Hong Kong - Construction Industry Comes Under Scrutiny By Competition Regulator.
Legal News & Analysis - Asia Pacific - Hong Kong - Competition & Antitrust
29 June, 2018
Hong Kong’s Competition Ordinance came into full effect in December 2015. The law applies to all sectors of the economy and prohibits conduct which has the object or effect of harming competition in Hong Kong.
The Competition Commission (Commission) is empowered to investigate suspected contraventions of the competition rules and enforce the provisions of the Competition Ordinance. It directs particular focus on “hard core” cartel conduct, including price-fixing, market sharing, output restriction and bid-rigging.
The construction industry (including building renovation and maintenance) is a major part of Hong Kong’s economy, and is also one of the most highly scrutinized industries by the Commission. As noted in a 2016 market study on the residential renovation and maintenance sector undertaken by the Commission, there is “substantial anecdotal and other market intelligence” suggesting that collusive activities, including bid-manipulations, are widespread among residential renovation and maintenance contractors in Hong Kong.
Between December 2015 and March 2017, the Commission launched approximately 12 initial assessments or in-depth investigations involving firms in the construction and infrastructure sector.
In August 2017, the Commission filed a complaint against ten residential renovation service providers with the Competition Tribunal (Tribunal), alleging that the providers have violated the competition law by (i) participating in a market sharing agreement involving the provision of renovation work for the tenants of three new buildings that were part of a public housing estate in Kwun Tong; and (ii) fixing the prices they offered to the tenants for the renovation work. The Tribunal will hear the case later this year.
The Tribunal has the power to impose fines on undertakings, of up to 10% of their respective turnovers in Hong Kong, and on individuals, and order the disqualification of directors, among other available sanctions. Contravening parties are further exposed to private follow-on damages actions.
The complaint against the ten residential renovation service providers affirms the Commission’s commitment and stated priority in fighting “hard core” cartel conduct. In fact, the Commission indicated that it might bring legal actions against additional firms suspected to have engaged in cartel activities in connection with the provision of renovations in public housing estates.
With enforcement on the rise in the construction industry in Hong Kong, businesses are advised to carefully review their agreements and practices, including procurement and bidding procedures, to ensure full compliance with the Competition Ordinance.
For further information, please contact:
Peter Westerlind Wigstrom, Deacons