Court of Appeal hands down judgment on pecuniary penalties in Competition Commission v. W. Hing Construction Company Limited and Others [2022] HKCA 786

On 2 June 2022 the Court of Appeal handed down its judgment on the Competition Commission’s (“Commission“) appeal against pecuniary penalties imposed by the Competition Tribunal (“Tribunal“) against certain respondents.

One of the issues raised on appeal was whether the Tribunal erred discounting the pecuniary penalties imposed on certain respondents that did not directly engage in anti-competitive conduct. The respondents in question were construction and engineering contractor companies that had subcontracted the works on two public housing estates and let their Housing Authority licences to subcontractors who in turn were found to have entered into price-fixing and market sharing agreements in breach of the First Conduct Rule of the Competition Ordinance (Cap. 619) (“Ordinance“).

At first instance the Tribunal discounted the pecuniary penalties imposed on these respondents by one-third on the grounds that:

  1. the pecuniary penalty was sought only against the respondents and not the respondents together with their subcontractors;
  2. it would not be right or safe to assume that the respondents would be able to recoup all or part of the pecuniary penalty imposed from their subcontractors; and
  3. the pecuniary penalty imposed should reflect the role of the respondents as only part of their respective undertakings.

The Commission sought to set aside this discount on the basis that the Tribunal had erred on principle and taken irrelevant factors into account (or had failed to take account of relevant factors). The Commission contended that the pecuniary penalty must be specific to the undertaking and the undertaking’s contravention of the Ordinance, not to the natural or legal persons constituting the undertaking and/or their role within the undertaking.  Rather, each respondent along with their respective subcontractors formed a single economic unit or undertaking, and each undertaking as a whole infringed the First Conduct Rule.

The Court of Appeal held that it would be wrong in principle to reduce the penalty to reflect the extent of the respondents’ role as part of the undertaking. Where an undertaking contravenes the Ordinance, it is for the undertaking to answer for that infringement, and in this case the respondents and their subcontractors were to be jointly and severally liable for the infringement. Joint and several liability follows when an undertaking constituted by a number of natural and legal entities engage in anti-competitive conduct and facilitates the effective enforcement of the Ordinance. The Court of Appeal accepted that it would be highly onerous for the Commission to name all the entities within an undertaking in enforcement proceedings before the Tribunal in order to avoid any discount to the penalty.

The Court of Appeal allowed the Commission’s appeal, setting aside the one-third reduction and restoring the amount of pecuniary penalties to be paid by the respondents in full.

2 August 2022
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