By this subsequent decision dated 29 April 2020 ( HKCT 1), the Tribunal had to decide how pecuniary penalty under s 93(1) of the Ordinance should be calculated in Hong Kong.
In Competition Commission v W Hing Construction Company Ltd  HKCT 3, the Tribunal found that the respondents had contravened the first conduct rule by engaging in market sharing and price fixing in relation to the provision of renovation services in a public housing estate.
The Tribunal preferred a structured and methodological multi-step approach to a more flexible approach. This is because in Hong Kong, where competition law is still a nascent subject, a structured approach is necessary to provide the desirable level of certainty, clarity and transparency in the assessment.
The Tribunal held that: –
- The determination of the pecuniary penalty should be approached in 4 main steps: –
Step 1 – determining the base amount
Step 2 – making adjustments for aggravating, mitigating and other factors
Step 3 – applying the statutory cap
Step 4 – applying cooperation reduction and considering plea of inability to pay, if any
Step 1 — determining the base amount
- The base amount is calculated by first identifying the value of the undertaking’s sales directly or indirectly related to the contravention in the relevant geographic area within Hong Kong in the financial year in question (“Value of Sales”).
- To reflect the seriousness of the conduct in question, a ‘gravity percentage’ will be identified, to be applied to the Value of Sales. For serious anti-competitive conduct, the range of 15% to 30% is appropriate.
- To reflect the temporal extent of the conduct in question, the amount thus obtained is multiplied by the number of years of the undertaking’s participation in the contravention (“Duration Multiplier”) to derive the base amount.
Step 2 — making adjustments for aggravating, mitigating and other factors
- Aggravating factors may include where an undertaking acts as a leader in or instigator of the contravention; where it takes coercive or retaliatory measures against other persons to ensure the implementation, continuation or concealment of the contravention; where directors and senior management are involved in the contravention; where the conduct is of a particularly egregious nature; where the anti-competitive practice is reflective of widespread industry practice such that there is a need for general deterrence; where the conduct is serious anti-competitive conduct and the undertaking has continued with it despite being aware of the Commission’s investigation; and where an undertaking obstructs the Commission’s investigation.
- Mitigating circumstances may include where there was genuine uncertainty as to the lawfulness of the conduct in question; where the undertaking’s participation in a contravention is limited; and where an undertaking has taken steps to ensure genuine compliance with the Ordinance that reflect a corporate commitment to competition compliance.
- Other considerations include the loss and damage caused by the conduct, previous contravention and proportionality.
Step 3 — applying the statutory cap
- The statutory cap is calculated by reference to overall turnover of an undertaking, not the value of the kind of sales affected by the infringement.
- It is applied only towards the end of the process of assessment so as to ensure that the maximum is not exceeded, and not treated as part of the general considerations in arriving at the amount of the penalty in the first place.
Step 4 — applying cooperation reduction and considering plea of inability to pay
- The Tribunal is not bound by the Commission’s recommendation of a reduction for cooperation. The Tribunal may, however, properly have regard to the Commission’s recommendation bearing in mind the policy justifications.
- It is appropriate that the cooperation reduction is dealt with after applying the statutory cap, to ensure that even if the pecuniary penalty would already be limited by the statutory cap, there would still be a real benefit for someone to offer cooperation.
- To make out a case of financial hardship, it is necessary for the respondent in question to produce clear and comprehensive evidence of its financial position.
Following the hand down of this judgment, the Commission published its Policy on Recommended Pecuniary Penalties (“Policy”) on 22 June 2020, which outlines the general principles and methodology the Commission adopts when making recommendations to the Tribunal on the level of fines. The Policy sets out a 4-step approach which is in line with this Judgement. The Policy can be found here.