Introduction

As discussed in our previous article, the Competition Commission (the “Commission”) is empowered by the Competition Ordinance (Cap. 619) (the “Ordinance”) to conduct investigation when it becomes aware of any potential contraventions of the Ordinance, in joint operation with other authorities.

On 16-17 April 2024, the Commission and ICAC conducted their first joint operation in relation to corruption and tender-rigging over building maintenance.

The joint operation

The joint operation was conducted subsequent to a corruption complaint received from the public by ICAC. After inquiries by ICAC, several companies and individuals were identified to have engaged in corruption and anti-competitive conduct. In Contravention of section 9 of the Prevention of Bribery Ordinance and the First Conduct Rule of the Ordinance, the syndicate have allegedly engaged in anti-competitive activities and corruption in relation to renovation projects of residential estates, residential-commercial composite buildings and industrial buildings. The syndicate allegedly exaggerated contract sums, manipulated the tendering exercises of building maintenance projects, project supervision and payment release, and assisted associated contractors to obtain maintenance projects. Being satisfied that there was reasonable cause to suspect that the relevant projects had been the target of collusion, the Commission decided to investigate the case.

The Commission and ICAC have executed search warrants and searched around 40 premises, such as the offices of consultancies and property management companies. During the search, the Commission and ICAC have seized exhibits including mobile phones, computers and tendering documents. Relevant parties and individuals were also asked to provide relevant information during the search.

In the joint operation, 20 persons were arrested by the ICAC, including project contractors, consultants, middlemen, members of Incorporated Owners and members of property management companies.

Other measures over building maintenance: Non-collusion Clauses

Under the Ordinance, cartel conduct such as bid-rigging, market sharing and price fixing are considered as a serious anti-competitive conduct. In this regard, the Commission has been following up on cases in relation to building maintenance proactively.

One of the measures introduced by the Commission is the publication of a set of model “Non-collusion Clauses”. Procurers can incorporate this set of clauses in their invitation to bid documents and contracts. The clauses warn bidders of the prohibition against entering into anti-competitive arrangements, as well as informing them about the consequences of doing so. The clauses also provide contractual remedy for procurers if the clauses are breached.

Takeaway

This joint operation of ICAC and the Commission illustrates the extensive investigation powers of the Commission with assistance of other authorities.

Under sections 41 and 42 of the Ordinance, the Commission can obtain documents or specified information, and require any person to attend before the Commission to answer questions which relate to any matter the Commission reasonably believes to be relevant to an investigation, by issuing written notices.

Pursuant to sections 48 and 50 of the Ordinance, the Commission can enter and search any premises for documents, information and other items relevant to its investigation, by applying to the Court for a search warrant.

It should be noted that under section 52 of the Ordinance, it is a criminal offence for failure to comply with a requirement or prohibition imposed on a person pursuant to sections 41, 42, 48 or 50 of the Ordinance. In addition, under section 54 of the Ordinance, it is a criminal offence to obstruct the search under a warrant issued under section 48.

In light of the above potential consequence, companies and individuals are advised to seek legal advice when they are subject to investigation by the Commission.