Introduction

Being an independent statutory body established under the Competition Ordinance (Cap. 619) (the “Ordinance”), the Competition Commission (the “Commission”) is empowered by the Ordinance to conduct an investigation when it becomes aware of any potential contraventions of the Ordinance, whether via a complaint received from the public, or a referral of any conduct for investigation by the Court, the Competition Tribunal or the Government.

Having said that, to exercise such investigation powers as conferred under the Ordinance, the Commission is required to establish a reasonable cause to suspect that a contravention of the Ordinance has taken place (the “Reasonable Cause”) pursuant to s. 39(2) of the Ordinance.

Investigation

For every potential or alleged contravention of the Ordinance, the Commission’s investigation will generally be carried out in two phases, namely the Initial Assessment Phase and the Investigation Phase. The key function of the Initial Assessment Phase is to determine whether there is sufficient evidence to establish a Reasonable Cause (the “Test”) and if the answer is affirmative, the case will be proceeded to the Investigation Phase during which the Commission may rely on the statutory power to compel the production of evidence or to enter and search premises.

Initial Assessment Phase

For the purpose of the Test, the Commission will first gather information in the Initial Assessment Phase on a voluntary basis, for example by contacting parties by telephone or in writing, meeting and interviewing persons who may have knowledge of the case, reviewing publicly available information such as market surveys and industry reports or conducting surveys.

For illustration, when the Commission received a complaint earlier alleging that wholesalers in the Aberdeen Wholesale Fish Market engaged in price fixing when selling fisheries products, the Commission attempted to seek information by surveying practitioners from over 30 wholesalers at the fish market in November 2022. Of interest is that the operation was not just done by the Commission but jointly with the Hong Kong Police, the Agriculture, Fisheries and Conservation Department, the Food and Environmental Hygiene Department, the Fire Services Department, the Immigration Department and the Marine Department. It was not clear if the Commission executed any search warrant on site but uniformed Police was seen at the site while joint operation is carried out and the Commission’s investigators were asking questions to the practitioners at the Aberdeen Wholesale Fish Market.

Another example is that after receiving intelligence earlier alleging that funeral service practitioners engaged in market sharing by coordinating their solicitation of customers at the New Territories (Shatin) Forensic Medicine Centre, the Commission conducted a surprise visit to the forensic medicine centre in August 2023 for the purpose of collecting more information on-site from the practitioners and staff members working at the Forensic Medicine Centre. It was not clear if the Commission officers executed any search warrant there but it was reported that the on-site inspection was assisted by the Hong Kong Police who presumably had accompanied the Commission officers when they attended the Forensic Medicine Centre.

Investigation Phase

The Commission’s view on the Test is that it does not require evidence to a standard that, on balance, tends to suggest that a contravention has occurred. Hence to fulfil the Test, the Commission is only required to be satisfied, at least beyond mere speculation, that there may have been a contravention of the Ordinance.

Since Reasonable Cause was established in both fish wholesale case and funeral service case mentioned above, the Commission decided to escalate both cases to the Investigation Phase for further action and operation.

As mentioned, during the Investigation Phase, the Commission is entitled to exercise its compulsory powers under ss. 41, 42, 48 and 50 of the Ordinance, a summary of which is set out as follow:

In order to gather more evidence regarding the fish wholesale case, the Commission, in addition to requesting relevant parties to produce documents and information and attend before the Commission to provide information, executed search warrants at a vessel, a number of premises in the fish market and two offices of the companies involved for documents relating to the case in December 2022 and June 2023, respectively.

The same happened in the funeral service case. Compulsory powers were exercised by the Commission in an operation in January 2024 during which the Commission executed search warrants at 13 premises, including a number of funeral service companies and an office of a trade association in Hung Hom, Tuen Mun and Yuen Long. The Commission also requested relevant parties to produce documents and information for analysis.

Takeaway

The abovementioned cases illustrated that while the Commission has extensive investigation powers, they sometimes would not invoke them but rely on questioning and information gathering on a voluntary basis (i.e. the person being interviewed or questioned may or may not answer their questions) with the assistance of law enforcement agencies. This might lead to uncertainty or difficulty on any person being questioned whether or not one has the right to silence or whether one should contact a lawyer for legal advice. This is because if the Commission’s officer is only asking a question, then the person being asked could choose not to answer the question and remain silent, which is the person’s right.

However, if the questioning is based on an investigation power invoked by the Commission officer or as provided in a court search warrant, then the person might not have the right to remain silent or not answering the Commission officer’s questions might amount to an obstruction of investigation, which is a criminal offence. It is therefore important to ask and seek clarification from the Commission officer and also to seek legal advice.

If the Commission opines that a contravention of the Ordinance has occurred or may occur, there are a range of options available for the Commission to resolve its concerns, including but not limited to accepting a commitment from the related parties to take or refrain from taking any action under s.60 of the Ordinance, issuing warning notice under s.82(1) of the Ordinance, issuing infringement notice under s.67 of the Ordinance or most seriously, commencing proceedings in the Competition Tribunal.

In light of the seriousness of the potential consequence and time and costs that may incur, it is advisable for all companies and associations, whether currently under investigation or not, to ensure strict compliance with the Ordinance and immediately seek legal advice when being investigated or even just being questioned.