(A) Introduction
The Competition Ordinance (the “Ordinance”) came into full effect on 14 December 2015. [1] As we mark the 10th year of competition law enforcement in Hong Kong, it is time to reflect on what the competition law framework is and what it will be.
Competition Commission v. ATAL Building Services Engineering Ltd and others [2025] HKCA 1120, date of judgment: 12 December 2025, [2] provides a significant point for such reflection. It concerns two consolidated appeals challenging case management orders made by the President of the Competition Tribunal (the “Tribunal”), Harris J (the “President”) at the first case management conference in enforcement proceedings between the Competition Commission (the “Commission”) and the respondents.
The first appeal (CAMP 369/2023), brought by the 1st Respondent, relates to the disclosure of communications between the Commission and immunized witnesses. The main issue is whether “without prejudice” privilege protects communications leading to a Cooperation Agreement with the Commission from disclosure to non-settling co-respondents (the “Disclosure of Communications” Issue). [3]
The second appeal (CAMP 370/2023), brought by the Commission, relates to the timing for determining pecuniary penalty against a settling party under the Kam Kwong procedure. The main issue is whether a pecuniary penalty against a settling party under the Kam Kwong procedure should be determined immediately upon settlement or adjourned until after the trial of non-settling co-respondents (the “Sentencing of Penalties” Issue). [4]
Ultimately, the Court of Appeal upheld the President’s orders that (1) correspondence and communications between the Commission and 1st Respondent and its employees must be disclosed; and (2) the determination of 1st Respondent’s penalty was properly adjourned given the special circumstances of this case. [5]
This case provides helpful guidance on the above procedural questions and outlines key aspects of the legal framework governing competition law in Hong Kong.
(B) Legal Framework of Competition Law
The Ordinance establishes Hong Kong’s foundational competition rules: [6]
(1) The First Conduct Rule, which prohibits anti-competitive agreements (Section 6);
(2) The Second Conduct Rule, which prohibits abuses of substantial market power (Section 21); and
(3) The Merger Rule, which prohibits anti-competitive mergers and acquisitions (Section 3 of Schedule 7).
The Commission, established under the Ordinance, is empowered under Section 131(1) to “do all such things as appear to it to be necessary, advantageous or expedient for it to do for, or in connection with, the performance of its functions” which include investigating conduct that may contravene the competition rules and enforcing the provisions of the Ordinance. [7]
The Tribunal is the dedicated judicial body for competition matters. Under Section 142(2), it exercises “the same jurisdiction to grant remedies and reliefs, equitable or legal, as the Court of First Instance”. [8] The Tribunal may determine its own procedures or “follow the practice and procedure of the Court of First Instance in the exercise of its civil jurisdiction”, conducting its proceedings “with as much informality as is consistent with attaining justice” under Section 144. [9] Further, pursuant to Section 147, its proceedings are not bound by the rules of evidence, except in application for pecuniary penalty under Section 93 or financial penalty under Section 169. [10]
The relationship between the Commission and the Tribunal is central to the enforcement regime. The Commission investigates and prosecutes contraventions, while the Tribunal acts as a gatekeeper, adjudicating cases and overseeing the Commission’s exercise of its powers. [11]
Practice and procedure are detailed in the Competition Tribunal Rules (Cap. 619D) (“CTR”), Competition Tribunal Practice Direction No. 1, Proceedings before the Tribunal (“CTPD1”) and Competition Tribunal Practice Direction No. 2, Confidential Information (“CTPD2”). While the Tribunal may determine its own procedures and exercise its powers with a reasonable degree of informality and practicality, it must act in accordance with the general principles and concepts of the civil procedure of the Court of First Instance. However, ordinary civil concepts may need to be replaced or adapted to address the special character of an enforcement regime with coercive investigative powers and functions. [12]
The CTPD1 highlights that one of the Tribunal’s primary objectives is to facilitate the settlement of disputes. Paragraph 72 of the CTPD1 provides that the Tribunal may impose a pecuniary penalty under Section 93 based on a statement of agreed facts submitted by the parties. [13]
This objective is operationalized through the Kam Kwong procedure, established in Competition Commission v Kam Kwong Engineering Co Ltd [2020] 4 HKLRD 61. It allows the Tribunal to resolve proceedings against a respondent who admits liability on the basis of an agreed set of facts (Sections 93-94 of the Ordinance and paragraph 72 of the CTPD1). This procedure is analogous to a plea and sentence on agreed facts in criminal proceedings, where the accused admits guilt and is sentenced without a contested trial. [14]
(C) Facts
The Commission instituted two related enforcement proceedings arising from an investigation into anti-competitive conduct in the supply of air conditioning maintenance, installation, repair and replacement works in Hong Kong:
(1) CTEA 2/2022: Against ATAL Building Services Engineering Ltd (“ATAL”), its parent company, Shun Hing Engineering Contracting Cot Ltd, Shun Hing Holdings Co Ltd and four employees for alleged price-fixing, market-sharing and bid-rigging. [15]
(2) CTEA 2/2023: Against ATAL, Johnson Controls Hong Kong (“Johnson Controls”, 2nd Respondent), York International (Northern Asia) Limited (3rd Respondent), Johnson Controls International PLC (4th Respondent) (the 2nd to 4th Respondents collectively, the “JC Parties”) and a former employee of Johnson Controls for similar alleged collusive conduct. [16]
On 4 November 2022, ATAL and two of its employees admitted liability and entered into a Cooperation Agreements with the Commission (the “Cooperation Agreement”). [17]
Subsequently, on 17 and 18 August 2023, the Commission and ATAL filed joint consent summonses seeking a Kam Kwong order for a declaration of contravention and a pecuniary penalty of HK$150 million. [18]
At the first case management conference for CTEA 2/2023 on 29 August 2023, two key disputes arose: [19]
(1) Disclosure Dispute: The JC Parties sought discovery of all correspondence and communications related to ATAL’s Cooperation Agreement. ATAL objected as such documents were protected by “without prejudice” privilege.
(2) Timing Dispute: The JC Parties objected to the Kam Kwong penalty hearing for ATAL being determined before the trial against the non-settling co-respondents.
On 25 October 2023, the President handed down his Decision on several issues arising from the summonses, including the “Disclosure of Communications” issue and the “Sentencing of Penalties” issue. [20]
On 27 November 2023, the President heard applications for leave to appeal two of his orders: ATAL sought leave regarding the “Disclosure of Communications” issue; and the Commission sought leave regarding the “Sentencing of Penalties” issue. [21]
In a decision dated 11 January 2024, the President refused both leave applications. ATAL and the Commission then renewed their applications for leave to appeal before the Court of Appeal respectively. [22]
(D) Decision
The “Disclosure of Communications” Issue
Discovery under the Ordinance
Rule 24 of the CTR governs the discovery and inspection of documents. The decision to order discovery is discretionary, and the Tribunal must consider all circumstances of the cases. [23]
Order 24 of the Rules of the High Court (Cap 4A), except for Rules 1, 2, 3, 4 and 6, applies to proceedings before the Tribunal with necessary modifications. This includes Order 24, Rule 5, which requires that the grounds on which documents are privileged from production are to be stated in the list of documents, and Order 24, Rule 15, which directs that the rules on discovery are without prejudice to any rule of law authorizing or requiring the withholding of a document on the ground that disclosure would be injurious to the public interest. [24]
Protection of Confidential Information
Part 8 of the Ordinance protects confidential information through strict rules against unauthorized disclosure and provides a framework for its discovery. [25] The CTPD2 sets out the procedures and directions for handling such information. [26]
The Commission’s Duty of Disclosure
In contested enforcement proceedings, the Commission has a duty to make fair disclosure to the accused party as part of the right to a fair trial. This duty extends to material or information in the possession or control of the Commission that may undermine its case or advance the defence case, subject to claims of privilege or public interest immunity. [27]
A specific aspect of this duty is the “warts and all” principle regarding accomplice evidence. Where the Commission relies on evidence from a cooperating witness (an accomplice), the defence is entitled to full disclosure concerning that witness, including the terms of any leniency or cooperation agreement and any matters affecting the credibility and reliability of the witness and his or her evidence. [28]
The “Without Prejudice” Rule
The “Without Prejudice” Rule is founded on the public policy of encouraging parties to settle disputes. It protects communications made in a genuine attempt to settle existing or contemplated litigation from being admitted as evidence. The rule’s application depends on the nature of the communications, the circumstances in which they were made and purpose for which they are relied upon in court proceedings. It is not absolute and is subject to various exceptions. [29]
The Court of Appeal’s Ruling
The Court of Appeal granted ATAL leave to appeal but dismissed the appeal, upholding the President’s disclosure order on the following grounds:
(1) Right to a Fair Trial and Duty of Disclosure
The non-settling respondents, who are contesting the allegations made against them, have a fundamental right to a fair trial. Therefore, the Commission has a duty to disclose all material evidence, including evidence that may undermine its case or assist the defence. This duty is paramount where the case relies on evidence from accomplices (ATAL and its employees). The defence is entitled to know the terms of any immunity or cooperation agreement and all surrounding matters that may affect the accomplices’ credibility. [30]
(2) Status as Accomplices
ATAL and its employees admitted liability and agreed to assist the Commission against the JC Parties. They are accomplices cooperating with the prosecution, not confidential informants. Therefore, informer privilege does not apply to their communications with the Commission. [31]
(3) Relevance and Fairness of Disclosure
The correspondence and communications related to the Cooperation Agreement are relevant to the case against the JC Parties. As the Commission intends to rely on information and potentially testimony from these accomplices, fairness requires full disclosure of the background and context of their cooperation to the non-settling parties. The Court found no real prejudice to ATAL from this disclosure, as they had already admitted liability. [32]
(4) Insufficient Claim of Privilege or Confidentiality
ATAL’s allegation that the correspondence was protected by “without prejudice” privilege or was confidential was unsupported by specific evidence and was displaced by the “warts and all” principle. The Court noted that if specific documents required protection vis-à-vis other third parties, ATAL could apply to the Tribunal for appropriate orders. [33]
(5) Compliance with the Discovery Framework
The parties had substantively addressed the relevant considerations for discovery of confidential information. ATAL failed to establish that the correspondence was confidential and privileged against the JC Parties in these proceedings. [34]
The “Sentencing of Penalties” Issue
The Kam Kwong Procedure
The Tribunal has established the Kam Kwong procedure, based on the Carecraft procedure, to expedite the resolution of enforcement proceedings by the Commission against alleged offenders of competition law. Its essential feature is that the parties submit an agreed statement of facts on which the disqualification order sought should be made. [35]
The Tribunal is not bound by the parties’ agreement. It must be satisfied that the pecuniary penalty is appropriate, having regard to relevant matters, including the nature and extent of the conduct, the loss or damage caused, the circumstances of the conduct and any previous contraventions. [36]
The Commission may settle with one party under the Kam Kwong procedure even if the case against other alleged offenders remains outstanding. The Tribunal should generally give effect to such settlements without delay. However, it retains the power to require parties to address any deficiencies in the agreed facts to ensure the penalty's appropriateness. [37] If a cooperating party's ability to pay the proposed pecuniary penalty is at risk due to delay, the consenting parties and the Tribunal have appropriate remedial measures available, such as requiring payment of the proposed pecuniary penalty to the Tribunal pending final determination of its appropriateness. [38]
The Court of Appeal’s Ruling
The Court of Appeal granted the Commission leave to appeal but dismissed the appeal, upholding the President’s order to adjourn the Kam Kwong penalty hearing on the following ground:
(1) Proper Exercise of Discretion
The President did not error in principle or act unreasonably in exercising his discretion to adjourn the hearing. His decision was justified by the specific circumstances of this case, which involved: (a) two separate proceedings against ATAL concerning distinct cartels with different parties; (b) the procedural complexity of seeking a single penalty across two unconsolidated cases; and (c) the management of interconnected cases at different stages. [39]
The Court of Appeal added that the above ruling was an exception. As a general principle, Kam Kwong applications should be determined without unnecessary delay. [40]
(E) Key Takeaways
This case is significant on the following grounds:
(1) Duty of Disclosure: This case affirms the Commission's duty to make full and fair disclosure. The “warts and all” principle requires disclosure of all materials, including settlement negotiation correspondence which may affect the credibility of accomplice evidence or assist the defence of non-settling parties.
(2) Limited “Without Prejudice” Privilege in Settlements: This case narrows the application of the without prejudice privilege in cooperation agreements with the Commission. Where a settling party agrees to assist the Commission against co-respondents, communications during settlement negotiations are unlikely to be protected from disclosure to those non-settling parties. Parties contemplating settlement must anticipate that negotiation details may be revealed to and utilized by their co-respondents.
(3) Case Management in Kam Kwong Procedure: While the Kam Kwong procedure is designed for expeditious resolution, the Tribunal has discretion to delay a settling party’s penalty hearing in complex, multi-party proceedings. This can ensure complete factual understanding and consistency in penalties.
[1] https://www.compcomm.hk/en/media/press/files/Competition_Ordinance_Comes_into_Full_Effect_Today_EN.pdf
[2] https://legalref.judiciary.hk/doc/judg/word/vetted/other/en/2023/CAMP000369_2023.docx
[3] Competition Commission v. ATAL Building Services Engineering Ltd and others [2025] HKCA 1120, date of judgment: 12 December 2025, §2, §4
[4] Ibid, §5-§6
[5] Ibid, §151-§152
[6] Ibid, §8
[7] Ibid, §10
[8] Ibid, §12
[9] Ibid, §14
[10] Ibid
[11] Competition Commission v. ATAL Building Services Engineering Ltd and others [2025] HKCA 1120, date of judgment: 12 December 2025, §18
[12] Ibid, §17
[13] Ibid, §22
[14] Ibid, §23
[15] Ibid, §25-§26
[16] Ibid, §28-§29
[17] Ibid, §27
[18] Ibid, §30
[19] Ibid, §33
[20] Ibid, §34-§35
[21] Ibid, §36
[22] Ibid, §38
[23] Ibid, §51
[24] Ibid, §53
[25] Ibid, §54
[26] Ibid, §59
[27] Ibid, §61
[28] Ibid, §62
[29] Ibid, §69
[30] Ibid, §96
[31] Ibid, §99
[32] Ibid, §100
[33] Ibid, §101
[34] Ibid, §102
[35] Ibid, §136
[36] Ibid, §137
[37] Ibid, §142
[38] Ibid, §144
[39] Ibid, §149
[40] Ibid, §150
No comments:
Post a Comment