Hong Kong: Competition Litigation

The Competition Ordinance (Cap.619) (“CO”) provides for very limited scope for private competition damages claim. The CO only permits follow-on actions, as opposed to stand-alone actions, to be brought by a private party in respect of loss and damages suffered as a result of any “act that has been determined to be a contravention of a conduct rule” (section 110(1) of the CO).
An act is taken to have been “determined” to be a contravention of a conduct rule if (section 110(3) of the CO):-

• the relevant court or the Competition Tribunal (“CT”) has decided that the act is a contravention of a conduct rule; or
• a person has made an admission, in a commitment that has been accepted by the Hong Kong Competition Commission (“CC”), that the person has contravened a conduct rule.

The conduct rules under the CO are:-

• the first conduct rule, which prohibits agreements, concerted practices or decisions of association of undertakings that has the object or effect of preventing, restricting or distorting competition in Hong Kong (Part 2, Division 1).
• the second conduct rule, which prohibits undertakings with substantial degree of market power in a market from abusing that power by engaging in conduct that has the object or effect of harming competition in Hong Kong (Part 2, Division 2).

Stand-alone private actions were removed during legislative deliberations, details of which are explained in Question 25 below.

The plaintiff can bring a follow-on action by filing an originating notice of claim (Form 8 of the schedule of the Competition Tribunal Rules (Cap.619D) (“CTR”)) and a statement of claim (rule 93 of the CTR).

In particular, the originating notice of claim must specify the decision of the relevant court, the CT or the admission in a commitment (see Part 4, Division 1 of the CO) on which the plaintiff relies to establish a contravention of a conduct rule. The statement of claim must specify the particular part of the relevant decision or commitment which determines or admits that a relevant act is a contravention of a conduct rule.

As an originating document, the originating notice of claim is open to inspection by the public upon payment of a fee. Therefore, where the plaintiff wishes to maintain the confidentiality of any information contained in the statement of claim, the plaintiff may file the statement of claim and the originating notice of claim separately. Otherwise, the plaintiff may apply under rule 37 of the CTR for an order that the document be treated as confidential.

Under section 112 of the CO, the CT in a follow-on action may make any one or more of the relief specified in schedule 3 of the CO. The remedies include, amongst others, declaration of contravention by the defendant, prohibitory and mandatory injunction, modification or termination of contravening agreement and damages.

Hong Kong has not had an opportunity to consider these issues, however, it is anticipated that the measure of damages in a competition damages claim would be similar to other ordinarily principles in cases of torts, ie, that damages are generally compensatory and a plaintiff would be entitled to be put in the same position as he would have been in had the contravention of the conduct rule not occurred (counterfactual). The burden lies on the plaintiff to prove on the balance of probabilities that the damages sought to be recovered are foreseeable, caused by the contravention and not excluded from recovery by public or social policy.

Whilst the Hong Kong Court of Appeal in Competition Commission v W Hing Construction Co Ltd & Ors [2022] HKCA 786 recognised the application of the principle of joint and several liability in the context of calculation of pecuniary penalties in enforcement proceedings, it remains to be seen the extent to which such principle would apply in the context of competition damages claim.

Except with the leave of the court, a plaintiff can only initiate a competition damages claim after the expiry of the period within which appeals can be brought against the decisions of the specified courts and the CT; and if the appeals have been bought, until the determination of the same (section 111(1) of the CO). The Court of First Instance (“CFI”) or the CT may, on the application of the party seeking to bring proceedings, permit proceedings for a follow-on action to be brought despite the relevant period under section 111(1) of the CO has not expired yet (section 111(2) of the CO).

A plaintiff is barred from bringing such a claim more than 3 years after the earliest date on which the action could have been commenced following the expiry of the aforesaid period (section 111(3) of the CO).

Sections 108 of the CO provides that composite claims (which are claims consisting of claims based on the contravention of a conduct rule and other claims) to be brought in either the CFI or the CT. Section 109 of the CO provides that pure competition claims can only be brought in the CT.

In order to discourage “forum shopping” in which parties choose either the CFI or the CT to litigate depending on any perceived procedural advantages, sections 113 to 116 of the CO provide for a transfer mechanism, under which the decision as to whether a claim should be heard in the CFI or the CT would be made by the CFI/CT and not by the parties to the proceedings.

Under the aforesaid mechanism, the CT would have primary jurisdiction over competition matters. Pure follow-on claims would be considered by the CT. In the event that a composite claim is first brought in the CFI, the CFI would transfer all competition-related parts of the claim to the CT, and would retain those closely connected claims only if it is in the interests of justice to do so.

The first conduct rule and the second conduct rule capture conduct outside Hong Kong, so long as the same may prevent, restrict or distort competition in Hong Kong (see, respectively, sections 8 and 23 of the CO).

This is different from the position in the UK whereby the counterpart of the first conduct rule applies only if the agreement is, or is intended to be, implemented in the UK (see section 2(3) of the Competition Act 1998). Such an approach was considered not suitable for Hong Kong as the same would narrow the scope of the CO and undermine the competition authorities’ ability to tackle agreements or conduct which are not implemented in Hong Kong but nonetheless affect competition in Hong Kong.

The CO governs all competition damages claims in Hong Kong.

For private competition damages proceedings, the civil standard of proof on the balance of probabilities applies.

The CO provides for a judicial enforcement model through the establishment of the CC and the CT. In terms of enforcement work, the CC is tasked with the functions to investigate into competition-related complaints, and to bring public enforcement action before the CT in respect of anti-competitive conduct either on receipt of complaints, on its own initiative, or on referral from the Hong Kong government or a court (sections 130 to 131 of the CO). These are similar to functions carried out by the Broadcasting Authority and the Telecommunications Authority in the broadcasting and telecommunications sectors.

The CT has been set up within the Hong Kong judiciary as a superior court of record to hear and adjudicate on competition cases brought by the CC, private actions as well as reviews of determination made by the CC. Unlike its counterpart in the EU, the CC does not have power to take decisions finding infringement of the competition rules.

Hong Kong courts and the CT are not bound by decisions of foreign competition authorities. That said, Hong Kong courts and the CT have drawn frequently on foreign competition authorities, especially EU cases, when deciding novel points of competition law in Hong Kong: Competition Commission v Nutanix Hong Kong Limited [2019] HKCT 2, Competition Commission v W Hing Construction Company Limited [2019] HKCT 3, Taching Petroleum Company Limited and another v Meyer Aluminium Limited [2019] HKCT 1.

There is no bar in the CO against private damages action proceeding while related enforcement action is pending. However, in view of the absence of a stand-alone right of action under the CO, private damages action typically can only be brought after the conclusion of the related public enforcement action, and not while the same is pending.

There is no mechanism for class actions in Hong Kong. That said, the Rules of the High Court (Cap.4A) (“RHC”) provides for various mechanisms with features and objectives which enable claims to be made in a fashion similar to that of class actions.

Consolidation of competition damages claims can be made under Order 4 rule 9(1) of the RHC on the grounds that some common question of law or fact arises in both or all of them, or that the rights to relief claimed therein are in respect of or arise out of the same transaction or series of transactions, or that for some other reason it is desirable to consolidate the cases.

Further, under Order 15 rule 12 of the RHC, where numerous persons have the same interest in any proceedings, the proceedings may be begun and continued by or against any one or more of them as representatives of all or some of the others. A judgment or order given in representative proceedings under this rule shall be binding on all the persons represented in the claim, but shall not be enforced against any person who is not a party to the proceedings, except with the leave of the court.

The Hong Kong courts and the CT have yet to have an opportunity to consider these issues, as no competition damages ruling have been made as of the date of the drafting of these answers. Whether specific defences such as pass on applies, and if so the extent, remains to be seen.

Under Order 38, rule 6 of the RHC and paragraph 25(i) of the Competition Tribunal Practice Directions 1 (“CTPD 1”), the CT may give leave to adduce expert economic evidence. The test for granting leave is whether the expert evidence is relevant to the issues in dispute as disclosed from the pleadings.

Parties should usually be allowed to appoint their own experts, although the CT may order the parties to appoint a single joint expert. When separate experts are appointed, the CT may direct that there be a meeting “without prejudice” of such experts for the purpose of identifying those parts of their evidence which are in issue. Where such a meeting takes place, the experts may prepare a joint statement setting out the matters they agreed and those they have not agreed on, and the reasons for any non-agreement.

An expert witness has a duty to help the CT on matters within his expertise. This duty overrides any obligation to the person from whom the expert has received instructions or by whom he is paid.

An application to the CT is heard and determined by member(s) of the CT, which consist of all full-time judges of the CFI (sections 135(1) and 145(1) of the CO).

In terms of the treatment of evidence, the CT is not bound by the rules of evidence and may receive and take into account any relevant evidence or information, whether or not it would be otherwise admissible in a court of law (section 147 of the CO).

Rule 35 of the CTR states that the evidence of witnesses at the hearing of any proceedings may be taken orally on oath or affirmation, or by affidavit, declaration or otherwise as the CT thinks fit.

This would depend on a variety of factors, including the complexity of the case (e.g. volume of testimony and documentary evidence) and the number of interlocutory applications. According to paragraph 11 of the CTPD 1, the CT will indicate, as early as practicable, a target date or range of dates for the substantive hearing of a matter. Realistic timetables leading towards such date(s) will be laid down which are expected by the CT to be strictly observed.

Sections 154 and 155 of the CO sets out the procedures to be followed for appeals to the Court of Appeal. Subsequently, a further appeal can be made to the Court of Final Appeal either on (i) questions of general public importance or (ii) the Appeal Committee of the Court of Final Appeal deems that leave to appeal should be granted on the “or otherwise” basis (i.e. in effect, an exercise of residual discretion) (section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance (Cap.484)).

The CO does not provide any benefit for leniency recipients in the damages litigation context. Practically, however, as Hong Kong only has ‘follow on’ right of action, a leniency agreement will mean no enforcement against the leniency recipient, and therefore no “determinations of contraventions” from which victims can ‘follow-on’ in their damages claim.

The CO does not provide any benefit for leniency recipients in the damages litigation context. Practically, however, as Hong Kong only has ‘follow on’ right of action, a leniency agreement will mean no enforcement against the leniency recipient, and therefore no “determinations of contraventions” from which victims can ‘follow-on’ in their damages claim.

Section 153A(1) of the CO provides simple interest rate for pre-judgment interest and section 153A(4) further provides that such interest is to be calculated at a rate that the CT deems fit. Section 153A(6) of the CO allows the CT to adopt different rates for different periods in calculating interest.

Section 153B(1) provides that a judgment debt is to carry simple interest at a rate as determined by the CT or, in the absence of an order by the CT, at a rate determined by the Chief Justice.

As of the date of this Guide, the CT has yet to offer any guidance on how it would exercise its statutory discretion under the aforesaid provisions on the calculation of interest.

Provision is made for third party proceedings in rule 23 of the CTR.

In the context of enforcement proceedings, in Competition Commission v W Hing Construction Company Limited [2022] HKCA 786, the Court of Appeal confirmed that a third party may be joined by a respondent for the purpose of seeking indemnity and contribution against it, such that the findings of the CT in enforcement proceedings can bind the third party.

The position in the context of a damages claim (more particularly, a “follow-on” damages claim under the CO) remains to be seen.

Normal procedural mechanisms for the disposal of actions without trial, such as summary judgment and order for strike out of pleadings, also apply in the context of a competition damages claim. This is because, in the absence of an applicable rule in the CTR, the RHC also applies to competition damages claim, with modifications as necessary to fit a competition damages context (rule 4 of the CTR).

Practically however, as Hong Kong only has a “follow-on” damages regime (when only causation and quantum are in issue), the use of some of the relevant mechanisms may be limited. For example, in view of the usual complexity in the assessment of competition damages, it is fairly unlikely that any “follow-on” damages claim can be disposed of by way of summary judgment (provided for under Order 14 of the RHC).

The CO does not provide for any specific mechanism for the collective settlement of competition damages claims.

There is no automatic general discovery in proceedings in the CT. Parties may instead apply for general directions on discovery or apply for discovery and production of specific documents. However, even where a document is relevant, the CT may refuse to make an order having regard to all the circumstances of the case. These considerations may include the confidential nature of the information, the balance between the interests of the parties and other persons, and the extent to which the discovery is necessary for the fair disposal of the proceedings (rule 24 of the CTR).

The CT has jurisdiction to order disclosure against non-parties where it can be shown that the non-party is likely to have the relevant documents sought which are necessary either for fairly disposing of the matter or for saving costs (Order 24 rule 8 of the RHC).

Privileged documents are generally not discoverable. On the other hand, mere confidentiality would not justify restricting the access of a party to a document. In practice, the following methods are usually employed to protect confidentiality. An originating document filed in the CT is open to inspection by the public. Where a party wishes to keep confidential any information in such a document, he can apply to the CT in writing, specifying the information for which confidential treatment is requested.

“Confidentiality rings” are typically formed at the earlier stage of the proceedings, so that confidential information is to be disclosed only to certain individuals within a party or among its representatives. Members of a confidentiality ring are required to give confidentiality undertakings to limit any further disclosure of the confidential information as discovered to them.

Redaction of documents is another common method to protect confidentiality. Confidential treatment is only to be accorded to information that genuinely requires to be protected. In general, confidentiality cannot be claimed for the entire or whole sections of a document as it is normally possible to protect confidential information with limited redactions.

Whilst trials in the CT should generally be heard in open court, the CT has discretion to direct that a confidential matter be heard in camera.

Confidential materials are also typically excised from judgments.

Yes. Costs normally follow the event, although the courts and CT may make some other order as to the whole or any part of the costs, depending on the circumstances of the case. The rules on costs under Order 62 of the RHC also applies to competition damages claims.

Circumstances relevant to the determination of an award of costs may include, among other matters:-

• Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
• The manner in which a party has pursued or defended his case or a particular allegation or issue;
•  Whether a plaintiff who has succeeded in his claim, in whole or in part, exaggerated his claim; and
•  Conduct before, as well as during, the proceedings.

Consideration on costs issue in terms of a party’s treatment of a particular allegation or issue does not only apply for a substantive competition damages trial, but also interlocutory proceedings too.

No. In Hong Kong, third parties are generally not permitted to fund any form of litigation. Depending on its form and purpose, such funding may either constitute maintenance or champerty. In Winnie Lo v HKSAR (2012) 15 HKCFAR 16, the Court of Final Appeal defines them as follows:

•  Maintenance: Wanton and officious intermeddling with the disputes of others in which the maintainer (i.e. the funder) has no interest whatsoever, and where the assistance he renders to any party to the litigation is without justification or excuse.
• Champerty: A form of maintenance which occurs when the person maintaining another takes as his reward a portion of the property or sums in dispute, if the action succeeds.

Lawyers in Hong Kong are not permitted to act on a contingency or conditional fee basis as it may constitute champerty. Champerty is a form of maintenance, and occurs when the person maintaining another takes as his reward a portion of the property in dispute.

Although maintenance and champerty has been abolished in various common law jurisdictions (including the UK), it remains to be a criminal offence in Hong Kong.

Contingency or conditional fee arrangement is also prohibited under the Hong Kong Bar Code and the Hong Kong Solicitors’ Guide to Professional Conduct.

As explained above in Questions 1 and 10, a victim who has suffered loss and damage as a result of another’s contravention of a conduct rule can only bring a “follow-on” action against the contravener. Unlike other common law jurisdictions, a victim in Hong Kong does not have the liberty to commence a stand-alone damages claim. Practically speaking, a private damages claim generally can only be commenced after a successful public enforcement action has been brought by the competition authorities.

Enforcement agencies, however, are typically constrained by budget and manpower. This can lead to a bottleneck in private damages claims due to competition authorities having to deal with a backlog of public enforcement cases, before there can be “determinations” of contravention which would enable a “follow-on” action to be brought. In a similar vein

Likewise, the conclusion of investigations by way of leniency agreement further reduces the number of “determinations” of contraventions, and in turn “follow-on” actions by private parties.

In a different vein, in enforcement proceedings, competition authorities have to prove their cases on the criminal standard of proof, which is higher than the civil (or commensurate) standard that typically applies in stand-alone damages claims overseas. The higher standard of proof in enforcement proceedings may mean fewer successful public enforcement actions, and in turn fewer “determinations of contraventions” from which victims can “follow-on” in their private claim(s) against the contravener.

Looking forward, it is hopeful that a stand-alone right of action can be reintroduced in Hong Kong.

The original Competition Bill provided for private actions to be brought by persons who have suffered loss and damages as a result of a contravention of a conduct rule. However, such a stand-alone right of action was eventually removed as a result of a compromise by the Government and small and medium enterprises (“SMEs”). During the legislative stages of the Bill, SMEs expressed concerns that large companies could make use of a stand-alone right of private action to harass SMEs. They were worried that larger companies, which had more resources, could resort to or threaten litigation as a means to drive out or affect the business of smaller competitors.

To reduce the anxiety and concerns of SMEs, the government considered that “a gradual approach” should be adopted, such that at the initial stage, enforcement would be carried out by the CC, supplemented by the follow-on right of action for determined contraventions. As the business community acquired more experience with the new competition regime, “a stand-alone right of action might be introduced”. The government also said it would review the need to introduce the stand-alone right of private action “in a few years’ time”.

As of the date of the drafting of these answers, more than 8 years have passed since the CO came into full effect on 14 December 2015. The need to review the appropriateness of stand-alone right of private action is therefore overdue. Given the general consensus that private enforcement can complement public enforcement by increasing deterrence and providing compensation, it is hoped that the government will review the competition law regime and introduce the stand-alone right of action soon.