Hong Kong - Successful Leniency Application Sees HKCC Take New It Cartel Case To Court And Adoption Of First Infringement Notice Remedy By Authority.

Legal News & Analysis - Asia Pacific - Hong Kong - Competition & Antitrust

28 January, 2020


On 22 January 2020 the Hong Kong Competition Commission (HKCC) commenced proceedings against Quantr Ltd (Quantr) and one of its directors in the Competition Tribunal (Tribunal). The proceedings concern alleged cartel conduct in 2017 relating to a bidding exercise organised by Ocean Park Corporation (Ocean Park) for the procurement of IT services based on Nintext technology. Ocean Park is the operator of one of Hong Kong’s major theme parks.


This is the second of the HKCC’s cases to focus on the IT sector but is notable for two reasons. Firstly, the HKCC has made use of the infringement notice mechanism in the Competition Ordinance (CO), which essentially provides a party with an opportunity to cease its anti-competitive conduct and avoid full proceedings in the Tribunal. Secondly, these are the first enforcement proceedings to result from a successful leniency application.


Companies who may be involved in anti-competitive conduct, or under investigation by the HKCC, should place close attention to this case and ensure that they are able to mitigate competition law risk and to navigate the range of enforcement outcomes that may result from a HKCC investigation.


The infringement notice mechanism applies in the case of contraventions of the First Conduct Rule (which prohibits anti-competitive agreements) which amount to serious anti-anticompetitive conduct, such as cartel conduct, as well as contraventions of the Second Conduct Rule (which prohibits abuse of substantial market power).


In such cases the HKCC has the discretion to issue an infringement notice to a person against whom it proposes to bring proceedings, offering not to bring those proceedings on condition that the person complies with the requirements of the notice.


In this case, software supplier Nintex Proprietary Limited (Nintex) has offered commitments, in relation to an infringement notice issued by the HKCC. By way of these commitments Nintex has admitted that it contravened the First Conduct Rule and has agreed to adopt and implement an effective competition compliance programme.


The case was brought to the HKCC’s attention by Quantr’s co-bidder through a leniency application. The leniency process allows a cartel participant to inform the HKCC about the existence of a cartel and, in return for cooperating with any subsequent investigation or Tribunal proceedings, the HKCC will undertake not to commence proceedings for a pecuniary penalty against the successful applicant. Prior to the Quantr case the HKCC’s leniency policy was not a proven enforcement tool, with the HKCC’s first two successful cases carried out without the use of leniency.


This successful use of leniency in this case comes at a time when the number of leniency applications in other jurisdictions such as the EU are reported to be in decline and Brent Snyder, the CEO of the HKCC, has described it as “an important enforcement milestone for the Commission”.


Both the use of an infringement notice and the successful deployment of the leniency policy demonstrates the HKCC making use of the wide range of enforcement tools available to it. It also shows that the HKCC is willing to adopt different enforcement outcomes depending on the circumstances. The HKCC will be hoping that this case encourages other cartel participants to come forward to the authority with details of their cartel conduct and cooperate with its investigations, or face being prosecuted in front of the Tribunal.


herbert smith Freehills


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Adelaide Luke, Herbert Smith Freehills