First cartel case relating to the Government’s Anti-Epidemic Fund taken to the Competition Tribunal
Introduction
On 22 March 2023, the Competition
Commission (the “Commission”) commenced
proceedings in the Competition Tribunal (the “Tribunal”) against 4 undertakings and 3 individuals (the “Respondents”) for their suspected
contravention of the First Conduct Rule of the Competition Ordinance, Cap 619
(the “Ordinance”) in the context of
cover bidding when providing quotations in applications for government subsidy totalling
around HK$13 million.
Government
subsidy programme
In 2020, the Government launched the Distance
Business Programme (“D-Biz”) under
the Government’s Anti-Epidemic Fund to support local enterprises to adopt IT
solutions to continue their businesses and services during the COVID-19 pandemic. Under
D-Biz, written price quotations from at least 2 service providers should be
obtained and the service provider submitting the lowest conforming quotation would
be selected.
Investigation
and findings
The Secretariat of D-Biz, the Hong Kong
Productivity Council, referred various complaints relating to D-Biz to the
Commission in June 2020. The Commission conducted screening on almost 14,000
applications accordingly and discovered the unusual bidding patterns involving
the Respondents which suggests potential anti-competitive conduct. The
Respondents’ application documents reveal the following suspicious features:-
1.
Same typographical error appeared in quotations submitted by 2 of the
Respondents;
2.
Some Respondents used almost identical wordings and formatting of
quotations; and
3.
Identical signatures appeared on the documents submitted by different
companies.
As a result of the above findings, the
Commission was satisfied that there is a “reasonable cause to suspect” a
contravention of a competition rule has taken place, and therefore, the case
was taken to undergo further investigation, interviews and premises searches pursuant
to search warrants.
The Commission was of the view that the
Respondents provided cover bids in a batch of D-Biz applications, totalling approved
government funding of around HK$13 million, to ensure one or the other Respondents
would win the projects. The Commission therefore took the case to the Tribunal
on the ground of reasonable cause to believe that the conduct amounts to
serious anti-competitive conduct in the form of price-fixing, customer
allocation, bid-rigging and/or sharing competitively sensitive information, in
contravention of the First Conduct Rule of the Ordinance. The Commission sought
from the Tribunal, among others, orders for imposition of pecuniary penalties
and requiring each of the undertakings to adopt an effective compliance programme as the
Tribunal considers appropriate, and director qualification order against one of
the individual Respondents.
Notably, one of the undertakings has
agreed to admit liability and entered into a cooperation agreement with the
Commission under the Commission’s “Cooperation
and Settlement Policy for Undertakings Engaged in Cartel Conduct”.
The case is now undergoing adjudication by the Tribunal
and the result of the case is yet to be known.
Maximum
penalties for contravention of the Ordinance
Contravention of the Ordinance can attract
severe penalty that one shall not take lightly. The maximum penalties for an
undertaking include a pecuniary penalty of up to 10% of the undertaking’s
annual Hong Kong
turnover per contravention for a maximum period of 3 years. The Tribunal may
also issue orders requiring individuals to pay a pecuniary penalty or
disqualifying them from serving as director of a company for a period of up to
5 years.
Takeaways
The Commission has emphasised that this case serves as a good reminder to
the business sector that one should never agree with their competitors to rig
bids, fix prices, share markets or exchange competitively sensitive
information. Applicants applying for and receiving subsidies are expected to
remain vigilant during the procurement process and to guard against potential
anti-competitive practices. As a last note, the Commission welcomes those
involved in cartel conduct to approach the Commission for leniency or
cooperation.
For enquiries,
please feel free to contact us at: |
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E: competition@onc.hk T: (852) 2810
1212 19th Floor, Three Exchange Square, 8 Connaught
Place, Central, Hong Kong |
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Important: The law and procedure on
this subject are very specialised and
complicated. This article is just a very general outline for reference and
cannot be relied upon as legal advice in any individual case. If any advice
or assistance is needed, please contact our solicitors. |
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Published by ONC Lawyers © 2023 |
