Hong Kong Competition Commission’s revised Cartel Leniency Policy for Individuals: encouraging individuals to come forward

The Hong Kong Competition Commission (HKCC) recently published a revised Leniency Policy for Individuals Involved in Cartel Conduct (the New Individuals Policy). The New Individuals Policy clarifies the circumstances in which individuals may apply for leniency, further incentivising individuals to come forward. In this blog, we consider the key changes under the New Individuals Policy and review some of the implications of this revised approach.

The HKCC’s leniency regime at a glance and the key changes

The HKCC has published two leniency policies in the past: the Leniency Policy for Undertakings Engaged in Cartel Conduct (the Undertakings Policy) and the former leniency policy for individuals. These policies explained the HKCC’s approach to leniency, and the benefits and application procedures for undertakings and individuals, respectively. These leniency policies only apply to cartel conduct that contravenes the First Conduct Rule under Hong Kong’s Competition Ordinance, such as price fixing, market sharing, output limitations or bid rigging.

Under Hong Kong’s current leniency regime, leniency is granted to the first cartel member or the first individual who comes forward to report the cartel conduct to the HKCC. The HKCC will enter into a leniency agreement with the successful applicant and agree not to commence proceedings in Hong Kong’s Competition Tribunal against that applicant in relation to the reported conduct. The successful applicant must cooperate with the HKCC throughout the investigation and in any proceedings brought by the HKCC before the Competition Tribunal. Ringleaders of cartels or who coerce other parties to participate in the cartel conduct are not eligible for leniency.

However, under the former policy for individuals, leniency was not available to individuals if an undertaking had already obtained leniency for the same conduct, regardless of whether the individual is connected to that undertaking. In addition, the former policy for individuals did not distinguish between applications made before and after the HKCC has started assessing or investigating the cartel conduct. It was therefore unclear whether individuals could apply for leniency in relation to cartel conduct that was already on the HKCC’s radar. As a result of the uncertainty, the former policy for individuals risked discouraging individuals from coming forward to report cartel conduct.

The HKCC has changed its position on these two points in that the New Individuals Policy:

• distinguishes between leniency applications based on whether the application is made before or after the HKCC has opened its initial assessment or investigation of the cartel conduct; and
• offers the possibility for a leniency application to be made by the first individual who reports a cartel to the HKCC, even if leniency has been already granted to an undertaking in the same case.

Following the revisions of the New Individuals Policy, leniency is now available for the first individual who either:

• discloses his/her involvement in cartel conduct regarding which the HKCC has not opened an initial assessment or investigation (so-called Type 1 leniency application), or
• is able, in the HKCC’s view, to provide substantial assistance to the HKCC’s investigation and subsequent enforcement action against cartel conduct that the HKCC was already assessing or investigating (so-called Type 2 leniency application).

What are the practical implications? 

Possible uptick in leniency applications from individuals. The New Individuals Policy allows an individual to seek leniency even when the HKCC has already initiated an investigation into the alleged cartel conduct, or an undertaking has already been granted leniency in the same case. The HKCC has also indicated in a press release that it will not seek “… an order declaring that the successful leniency applicant is involved in contravention of a competition rule under [Hong Kong’s Competition] Ordinance” . These clarifications are expected to encourage more individuals to come forward to report cartel conduct. The HKCC also anticipates that the additional guidance and incentives for individuals to report cartel conduct will enhance its cartel detection and enforcement actions.

Heightened conflicts of interest between companies and their employees/ex-employees. The New Individuals Policy clarifies that an individual can “blow the whistle” and apply for leniency in relation to cartel conduct during the investigation stage, even if his/her employer does not wish to apply for leniency under the Undertakings Policy. The risk of conflict is heightened where a member of the cartel at issue has already been granted leniency under the Undertakings Policy. In such situations, other cartel members will not be eligible to apply for leniency, although their employees and ex-employees would still have the opportunity (and, depending on the circumstances, may have the incentive) to do so. The need for separate legal representation for companies and their employees will thus likely be even greater.

Uncertainty as to what constitutes “substantial assistance”. As with the Undertakings Policy, the New Individuals Policy requires so-called Type 2 leniency applicants to provide “substantial assistance” to the HKCC’s investigation and enforcement action. Although the HKCC press release on the New Individuals Policy indicates that individual applicants should provide practical assistance by either uncovering cartel conduct or providing substantial assistance in a case already on the HKCC’s radar, the New Individuals Policy itself does not specify precisely what kind of assistance would amount to “substantial assistance” by individual applicants. In the absence of further guidance, it is possible that some individuals may not necessarily be as incentivised to apply for leniency under these circumstances.