By Alex Liu

Hong Kong, 19 January 2022: In a landmark case, the Competition Commission has used its Cooperation Policy for the first time to investigate and punish three firms involved in price-rigging over the sale of mass-mailing machines.

Introduced almost three years ago, the Cooperation Policy allows firms engaged in anti-competitive conduct to assist with an investigation and admit wrongdoing in return for a reduced fine, with no action taken against individuals. It is seen as a valuable tool in enhancing the Commission’s effectiveness and efficiency in investigations.

The firms at the centre of the probe were Neopost, manufacturer of “inserter” machines which place letters and pamphlets inside envelopes for mass-mailing, and two resellers, Toppan Forms and Smartech Business Systems. The inserters were being sold to various organisations and businesses, including government departments, insurance companies and banks.

Investigators found the three firms held meetings at which it was agreed Toppan and Smartech would refrain from competing for each other’s customers over the sale of Neopost inserters. The two resellers agreed to each specify a higher price when a quote was requested by the other firm’s customer. They also agreed the winning party would source the inserter from the losing party, instead of purchasing directly from Neopost, to ensure they both obtained business. In order to facilitate this, Toppan and Smartech exchanged sensitive information, including intended prices and models of inserters, before submitting quotations to customers.

The Commission considered the firms’ behaviour amounted to serious anti-competitive conduct in the form of price-fixing, market-sharing, and bid-rigging in contravention of the First Conduct Rule of the Competition Ordinance. Soon after the investigation began, the firms ceased their anti-competitive practices and agreed to comply with the Cooperation Policy. All three were given discounted fines: Toppan received the heaviest penalty of HK$3,372,000, while Smartech was fined HK$808,000 and Neopost HK$1,399,000.

The Cooperation Policy was introduced as a supplement to the Commission’s existing Leniency Policy, under which the Commission agrees not to bring proceedings in the Competition Tribunal against the first cartel member which reports misconduct. Further, the Cooperation Policy provides for a Leniency Plus programme, under which companies who cooperate in a cartel investigation and come first to disclose the existence of another cartel can receive an additional discount of up to 10% on their fine.

It is worth noting the Commission recently marked the sixth anniversary of the Competition Ordinance coming into effect. In this time, a total of 12 cases have reached different enforcement outcomes. Nine of these, involving some 47 respondents, were brought before the Tribunal and the Commission has gained success in all five cases already ruled by the Tribunal.

Moving forward, the Commission has signalled it will pay attention to three specific areas while maintaining its general enforcement focus:

• Anti-competitive behaviour which affects people’s livelihood, especially when offenders target low income groups, grassroots bodies or organisations which support vulnerable citizens.
• Cartels that aim to take advantage of government or public funding, thereby enriching themselves as the expense of the people of Hong Kong.
• The digital economy, which has expanded significantly during the Covid-19 pandemic, with online retail being a particular concern.

In summary, it should be stressed that the Competition Ordinance helps Hong Kong’s free market economy to thrive under clearly defined rules that ensure open and fair competition. It applies to all sectors, prohibiting conduct which may prevent, restrict or distort the level playing field. At BC&C, we have an experienced legal team ready to advise businesses and consumers alike with regard to their obligations and rights.

A Partner in BC&C since 2000, Alex Liu’s key areas of practice include commercial and corporate litigation, investigations by governmental bodies such as the SFC, ICAC and Commercial Crime Bureau, insolvency and debt restructuring, intellectual property, defamation, property and commercial contract drafting. He can be contacted at alex@boasecohencollins.com.