On 6 September 2018, the Hong Kong Competition Commission (Competition Commission) filed its third legal action with the Hong Kong Competition Tribunal (Competition Tribunal) against three decoration contractors – Kam Kwong Engineering Company Limited (Kam Kwong), Goldfield N & W Construction Company (Goldfield), and Pacific View Engineering Limited (Pacific View), and two individuals in connection with the provision of decoration services to the owners of a newly constructed residential estate in Kowloon (Application).
It was the first time individuals (i.e. natural persons) were named as respondents in an enforcement action under the Hong Kong Competition Ordinance (Competition Ordinance), which has taken full effect since December 2015.
The Application alleged that the three contractors participated in an “Allocation Arrangement” under which they agreed to share potential customers by allocating among themselves specific flat units and floors of King Tai Court, a newly constructed residential estate in San Po Kong, Kowloon, between June and November 2017.
In addition to the Allocation Arrangement, it was also alleged that the contractors engaged in a “Price Coordination Arrangement” by which they shared information on the prices and decoration work items that each had included in its standard decoration packages. Such information was allegedly used in the promotional leaflets offered to the unit owners of King Tai Court (Leaflets).
According to the Application, the two named individuals were managers in charge of all the decoration work conducted by Kam Kwong and Pacific View at King Tai Court. Both individuals were alleged to have participated in the Allocation Arrangement described above. In addition, one of the individuals was alleged to have provided information in his standard decoration packages to the other individual, who in turn allegedly organised the printing of the Leaflets on behalf of all three contractors.
The Application alleged that the three contractors have contravened the First Conduct Rule under the Competition Ordinance by engaging in the alleged Allocation Arrangement and Price Coordination Arrangement. As the alleged arrangements are deemed “Serious Anti-Competitive Conduct” under the Competition Ordinance, the Competition Commission was not required to show evidence of anti-competitive effects before bringing legal proceedings against the infringing parties. With respect to the two individuals named in the Application, it was alleged that they have also violated the First Conduct Rule by their involvement in the alleged Allocation Arrangement and Price Coordination Arrangement.
The Application was the second enforcement action the Competition Commission brought against decoration contractors involved in the provision of residential decoration services under the Hong Kong Housing Authority’s Decoration Contractor System.
This recent action confirmed the Competition Commission’s previous public statements regarding bringing legal actions against additional firms suspected to have engaged in cartel activities in connection with the provision of decoration work services in public housing estates.
The Application also affirms the Competition Commission’s commitment and stated priority in fighting hard core anti-competitive conducts such as agreements to divide the markets and fix prices.