Immunity, Sanctions & Settlements

Last verified on Thursday 21st June 2018

Hong Kong

Philip F Monaghan and Charles Paillard
O'Melveny & Myers

    Immunity or a 100 per cent reduction in sanctions

  1. 1.

    What benefits are available to the first applicant to qualify?

  2. Under its Leniency Policy for Undertakings Engaged in Cartel Conduct (Leniency Policy), the Hong Kong Competition Commission (HKCC) undertakes not to commence or continue proceedings before the Competition Tribunal for a pecuniary penalty against the first qualifying cartel member to self-report. This represents 100 per cent immunity from pecuniary penalties.

  3. 2.

    Do the protections extend to current and former officers, directors and employees?

  4. Under the Leniency Policy, the HKCC may conclude a leniency agreement with an undertaking cooperating in an investigation or in proceedings under the Competition Ordinance (CO). Undertakings include natural persons, corporations or partnerships engaged in an economic activity. A leniency agreement concluded with an undertaking ordinarily extends leniency (immunity from pecuniary penalties) to any current employee or officer of that undertaking on condition that they provide complete, truthful and continuous cooperation to the HKCC. The Leniency Policy states that leniency will also extend to any agent, former officer or former employee of the undertaking provided the leniency agreement specifically mentions them by name and they cooperate with the HKCC.

  5. 3.

    Is immunity available after an investigation begins?

  6. Yes. The HKCC may enter into a leniency agreement even after opening an investigation (including where the HKCC has already used its formal investigative powers). While the Leniency Policy explicitly provides that leniency ‘may be available’ in this context, the suggestion is, however, that the HKCC may determine that leniency is not available unless the leniency applicant is in a position to bring some new facts or material to the attention of the HKCC. Leniency also remains technically available after the initiation of proceedings, but the circumstances would need to be exceptional.

  7. 4.

    What are the eligibility requirements before an investigation begins?

  8. Leniency (full immunity) is available only in respect of cartel conduct contravening the First Conduct Rule (FCR) in the CO. Only an undertaking (any entity, including a natural person, engaged in an economic activity) may apply for leniency under the Leniency Policy. Leniency is generally available only for the first undertaking that reports the cartel to the HKCC and meets all the requirements for leniency under the Leniency Policy. If an undertaking meets all the conditions for leniency under the Leniency Policy, the HKCC will enter into an agreement with the undertaking not to take proceedings against it for a pecuniary penalty in exchange for its cooperation in the investigation of the cartel conduct and subsequent prosecution of the other parties to the cartel. As a condition of leniency, the undertaking receiving leniency must agree to and sign a statement of agreed facts admitting to its participation in the cartel on the basis of which the Competition Tribunal may be asked jointly by the HKCC and the leniency applicant under Rule 39 of the Competition Tribunal Rules (Cap 619D) (CTR) to make an order under section 94 CO declaring that the leniency applicant has contravened the FCR by engaging in the cartel.

  9. 5.

    What are the eligibility requirements after an investigation begins?

  10. The Leniency Policy does not provide for different eligibility criteria in this context. However, although the Leniency Policy provides that leniency ‘may be available’ after an investigation has begun, the suggestion is that the HKCC may determine that leniency is not available unless the leniency applicant is in a position to bring some new facts or material to the attention of the HKCC.

  11. 6.

    Will the applicant have to admit to a violation of law?

  12. The undertaking receiving leniency is required to agree to and sign a statement of agreed facts admitting to its participation in the cartel. Whether this amounts to admitting a violation of the law is debatable. The Leniency Policy provides that the HKCC will not require the leniency applicant to comply with this condition in circumstances where the HKCC decides not to commence proceedings against any other persons engaged in the cartel conduct.

  13. 7.

    Are ringleaders or initiators of the conduct eligible?

  14. Yes. Leniency is not, however, available for undertakings that have coerced parties to engage in the cartel conduct.

  15. 8.

    When must the applicant terminate its involvement in the conduct?

  16. On entering into a leniency agreement, the undertaking is required to confirm it has taken prompt and effective action to terminate its involvement in the cartel unless the HKCC has consented to its continued participation in the cartel. The HKCC may consent to continued participation for operational reasons.

  17. 9.

    What constitutes termination of the conduct?

  18. The Leniency Policy does not provide guidance on the meaning of ‘prompt and effective action to terminate’ a party’s involvement in a cartel.

  19. 10.

    Will the applicant be required to make restitution to victims?

  20. The undertaking receiving leniency will be required to agree to and sign a statement of agreed facts admitting to its participation in the cartel on the basis of which the Competition Tribunal may be asked to make an order declaring that the applicant has contravened the FCR in the CO. Under section 110(1) CO, a person who has suffered loss or damage as a result of any act that has been determined to be a contravention of a conduct rule has a right of action against any person who has contravened a conduct rule, including the FCR. Accordingly, a successful applicant for leniency may be sued for damages. The Leniency Policy provides that the HKCC will not seek an order from the Competition Tribunal declaring that the applicant has contravened the FCR where the HKCC decides not to commence proceedings against any other persons engaged in the cartel conduct. Further, even where the HKCC decides to initiate proceedings against the other cartel participants it may be willing to discuss with the leniency applicant the appropriate timing for any application to the Competition Tribunal for an order against the applicant to ensure that the leniency applicant is not worse off relative to the other parties to the cartel. For example, the HKCC may be willing to postpone the seeking of an order against the applicant until after proceedings against the other parties in the Competition Tribunal have been brought to a successful conclusion.

  21. 11.

    Can more than one applicant qualify for immunity?

  22. In principle, yes. The HKCC retains a discretion to grant full immunity to any number of parties. However, the Leniency Policy clarifies that absent exceptional circumstances, the HKCC would not enter into a leniency agreement with more than one cartel member in a given case. Accordingly, only the first leniency applicant can expect full immunity through leniency under the Leniency Policy. Other undertakings party to the same cartel may be in a position to secure a cooperation benefit where the HKCC recommends to the Competition Tribunal a reduced pecuniary penalty.

  23. 12.

    Can an applicant qualify if one of its employees reports the conduct to the authority first?

  24. In principle, yes – so long as the other conditions for leniency are satisfied including that the applicant is the first undertaking to report the cartel to the HKCC. Nonetheless, while the Leniency Policy provides that leniency may be available even if the HKCC has already begun an investigation, the suggestion is that the HKCC may determine that leniency is not available unless the leniency applicant is in a position to bring some new facts or material to the attention of the HKCC.

  25. 13.

    Does the afforded protection extend to any non-antitrust infringements?

  26. Section 80 CO provides that the HKCC may, in exchange for a person’s co-operation in an investigation or in proceedings, make a leniency agreement with the person that it will not bring or continue proceedings under the CO for a pecuniary penalty in respect of an alleged contravention of a conduct rule in the CO. The conduct rules cover only antitrust law contraventions. However, it is likely that the HKCC will not positively report a leniency applicant to any other public authority absent some legal obligation to do so.

  27. 14.

    What confidentiality assurances are given to the first applicant to report?

  28. A general obligation of confidentiality binds the HKCC under section 125 CO (subject to certain exceptions under section 126 CO where there is lawful authority to disclose, eg, pursuant to an order of the Competition Tribunal or any other court). In addition, the Leniency Policy provides that the HKCC will use its best endeavours to appropriately protect all ‘leniency material’ (defined in the Leniency Policy at ¶5.6 to mean ‘any confidential information provided to the [HKCC] by a leniency applicant for the purpose of making a leniency application and/or pursuant to a leniency agreement; and the [HKCC]’s records of the leniency application process, including the leniency agreement’). The Leniency Policy states that it is the HKCC’s policy not to release ‘leniency material’ and to firmly resist, on public interest or other applicable grounds, all requests for ‘leniency material’ unless (i) the HKCC is compelled to make a disclosure by court order, by law or any requirement made by or under a law; (ii) the HKCC has the consent of the leniency applicant to disclose the material; (iii) the relevant information or document is already in the public domain; or (iv) the HKCC has terminated the leniency agreement under section 81 of the CO.

  29. 15.

    Does the authority publish guidance regarding the application of the programme?

  30. The Leniency Policy is available on the HKCC’s website at: https://www.compcomm.hk/en/legislation_guidance/policy_doc/files/Leniency_Policy_Eng.pdf

  31. 16.

    Do the rules for obtaining immunity in your jurisdiction conflict with the immunity rules in other jurisdictions?

  32. The Leniency Policy is consistent with international best practice. In terms of the requirement that absent a consent from the HKCC the applicant must take prompt and effective action to terminate its involvement in the cartel, the HKCC notes that it may consent to the undertaking’s continued participation in the cartel so as to avoid ‘tipping-off’ other cartel participants to the fact of the HKCC’s investigation or to assist in investigations by competition authorities in other jurisdictions. The Leniency Policy states that undertakings who are cooperating with the HKCC as a party to a leniency agreement will be expected to provide the HKCC with details of the other jurisdictions where they have sought immunity or leniency and an indication of the ongoing status of their application in those jurisdictions. In appropriate cases, the HKCC may require a leniency applicant to authorise the HKCC to exchange confidential information with authorities in other jurisdictions so as to facilitate cross-border cooperation between investigating competition authorities and to avoid conflicting regulatory outcomes.

    Immunity application and marker process

  33. 17.

    What is the initial process for making an application?

  34. A leniency applicant may apply to the HKCC for a marker by calling the HKCC’s Leniency Hotline (+852 3996 8010). A leniency applicant, or its legal representative, may also initially call the HKCC to enquire whether a marker is available for particular conduct prior to requesting a marker. Enquiries of this kind may be made on an anonymous basis. However, a marker will not be granted on the basis of anonymous enquiries.

  35. 18.

    What information is required to secure a marker?

  36. To obtain a marker, an undertaking must provide sufficient information to identify the conduct for which leniency is sought. This includes, at a minimum:

    • information concerning the identity of the leniency applicant;
    • information on the nature of the cartel (the products and services involved);
    • information on the main participants in the cartel; and
    • the contact details of the party reporting the cartel.
  37. 19.

    How much time will an applicant have to perfect its marker?

  38. The HKCC will require the undertaking to complete its proffer within a specified period but ordinarily within 30 calendar days of being notified that leniency is available and that the undertaking may make an application for leniency. Note, therefore, that this 30-day timeline (or other stipulated timeline) would not start to run from the date of the marker application but from the date the undertaking is notified by the HKCC that it may make an application for leniency by way of a proffer.

  39. 20.

    Can the deadline for perfecting the marker be extended?

  40. Yes. The HKCC may grant an extension of time to complete the proffer. In considering requests for an extension, the HKCC will have regard to the efforts already made by the leniency applicant to comply with the original deadline imposed by the HKCC. The HKCC will be less likely to grant an extension where delay risks impeding its investigation.

  41. 21.

    What is required to perfect the marker?

  42. After granting a marker, the HKCC will make a preliminary determination as to whether the reported conduct is cartel conduct and whether leniency is available in respect of the conduct. Once the HKCC has made these determinations, it will notify the undertaking with the highest ranking marker that it may make an application for leniency by way of a proffer (thereby perfecting its marker). The proffer may be made orally or in writing. The proffer can also be made in hypothetical terms or on a ‘without prejudice basis’ but must include:

    • a detailed description of the cartel;
    •  a detailed description of the undertakings involved;
    •  a detailed description of the role of the leniency applicant in the cartel;
    • a timeline for the conduct; and
    • a description of the evidence the leniency applicant can provide to substantiate the application for leniency.

    The proffer must also explain how the reported cartel affects/relates to competition in Hong Kong (the jurisdictional nexus) and provide an estimate of the value/volume of sales affected by the cartel in Hong Kong. After considering the initial proffer, the HKCC may ask the leniency applicant to provide access to evidence or to witnesses in support of the proffer. Information of this nature provided at the proffer stage will not be used as evidence in proceedings for a finding of a contravention of the FCR against the applicant or any other party.

  43. 22.

    Can the scope of the marker be expanded if additional information is discovered by the applicant?

  44. Yes, although the Leniency Policy does not explicitly provide as much and the position may need to be considered case by case. Generally, the HKCC will need to make a determination as to whether the additional information relates to the previously reported cartel or whether it concerns separate conduct. In practice, where there have been no intervening applications for leniency from other parties, it may be easier for the HKCC to treat the additional information as part of the original application.

  45. 23.

    Can an applicant lose its marker if a second applicant comes forward with better information?

  46. No. The HKCC will assess whether to make an offer to enter into a leniency agreement based on the proffer. The Leniency Policy provides that the HKCC will make an offer to enter into a leniency agreement once the HKCC concludes that the applicant has demonstrated its capacity to provide full and truthful cooperation and the requirements of the Leniency Policy are satisfied. If, however, an undertaking fails to complete its proffer within the timeframe specified by the HKCC, or any extension to it as might be agreed by the HKCC, the Leniency Policy provides that the undertaking’s marker will lapse. The next undertaking in the marker queue may then be invited by the HKCC to make an application for leniency. While the Leniency Policy is silent on the point, if an applicant otherwise fails to perfect its marker, presumably the next undertaking in the marker queue may be invited to apply for leniency. The Leniency Policy explicitly provides that where a leniency agreement is terminated, the HKCC will consider inviting the next undertaking in the marker queue to apply for leniency

  47. 24.

    What if the applicant’s investigation reveals that no violation exists?

  48. A leniency applicant may decide to withdraw its application at any time prior to entering into a leniency agreement with the HKCC. If an applicant decides not to pursue an application at the proffer stage, the HKCC will return any information which might have been provided by the applicant. However, the HKCC may later compulsorily require production of the same information using its statutory powers to obtain documents and information. The Leniency Policy is silent on whether an undertaking can withdraw from a concluded leniency agreement. The template leniency agreement annexed to the Leniency Policy is also silent on this. Absent an agreed termination with the HKCC, it is likely that a unilateral withdrawal would be considered a breach of the leniency agreement triggering a right on the part of the HKCC to terminate. If the leniency agreement is terminated, the HKCC may retain whatever information has been provided by the applicant and later use that information in evidence against the leniency applicant or any other undertakings.

  49. 25.

    What if the authority decides not to investigate?

  50. If the HKCC decides not to investigate, it will advise the leniency applicant. Information provided by that party at the proffer stage will be returned to it where no leniency agreement has been entered into. The Leniency Policy is silent on whether the marker might remain valid thereafter. The template leniency agreement annexed to the Leniency Policy does not specifically provide for termination in the event that the HKCC decides not to investigate. The HKCC and the applicant might, however, agree to terminate the leniency agreement in that scenario. The HKCC may not terminate a leniency agreement unilaterally.

    Immunity cooperation obligations

  51. 26.

    What is the applicant required to produce?

  52. If the HKCC determines that the applicant meets the conditions for leniency under the Leniency Policy following the proffer, the applicant will be asked to sign a leniency agreement in the form of the template leniency agreement annexed to the Leniency Policy. The leniency agreement requires the applicant to confirm that it has provided and will continue to provide full and truthful disclosure to the HKCC and that it will provide continuing cooperation, at its own cost, to the HKCC including in proceedings against other undertakings that engaged in the cartel conduct. On signing the leniency agreement, the leniency applicant is required to supply the HKCC with all non-privileged information and evidence in respect of the cartel.

  53. 27.

    Will the applicant be required to make a written confession?

  54. A leniency applicant must, to the satisfaction of the HKCC, agree to and sign a statement of agreed facts admitting to its participation in the cartel on the basis of which the Competition Tribunal may be asked jointly by the HKCC and the applicant to make an order declaring that the applicant has contravened the FCR in the CO by engaging in the cartel. See also the answer to question 10.

  55. 28.

    Can third parties obtain access to the materials provided by the applicant?

  56. As noted in the answer to question 14, the Leniency Policy provides that the HKCC will use its best endeavours to appropriately protect all ‘leniency material’ (defined in the Leniency Policy at ¶5.6 to mean any confidential information provided to the HKCC by a leniency applicant for the purpose of making a leniency application and/or pursuant to a leniency agreement and the HKCC’s records of the application process, including the leniency agreement itself). The Leniency Policy explicitly states that it is the HKCC’s policy not to release ‘leniency material’ and to firmly resist, on public interest or other applicable grounds, all requests for ‘leniency material’ unless (i) the HKCC is compelled to make a disclosure by court order, by law or any requirement made by or under a law; (ii) the HKCC has the consent of the leniency applicant to disclose the material; (iii) the relevant information or document is already in the public domain; or (iv) the HKCC has terminated the leniency agreement under section 81 of the CO.

  57. 29.

    Will the applicant lose its protection if one or more of its employees refuses to cooperate?

  58. In principle, if the undertaking party to the leniency agreement remains in a position to continue in compliance with its obligations under the leniency agreement (or the conditions for leniency in the case where a leniency agreement has not been concluded), then the HKCC may be willing to carve out the non-cooperating employees. This seems to be the implication of the wording in the preamble to the Leniency Policy where the HKCC explains that where an undertaking enters into a leniency agreement, the leniency ordinarily extends to any current officer or employee of the undertaking ‘where the relevant individuals provide complete, truthful and continuous cooperation with the Commission throughout its investigation and any ensuing proceedings’. Section 81 CO, which governs termination of a leniency agreement, provides only that non-cooperation on the part of the undertaking party to the leniency agreement is a ground for termination. Difficult questions may therefore arise as to when non-cooperation by employees can be equated with non-cooperation by the undertaking itself.

  59. 30.

    Will the applicant lose its protection if one of its employees engages in obstructive conduct before or after the application?

  60. In principle, if the undertaking party to the leniency agreement remains in a position to continue in compliance with the conditions for leniency (notably as regards cooperation) or its obligations under the leniency agreement (if one has been agreed), then the HKCC may be willing to carve out the relevant employee. If a leniency agreement has already been concluded, section 81 CO provides that the HKCC may terminate the agreement if:

    • it has reasonable cause to suspect that the information on which it based its decision to enter into the leniency agreement was incomplete, false or misleading in a material particular
    • the leniency applicant has been convicted of an offence under Part 3 CO, for example, because it destroyed or falsified documents or obstructed a search by the HKCC or
    • it is satisfied that the other party to the leniency applicant has failed to comply with the terms of the leniency agreement.

    The CO does not provide for the termination of a leniency agreement for obstruction by a single employee unless that employee’s conduct can be attributed to the undertaking.

  61. 31.

    Will the applicant be required to provide materials protected by attorney-client privileges or work-product doctrine?

  62. No. The template leniency agreement annexed to the Leniency Policy specifically requires that only non-privileged information relating to the cartel need be provided to the HKCC, excluding therefore communications covered by legal professional privilege. Under Hong Kong law, this covers the advice of an in-house lawyer in addition to communications with external legal counsel. The work-product doctrine is not part of Hong Kong law as such.

    Granting immunity

  63. 32.

    How does the authority announce its promise not to charge or sanction?

  64. By entering into a leniency agreement with the leniency applicant, the HKCC agrees not to bring proceedings before the Competition Tribunal for a pecuniary penalty under section 93 CO or any other proceedings (other than those for an order declaring that the leniency applicant has contravened the FCR). While the HKCC has a policy of not releasing the leniency agreement, it is to be expected that the fact that a party is a leniency beneficiary will become known if the HKCC brings proceedings against the other parties to the cartel. 

  65. 33.

    Does the authority put its commitment in writing?

  66. Yes. The HKCC will conclude a written leniency agreement with the successful leniency applicant. It may, however, be possible to agree with the HKCC some mechanism for entering into the agreement that does not require a signature from the applicant.

  67. 34.

    Who is given access to the document?

  68. See the answer to question 28.

  69. 35.

    Does the authority publish a model letter for conferring immunity?

  70. The HKCC has published a template for a leniency agreement with an undertaking engaged in cartel conduct attached at Annex A (see p.15) to the Leniency Policy which is available at:

    https://www.compcomm.hk/en/legislation_guidance/policy_doc/files/Leniency_Policy_Eng.pdf.

    Individual immunity or leniency

  71. 36.

    Is there an individual immunity programme?

  72. The preamble to the Leniency Policy provides that the policy does not apply to leniency agreements between the HKCC and persons who are not undertakings (undertakings are entities engaged in economic activity). The HKCC states that it will consider case by case whether it is appropriate to exercise its enforcement discretion towards such persons (including natural persons who are not undertakings such as employees). There is no published policy or programme for individuals but the HKCC may grant leniency to individuals nonetheless. In CTEA 1/2017 Competition Commission v Nutanix and Others, the HKCC entered into a cooperation agreement with a natural person whereby the HKCC offered immunity to that person in exchange for evidence against his former employer.

  73. 37.

    What is the process for applying?

  74. While there is no published process, individuals considering seeking leniency may wish to call the HKCC’s Leniency Hotline (+852 3996 8010) in the first instance. Alternatively, an approach might be made by a lawyer on behalf of a client.

  75. 38.

    What are the criteria for qualifying?

  76. There are no published criteria. The HKCC may grant leniency to an individual at its discretion. Section 80 CO provides that the HKCC may, in exchange for a person’s cooperation in an investigation or in proceedings, make a leniency agreement with the person, on any terms it considers appropriate. While it is not entirely clear that ‘person’ in this context encompasses a natural person who is not an undertaking, the HKCC would in any event expect complete, truthful and continuous cooperation on the part of any individual seeking immunity. To qualify for immunity the person should be able to provide evidence of cartel activity, be willing to provide a witness statement and to testify in proceedings before the Competition Tribunal should that be required.

    Revocation of immunity

  77. 39.

    On what basis can corporate immunity be revoked?

  78. Section 81 CO provides that the HKCC may terminate a leniency agreement if:

    • the other party to the agreement agrees to the termination;
    • the HKCC has reasonable grounds to suspect that the information on which it based its decision to enter into the leniency agreement was incomplete, false or misleading in a material particular;
    • the other party to the agreement has been convicted of an offence under Part 3 CO (for example, because it destroyed or falsified documents or obstructed a search by the HKCC); or
    • the HKCC is satisfied that the other party to the agreement has failed to comply with the terms of the leniency agreement.

    Before terminating a leniency agreement, the HKCC must afford an opportunity to be heard to the other party to the agreement, and any other person who appears to the HKCC to be likely to benefit from the agreement.

  79. 40.

    When can it be revoked?

  80. At any time provided the conditions for revocation are met.

  81. 41.

    What notice is required to revoke?

  82. Where the HKCC is of the view that it may terminate a leniency agreement because the conditions for termination are met, it will first orally inform the party to the leniency agreement of the concerns that it might have and give that party seven calendar days to take the necessary steps to remedy the situation. Thereafter, the HKCC will follow the process in section 81 CO:

    • First, the HKCC will give notice in writing to the other party to the agreement and to any other person who appears to the HKCC to be likely to benefit from the agreement, stating the proposed date of termination andthe reasons for termination.
    • The notice under section 81 CO will specify a period (not less than 30 days) within which representations may be made to the HKCC about the proposed termination.

    Before terminating the agreement, the HKCC must consider any representations about the proposed termination that are made to it.

  83. 42.

    Can the applicant file a judicial challenge to a decision to revoke?

  84. Yes. A decision to terminate a leniency agreement is a reviewable determination under section 83 CO.

    Reduction in sanctions

  85. 43.

    Does the leniency programme allow for reductions in sanctions?

  86. Under the Leniency Policy, leniency (in the sense of full immunity) is only available to the first applicant. Other undertakings willing to cooperate with the HKCC may, nevertheless, benefit from a lower level of enforcement relative to non-cooperating parties. The Leniency Policy provides that the HKCC will rely on its enforcement discretion regarding undertakings that cooperate in an investigation. The Leniency Policy provides that the exercise of the HKCC’s enforcement discretion towards undertakings that have engaged in cartel conduct but that do not qualify for leniency may take a number of forms. In particular, the HKCC may recommend to the Competition Tribunal a reduced pecuniary penalty where there has been cooperation. If the HKCC is seeking a reduced pecuniary penalty, it may make a joint submission to the Competition Tribunal with the cooperating undertaking on the appropriate level of penalty having regard to the timing, nature, extent and value of any cooperation provided by the cooperating undertaking. The Leniency Policy provides that the HKCC will consider a number of factors when assessing the cooperation provided by an undertaking, including whether the undertaking (Leniency Policy ¶4.4):

    • approached the HKCC in a timely manner seeking to cooperate;
    • provided significant evidence regarding the cartel conduct;
    • provided full and truthful disclosure, and cooperated fully and expeditiously on a continuing basis throughout the HKCC’s investigation and any related court proceedings;
    • coerced any other person to participate in the cartel; and
    • acted in good faith in dealings with the HKCC.

    It is understood that the HKCC is currently considering issuing a policy on settlement and/or cooperation with parties that are not ‘first in’ to add further detail to or supplement the Leniency Policy in this area.

  87. 44.

    What is the process for seeking a reduction in sanctions?

  88. There is no specific process for an undertaking seeking a reduction in pecuniary sanctions. The HKCC’s Enforcement Policy provides that if persons wish, at any time, to cooperate with the HKCC in its investigations the HKCC will take such cooperation into account in considering the proportionate enforcement response in relation to that person. Should parties wish to cooperate, they are encouraged to approach the HKCC in a timely manner.

  89. 45.

    Is there a marker process similar to immunity applications?

  90. No. However, when considering whether to award some cooperation credit on the basis of its enforcement discretion, the Leniency Policy provides that the HKCC will have regard to whether the relevant undertaking approached the HKCC in a timely manner seeking to cooperate and whether it provided significant evidence regarding the cartel conduct (relative, presumably, to the evidence already in the possession of the HKCC). It therefore follows that an early application is to be recommended.

  91. 46.

    Are the reductions in sanctions fixed or discretionary?

  92. The HKCC uses its enforcement discretion to determine whether an undertaking qualifies for cooperation credit. There are no fixed reductions. Moreover, any recommendation for a reduced penalty that might be made to the Competition Tribunal is not binding on the Competition Tribunal. To date, there have been no settlement or similar proceedings before the Competition Tribunal so whether the Competition Tribunal will follow a recommended penalty or respect an agreed penalty proposed by the parties in a joint submission is an open question.

  93. 47.

    How are the reductions in sanctions calculated?

  94. There is no specific guidance for the calculation of reduced penalties. In considering whether to recommend a reduced penalty to the Competition Tribunal or when agreeing with the parties on a reduced penalty which might be sought from the Competition Tribunal on a consent basis, the HKCC will take into account the following factors: the level of cooperation offered; whether the HKCC was approached in a timely manner; whether the party provided significant evidence; whether the cooperating party coerced any other person to participate in the cartel; and whether it acted in good faith in dealings with the HKCC. The Competition Tribunal, however, retains ultimate discretion on the level of any pecuniary penalty imposed.

  95. 48.

    Are there sentencing guidelines?

  96. No.

  97. 49.

    If an applicant's cooperation reveals self-incriminating information that expands the scope of the conduct known to the authority, will that conduct be factored into the fine calculation?

  98. The level and scope of cooperation of the undertaking, including the information provided and whether it is significant evidence regarding the cartel conduct will influence the decision of the HKCC to recommend a reduced pecuniary penalty to the Competition Tribunal and the level of penalty recommended. Should the HKCC and the cooperating party agree on a joint submission on penalty, the nature of the information provided by the cooperating party will also impact the level of penalty proposed to the Competition Tribunal. 

    Depending on the facts of the case, it may be possible for the HKCC to agree not to seek a penalty in respect of particular conduct if that conduct can be isolated from the remaining conduct. Equally, there may be room for the parties to argue that the new conduct is sufficiently distinct to constitute a separate cartel for which leniency should be available. 

  99. 50.

    Are there fixed or discretionary discounts for the first applicant to cooperate after the immunity applicant (assuming there is an immunity applicant)?

  100. No. In considering whether to recommend a reduced penalty to the Competition Tribunal or when agreeing with the parties on some reduced penalty which might be sought from the Competition Tribunal on a consent basis, the HKCC will take into account a range of factors as discussed above.

  101. 51.

    Other than fine reductions, are there additional incentives offered to an applicant that is the first non-immunity applicant?

  102. The Leniency Policy merely provides that the exercise of the HKCC’s enforcement discretion towards undertakings which do not qualify for immunity may take various forms including recommending to the Competition Tribunal a reduced pecuniary penalty and/or the making of some other appropriate order by the Competition Tribunal. The cooperating party may discuss with the HKCC whether there is a need for any further order (other than for a penalty) and/or the terms of any particular other order that might be sought.

  103. 52.

    Does the competition authority publish guidance regarding sentencing reductions?

  104. No.

  105. 53.

    Does the authority provide for "Amnesty Plus" benefits?

  106. No. However, there does not appear to be an obstacle to the HKCC arguing in a given case that the Competition Tribunal should give effect to an amnesty plus-type benefit. In so far as amnesty plus entails immunity for the second cartel, this can be achieved under the Leniency Policy. The discount for the first cartel could be recommended by HKCC to the Competition Tribunal but would ultimately be a matter for the Competition Tribunal to determine.

  107. 54.

    How is the Amnesty Plus discount calculated?

  108. There is no practice in this area.

    Cooperation obligations for sentencing reductions

  109. 55.

    Are the cooperation obligations similar to those for immunity applicants?

  110. The cooperation obligations for reductions in pecuniary sanctions are similar to those applicable to leniency applicants. In particular, the undertaking must provide full and truthful disclosure, and cooperate fully and expeditiously on a continuing basis throughout the HKCC’s investigation and any related court proceedings. There is also a requirement that the undertaking act in good faith in dealings with the HKCC.

  111. 56.

    Will the applicant be required to make a written confession?

  112. There is no practice to date. In principle, the HKCC may require the cooperating party to agree to and sign a statement of agreed facts admitting to its participation in the cartel on the basis of which the Competition Tribunal may be asked to make an order imposing a penalty.

  113. 57.

    Can third parties obtain access to the materials provided by the applicant?

  114. Without prejudice privilege may attach to certain communications with the HKCC. Pre-existing documents provided to the HKCC will likely have to be disclosed in proceedings if relevant.

  115. 58.

    Will an applicant qualify for sentencing reductions if one or more of its employees refuse to cooperate?

  116. The HKCC relies on its enforcement discretion to determine whether it should recommend a reduction in pecuniary penalty to the Competition Tribunal. Whether a non-cooperating employee will impact the position of the HKCC will depend on the circumstances of the case.

  117. 59.

    Will the applicant lose its protections if one of its employees engages in obstructive conduct before or after the application?

  118. The HKCC relies on its enforcement discretion to determine whether it should recommend a reduction in pecuniary penalty to the Competition Tribunal. Whether an obstructive employee will impact the position of the HKCC will depend on the circumstances of the case.

  119. 60.

    Will the applicant be required to provide materials protected by attorney-client privilege or work-product doctrine?

  120. No. See generally the answer to question 31. 

  121. 61.

    Can an applicant challenge the amount of the reduction of sanctions?

  122. Yes, in proceedings before the Competition Tribunal (unless the penalties are imposed on the basis of a consent) and/or on appeal.

    Settlements

  123. 62.

    How is the settlement process initiated?

  124. The HKCC Enforcement Policy provides that persons may wish to approach the HKCC on a without prejudice basis to settle a matter. Beyond this, and certain minimal references in the Leniency Policy, there are currently no published settlement guidelines although it is understood that the HKCC is considering issuing a policy or guideline. Settlement may be initiated by either the investigated parties or the HKCC.

  125. 63.

    Is the amount of the sanction always fixed in the settlement agreement?

  126. There is currently no practice in this area. Under Rule 39 of the CTR if the HKCC and an investigated party agree on the terms of an order to be made by the Competition Tribunal, the agreed terms (which may conceivably provide for a particular figure or range) must be sent to the Competition Tribunal for approval. The Competition Tribunal may then make an order by consent having regard to the agreed terms and any information submitted in support of those terms.

  127. 64.

    What role, if any, do the courts play in the settlement process?

  128. Rule 39 of the CTR provides that if the HKCC and an investigated party have agreed on the terms of an order to be made by the Competition Tribunal, the agreed terms, signed by or on behalf of the HKCC and the investigated party, must be sent to the Competition Tribunal for approval. The Tribunal may then make an order by consent (including one imposing a pecuniary penalty), with or without a hearing, having regard to the agreed terms and any information submitted in support of those terms. Practice Direction 1 of the Competition Tribunal supplements that an application under Rule 39 of the CTR, should be accompanied by a statement of agreed facts.

  129. 65.

    Are the settlement documents, including any factual admissions, made public?

  130. The Competition Tribunal has held that communications between settling parties and the HKCC are covered by without prejudice privilege at least until an agreement is reached (see Nutanix ¶¶61, 74). If a settlement is implemented by way of Rule 39 of the CTR, as a general rule, the agreed statement of facts will become public.

  131. 66.

    Is an admission of wrongdoing required?

  132. Practice Direction 1 of the Competition Tribunal provides that an application under Rule 39 of the CTR for an order by consent, should be accompanied by a statement of agreed facts.

  133. 67.

    Do companies that enter into settlement agreements receive an automatic sentencing discount?

  134. No. The HKCC relies on its enforcement discretion to determine and recommend a reduction in pecuniary penalties to the Competition Tribunal. The Competition Tribunal ultimately decides the level of the reduction in pecuniary penalties (if any). It is unclear at the present time whether the Competition Tribunal will follow a recommendation or abide by any agreed level of penalty or range of penalty.

  135. 68.

    Do all of the subjects of an investigation have to agree to the settlement procedure before it is initiated by the authority?

  136. No.

  137. 69.

    Will the authority settle with subjects who refuse to cooperate?

  138. This seems unlikely. A settlement on the basis of an order under Rule 39 of the CTR requires an agreed statement of facts. This could not be achieved in the absence of cooperation.

  139. 70.

    If the settlement discussions terminate without an agreement, may any information provided or statements made during the negotiations be used against the parties?

  140. The Competition Tribunal has held that communications between settling parties and the HKCC are covered by without prejudice privilege at least until an agreement is reached (see Nutanix ¶¶61, 74). Accordingly, if settlement discussions terminate, the HKCC cannot use the content of the communications between the settling parties and the HKCC as evidence against the parties. However, the HKCC may still decide to initiate an investigation of its own volition and use its investigative powers against parties with whom settlement discussions have been terminated. Pre-existing documents or evidence that are not privileged would be disclosable.

  141. 71.

    May a party to the settlement agreement void the agreement after it is entered?

  142. No.

  143. 72.

    Does the competition authority publish guidance regarding settlements?

  144. The HKCC Leniency Policy and the HKCC Enforcement Policy (¶¶4.1-4.5) provide minimal indications as to the procedures for settlement. There is no HKCC self-standing guidance on settlement although it is understood that the authority is currently considering publishing such guidance.

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Questions

    Immunity or a 100 per cent reduction in sanctions

  1. 1.

    What benefits are available to the first applicant to qualify?


  2. 2.

    Do the protections extend to current and former officers, directors and employees?


  3. 3.

    Is immunity available after an investigation begins?


  4. 4.

    What are the eligibility requirements before an investigation begins?


  5. 5.

    What are the eligibility requirements after an investigation begins?


  6. 6.

    Will the applicant have to admit to a violation of law?


  7. 7.

    Are ringleaders or initiators of the conduct eligible?


  8. 8.

    When must the applicant terminate its involvement in the conduct?


  9. 9.

    What constitutes termination of the conduct?


  10. 10.

    Will the applicant be required to make restitution to victims?


  11. 11.

    Can more than one applicant qualify for immunity?


  12. 12.

    Can an applicant qualify if one of its employees reports the conduct to the authority first?


  13. 13.

    Does the afforded protection extend to any non-antitrust infringements?


  14. 14.

    What confidentiality assurances are given to the first applicant to report?


  15. 15.

    Does the authority publish guidance regarding the application of the programme?


  16. 16.

    Do the rules for obtaining immunity in your jurisdiction conflict with the immunity rules in other jurisdictions?


  17. Immunity application and marker process

  18. 17.

    What is the initial process for making an application?


  19. 18.

    What information is required to secure a marker?


  20. 19.

    How much time will an applicant have to perfect its marker?


  21. 20.

    Can the deadline for perfecting the marker be extended?


  22. 21.

    What is required to perfect the marker?


  23. 22.

    Can the scope of the marker be expanded if additional information is discovered by the applicant?


  24. 23.

    Can an applicant lose its marker if a second applicant comes forward with better information?


  25. 24.

    What if the applicant’s investigation reveals that no violation exists?


  26. 25.

    What if the authority decides not to investigate?


  27. Immunity cooperation obligations

  28. 26.

    What is the applicant required to produce?


  29. 27.

    Will the applicant be required to make a written confession?


  30. 28.

    Can third parties obtain access to the materials provided by the applicant?


  31. 29.

    Will the applicant lose its protection if one or more of its employees refuses to cooperate?


  32. 30.

    Will the applicant lose its protection if one of its employees engages in obstructive conduct before or after the application?


  33. 31.

    Will the applicant be required to provide materials protected by attorney-client privileges or work-product doctrine?


  34. Granting immunity

  35. 32.

    How does the authority announce its promise not to charge or sanction?


  36. 33.

    Does the authority put its commitment in writing?


  37. 34.

    Who is given access to the document?


  38. 35.

    Does the authority publish a model letter for conferring immunity?


  39. Individual immunity or leniency

  40. 36.

    Is there an individual immunity programme?


  41. 37.

    What is the process for applying?


  42. 38.

    What are the criteria for qualifying?


  43. Revocation of immunity

  44. 39.

    On what basis can corporate immunity be revoked?


  45. 40.

    When can it be revoked?


  46. 41.

    What notice is required to revoke?


  47. 42.

    Can the applicant file a judicial challenge to a decision to revoke?


  48. Reduction in sanctions

  49. 43.

    Does the leniency programme allow for reductions in sanctions?


  50. 44.

    What is the process for seeking a reduction in sanctions?


  51. 45.

    Is there a marker process similar to immunity applications?


  52. 46.

    Are the reductions in sanctions fixed or discretionary?


  53. 47.

    How are the reductions in sanctions calculated?


  54. 48.

    Are there sentencing guidelines?


  55. 49.

    If an applicant's cooperation reveals self-incriminating information that expands the scope of the conduct known to the authority, will that conduct be factored into the fine calculation?


  56. 50.

    Are there fixed or discretionary discounts for the first applicant to cooperate after the immunity applicant (assuming there is an immunity applicant)?


  57. 51.

    Other than fine reductions, are there additional incentives offered to an applicant that is the first non-immunity applicant?


  58. 52.

    Does the competition authority publish guidance regarding sentencing reductions?


  59. 53.

    Does the authority provide for "Amnesty Plus" benefits?


  60. 54.

    How is the Amnesty Plus discount calculated?


  61. Cooperation obligations for sentencing reductions

  62. 55.

    Are the cooperation obligations similar to those for immunity applicants?


  63. 56.

    Will the applicant be required to make a written confession?


  64. 57.

    Can third parties obtain access to the materials provided by the applicant?


  65. 58.

    Will an applicant qualify for sentencing reductions if one or more of its employees refuse to cooperate?


  66. 59.

    Will the applicant lose its protections if one of its employees engages in obstructive conduct before or after the application?


  67. 60.

    Will the applicant be required to provide materials protected by attorney-client privilege or work-product doctrine?


  68. 61.

    Can an applicant challenge the amount of the reduction of sanctions?


  69. Settlements

  70. 62.

    How is the settlement process initiated?


  71. 63.

    Is the amount of the sanction always fixed in the settlement agreement?


  72. 64.

    What role, if any, do the courts play in the settlement process?


  73. 65.

    Are the settlement documents, including any factual admissions, made public?


  74. 66.

    Is an admission of wrongdoing required?


  75. 67.

    Do companies that enter into settlement agreements receive an automatic sentencing discount?


  76. 68.

    Do all of the subjects of an investigation have to agree to the settlement procedure before it is initiated by the authority?


  77. 69.

    Will the authority settle with subjects who refuse to cooperate?


  78. 70.

    If the settlement discussions terminate without an agreement, may any information provided or statements made during the negotiations be used against the parties?


  79. 71.

    May a party to the settlement agreement void the agreement after it is entered?


  80. 72.

    Does the competition authority publish guidance regarding settlements?