On 17 July 2020, the Competition Tribunal (the "Tribunal") handed down a decision in Competition Commission v Kam Kwong Engineering Company Ltd and Others  HKCT 3, for the enforcement actions initiated by the Competition Commission (the "Commission") against 3 decoration contractors and 2 individuals - in relation to provisions of decoration works in King Tai Court (as summarised in our previous issue in 2018). This is the first time that the Tribunal approved an application by the Commission with the respondents to dispose of proceedings following a settlement by consent.
Rule 39 of the Competition Tribunal Rules (Chapter 619D of the Laws of Hong Kong) (the "CTR") provides that:
"(1) if the parties have agreed on the terms of an order to be made by the Tribunal in any proceedings under Part 3 or 4, the agreed terms, signed by or on behalf of the parties, must be sent to the Tribunal for approval;
(2) the Tribunal may make an order by consent in those proceedings without or without hearing having regard to -
(a) the agreed terms; and
(b) any information submitted by the parties in support of those terms.
(4) Subject to this rule, Order 42 (except rule 5A) of the RHC applies to any proceedings under Part 3 or 4."
Also paragraph 72 of the Practice Direction No.1 of the Competition Tribunal (the "CTPD1") provides that:
"One of the underlying objectives of the procedures of the Tribunal is to facilitate the settlement of disputes. In particular, in respect of proceedings under Parts 3 and 4 of the Rules, rule 39 of the Rules provides power for the Tribunal to make orders by consent, including any findings, determinations or decisions and orders that are within the power of the Tribunal. Where the Ordinance provides the Tribunal may, upon being satisfied of certain facts, exercise a power, such as the imposition of a pecuniary penalty under s. 93 or other orders under s. 94, an application for such an order by consent should be accompanied by a statement of agreed facts on the basis of which the Tribunal is asked to make the order in question."
In this case, the Commission contends that the 1st, 2nd and 3rd respondents ("R1", "R2" and "R3") have contravened the First Conduct Rule (the "FCR") pursuant to section 6 of the Competition Ordinance (Cap 619) (the "Ordinance") and the 4th and 5th respondents ("R4" and "R5") have contravened section 91 of the Ordinance (being persons involved in contravention of the FCR).
By a settlement between the Commission and the respondents, to which R3 and R5 were not parties, R1, R2 and R4 agreed to admit their liability under the FCR. In this connection, by a consent summons, the Commission, R1, R2 and R4 jointly applied to the Tribunal to dispose of the proceedings by consent pursuant to rule 39 of the CTR. Accordingly, the Tribunal had to decide on 2 issues: (1) whether it is appropriate to adopt what is known as the Carecraft procedure, which allows the parties to submit a statement of agreed facts and proposed orders so as to dispense the need for a trial to determine the facts; and (2) whether it is appropriate to grant declarations by consent (often declarations by a court or tribunal is made after hearing the submissions and arguments of both parties).
Whether it is appropriate to adopt the Carecraft procedure
Mr Justice Harris ("Harris J") held that there are both juridical basis and justification in policy and practice in adopting the Carecraft procedure in the Tribunal. For juridical basis, rule 39 of the CTR provides that if the parties have agreed on the terms of an order to be made by the Tribunal, the Tribunal may make an order having regard to the agreed terms and information submitted by the parties.
As to justification in policy, the Carecraft procedure, which allows the Tribunal to dispense with a trial and reply upon the statement of agreed facts, was originated in the Insolvency Act 1986 of U.K. that is comparable to the enforcement of the Ordinance. In this connection, Harris J noted that the CTPD1 provides the underlying objective of an order by consent is to facilitate settlement of dispute. Citing UK, EU and Australian cases, Harris J was of the view that settlement procedure allows cases to be dealt with more expeditiously. Accordingly, it is in the interest of the public to provide a mechanism to facilitate settlement between the Commission and respondents.
Whether it is appropriate to grant declarations by consent
Given the facts stated in the Agreed Statements, Harris J found that R1 and R2 clearly contravened the FCR with the involvement of R4.
In terms of granting a declaration, the applicant must satisfy 3 requirements: (i) that he has a real interest in the subject matter of the declaration; (ii) that he has a real interest in obtaining a declaration against the adverse party; and (iii) that the adverse party is a proper contradictor. As such, Harris J held that the Commission as a regulator with a task of investigating anti-competitive market conduct has real interest in the outcome and the respondents are the proper contradictories.
Therefore, the Tribunal declared that R1 and R2 have contravened the FCR and R4 has contravened the FCR and section 91 of the Competition Ordinance.
The decision clarifies how the Commission may reach settlement with the respondents in the future, especially in cases where liability is not in dispute. This development of competition law further encourages settlement and incentivises the breaching parties to negotiate a consent order with the Commission in order to relieve the burden from going to a trial and to save time and costs. As a result, it is expected that the Carecraft procedure will be utilised more frequently in the Tribunal.
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