose a fine. 
• An undertaking can be held liable for the infringing conduct of its employees, provided that there is a sufficient connection between the acts of the employee in question and the undertaking.
• Under the "by object" test, the question is whether an agreement entails such a sufficient degree of harm to competition that no additional examination needs to be made on whether it has anti-competitive effects. 
• A respondent that seeks to invoke the efficiency defence bears the burden to prove such defence on the balance of probabilities.
• A company and its sub-contractors could be considered as a single undertaking, both of which could be held liable for contraventions of the Ordinance.
• The Commission is not required to issue a warning notice if it has reasonable cause to believe that the contravention involves "serious anti-competitive conduct".

A client briefing which discusses these two competition cases in detail is accessible here.