Hong Kong competition law enforcement update: Key developments and business takeaways (2024 – Q1 2025) – Part 3 of 3

Part 3: Significant progress at adjudicative level

1. First judicial challenge to the Commission’s application of Undertaking Leniency Policy

Background

The Hong Kong Competition Commission’s (the “Commission”) Leniency Policy for Undertakings Engaged in Cartel Conduct (“Undertaking Leniency Policy”) exempts the first undertaking from proceedings before the Hong Kong Competition Tribunal (the “Tribunal) for self-reporting its involvement in a cartel or providing substantial assistance to the Commission’s investigation.

A marker system determines the queue based on the date and time the Commission is contacted.¹1 2024 marked the first challenge brought by an undertaking in a prosecuted cartel activity about the Commission’s application of this policy.

In November 2023, the Commission brought Midland Realty International Limited (“Midland Realty”), Hong Kong Property Services (Agency) Limited (“HK Property”), their parent company Midland Holdings Limited (collectively, “Midland”), and five senior management members before the Tribunal for allegedly violating the First Conduct Rule (“FCR”) of the Competition Ordinance (“Ordinance”).

The Commission claims that Midland and its competitor Centaline Property Agency Limited and Ricacorp Properties Limited (collectively, “Centaline”) colluded to fix a minimum net commission rate – the commission paid by developers to agencies, minus rebates offered to end customers – for residential property sales in Hong Kong, with an effect of restricting the maximum rebates that agents from Midland and Centaline could offer to home buyers.²2

The Commission clarified that Centaline was exempt from potential penalties under its Undertaking Leniency Policy, as it was the first to provide substantial assistance in the investigation and subsequent enforcement action.

On 18 March 2024, Midland filed judicial review proceedings challenging the Commission’s application of the Undertaking Leniency Policy. Midland claimed it had applied for a leniency marker on 13 March 2023 – earlier than Centaline’s application on 4 May 2023 – but was informed that no marker was available.³3

Midland argued it was “first in line” and should have been given an opportunity to assist the Commission, potentially securing immunity from enforcement actions.⁴4

Review Undertaking Leniency Policy on “availability of leniency marker”

The first step in obtaining leniency is to secure a leniency “marker”, which gives the holder eligibility for leniency in relation to cartel conduct. A leniency marker may be unavailable if:

1. Another undertaking has already secured the marker for the same cartel conduct
2. The applicant is a ringleader
3. The applicant is not the first cartel member to disclose its participation in a cartel that the Commission has not yet assessed or investigated (Type 1 Leniency); or cannot, in the Commission’s view, provide substantial assistance in an on-going investigation (Type 2 Leniency); or
4. The Commission’s preliminary assessment determines that the conduct is not cartel conduct.

The Tribunal’s eventual decision on the judicial review initiated by Midland is expected to clarify how companies can seek leniency under the Commission’s policy, offering important guidance for businesses seeking leniency in cartel investigations.

The substantive trial against Midland has been delayed until August 2025, pending the outcome of its judicial review.

2. Important lessons on cooperation discount determination: insights from recent cartel cases

The Commission’s Cooperation and Settlement Policy for Undertakings Engaged in Cartel (“Cooperation Policy”)⁵5 offers businesses involved in cartels an opportunity to reduce penalties when they cannot qualify for full leniency. This policy establishes three tiers of cooperation discounts:

Table 1: Recommended Discounts under Cooperation Policy

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Two recently concluded cases provide important insights on the applicability of cooperation discounts in the Cooperation Policy:

Case 1: The D-Biz cartel

In June 2024, the Tribunal made a significant ruling against respondents for cartel conduct in a government-subsidised IT tender, followed by a judgment made on 30 July 2024.⁶6

Background

The case originated from the COVID-19 era’s Distance Business Programme (“D-Biz”) government subsidy programme. The investigation began in June 2020 when the Hong Kong Productivity Council referred suspicious procurement complaints to the Commission. After analysing application data and gathering evidence, the Commission identified unusual bidding patterns suggesting price-fixing, market-sharing, bid-rigging and information sharing in violation of the FCR of the Ordinance.⁷7

In March 2023, the Commission initiated proceedings to the Tribunal targeting multiple respondents, including Multisoft Limited and its parent company MTT Group Holdings Limited (collectively, “Multisoft”), BP Enterprise Company Limited and Noble Nursing Home Company Limited (together, “BP/Noble”), KWEK Studio Limited (“KWEK”), and individuals including a sole proprietor and her business trading as Yat Ying Hong (“Yat Ying”), a representative of Yat Ying and BP/Noble, and a director and shareholder of KWEK.⁸8

Four respondents settled, while the remaining two were found liable in absentia for failing to respond to the Commission’s proceedings.⁹9

How cooperation discounts were applied¹⁰10

Table 2: Discount Application in Multisoft Case

Please click on the superscript number ¹¹11 for details of the corresponding remark in the table.

View the table in actual size

Case 2: The cleaning service cartel

On 20 January 2025, the Tribunal issued orders against respondents in another significant case involving cleaning services, with a judgment made on 14 February 2025.¹²12

Background

On 14 December 2021, the Commission initiated proceedings against five respondents: two companies – Hong Kong Commercial Cleaning Services Limited (“HKC”) and Man Shun Hong Kong & Kln Cleaning Company Limited (“MS”) – and three directly involved individuals (two directors from HKC (holding 22% and 78% of HKC’s shares, respectively), and one director from MS (holding 30% of MS’s shares).¹³13

The case involved the exchange of commercially sensitive information between the two companies from May 2016 to August 2018. This exchange related to 17 tenders submitted to the Hong Kong Housing Authority for cleaning services at public housing estates and other buildings, resulting in price-fixing that violated the FCR.

In January 2024, MS and its director admitted liability, followed by HKC and its two directors in December 2024.¹⁴14

How discounts were applied

Table 3: Discount Application in HKC Case

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Key takeaways

1. Leveraging the Cooperation Policy: When leniency is not available, companies should consider cooperating with the Commission as early as possible to secure higher discounts. By conforming to the first undertaking – to express interest in cooperation before the Commission has secured substantial evidence and before the initiation of proceedings – it is possible to benefit from a Band 1 discount.
2. Financial circumstances matter: Companies facing financial challenges should provide solid evidence to support a request for additional discount based on financial viability.
3. Respond promptly to Commission’s proceedings: Failing to respond to the Commission’s proceedings can lead to default judgments under Rule 76 of the CTR, likely resulting in maximum penalties without any discounts.
4. Cooperation from individuals is encouraged: While the four-step approach and Cooperation Policy do not apply to individuals, cooperation from individuals may still obtain discounts at the Commission’s discretion.
5. Dual role of directors impacts fines: If a director is also a shareholder and the company is fined, the director’s guarantee to cover the penalty may result in a lower personal fine.
6. Director disqualification risk: Directors involved in misconduct are highly likely to face a disqualification order.

3. First criminal conviction in competition realm

In a landmark development for Hong Kong’s competition law regime, the Commission secured its first criminal prosecution and conviction of an individual for obstructing an investigation in February 2025.¹⁵15

This significant case originated from the above-mentioned cleaning cartel case – where during the 2021 raid, an employee attempted to delete electronic evidence from company computers.

The case was brought for plea before West Kowloon Magistrates’ Court on 29 August 2024 and the individual was jailed for two months, sending a clear message about the serious consequences of interfering with regulatory investigations.¹⁶16

Commission’s investigative authority

The Commission wields substantial powers when investigating potential Ordinance violations. Obstructing these investigations can lead to serious criminal offenses:

Table 4: Investigative Powers and Associated Offences

The Ordinance does not limit its offences solely to individuals. However, imprisonment penalties typically apply to individuals directly responsible for violations.

Global context and lessons

This case echoes a global trend of strict enforcement against investigation obstruction:

Mainland China:

In a 2019 investigation in Shandong Province, three affiliated pharmaceutical companies faced scrutiny for suspected abuse of market dominance. Employees from two of these companies not only lied about lost evidence and deleted computer documents but also organised resistance and violently obstructed the competition authority investigation.¹⁸18

As a result, the companies involved in obstruction received severe penalties: fines of 10% (the statutory maximum) and 9% of their previous year’s turnover, respectively. The third company, which did not obstruct the investigation, still received a 7% fine. The significant difference in penalties suggests that the obstruction aggravated the punishment for the offending companies.

For the obstruction itself, the companies each faced an additional fine of RMB 1 million (c. US$138,888), while individual employees received separate penalties ranging from RMB 20,000 (c. US$2,777) to RMB 100,000 (c. US$13,888).¹⁹19

EU:

Another recent example involved International Flavors & Fragrances Inc. and its affiliate (collectively, “IFF”) obstruction of European Commission (EC) raids in relation to a suspected cartel. During the inspection, an IFF employee intentionally deleted WhatsApp messages containing commercially sensitive information exchanged with a competitor after noticing the inspection.

However, upon EC’s discovery, IFF quickly acknowledged the misconduct, cooperated with EC to recover the deleted data, and accepted liability for the infringement. Due to IFF’s proactive cooperation, EC imposed a materially reduced fine by 50% of EUR 15.9 million (c. US$17.1 million), representing 0.15% of IFF’s total turnover, despite the initial severity of the obstruction.²⁰20

Key takeaways

1. Severe consequences: Authorities across jurisdictions are demonstrating zero tolerance for obstruction, with penalties including imprisonment, substantial corporate fines and individual liability.
2. Cooperation is key: When facing an investigation, full cooperation with authorities is the prudent approach. Attempts to conceal or destroy evidence invariably worsen outcomes.
3. Mitigation strategy: If compliance failures have occurred, prompt admission, active cooperation with authorities and implementation of corrective measures may significantly reduce penalties, as demonstrated in the EU case.
4. Training is important: Companies should ensure all employees understand competition law requirements and proper conduct during regulatory investigations to prevent costly missteps.

4. Going forward

Looking ahead, it is anticipated that enhanced cooperation between Hong Kong and Mainland China – particularly within the Greater Bay Area – is likely to intensify, alongside increased regulatory focus on small and medium-sized enterprises. It is also expected the Commission will broaden its scope to include cross-border businesses operating internationally or in both the Mainland and Hong Kong

More ongoing cartel cases are expected to be resolved, and scrutiny and investigations will persist in traditional sectors and likely expand into emerging sectors such as digital platforms, artificial intelligence and other innovative industries, potentially revealing new forms of collusion. Additionally, cases under the Second Conduct Rule are anticipated to surface. The Commission is also expected to closely track global antitrust enforcement trends and assess any related cases that may be of relevance to Hong Kong.

We strongly recommend that companies operating in Hong Kong proactively monitor developments in competition law and implement robust compliance programmes. Adhering to the Ordinance, as well as the Commission’s policies, enforcement practices and guidelines, will be critical to avoiding potential violations.