COMPETITION COMMISSION v. GRAY LINE TOURS OF HONG KONG LTD AND OTHERS

CTEA 1/2022

[2025] HKCT 4

IN THE COMPETITION TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COMPETITION TRIBUNAL ENFORCEMENT ACTION NO 1 OF 2022

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BETWEEN

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D E C I S I O N

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Introduction

1.  On 25 March 2025 I delivered my judgment in this matter in respect of the 4^th Respondent dealing primarily with the costs of the proceedings. The judgment followed the hearing before the Tribunal on 29 November 2023, which was required to determine the penalty to be imposed on the 4^th Respondent (“Prudential”). I imposed a penalty of HK$104,000. Prudential had since before the proceedings commenced conceded that it had infringed the First Conduct Rule (“FCR”). There had been a dispute about the framing of the statement of agreed facts required in order that liability could be determined by the Tribunal using the Kam Kwong procedure. It had been resolved by that date, which allowed the Tribunal to make an unopposed declaration that the FCR had been infringed. What remained was determination of the method by which the penalty was to be calculated. For the reasons contained in my judgment of 25 March 2025, I found in favour of Prudential. I made a costs order nisi that the cost of and occasioned by the hearing on 29 November 2023 be paid by the Commission to Prudential.

2.  There is no dispute that the Commission should pay Prudential’s costs of the hearing on 29 November 2023. What is controversial is, first, who should pay the remaining costs of the proceedings and, secondly, whether the costs incurred after the date Prudential purported to make a sanctioned payment pursuant to RHC O 22 should be paid by the Commission on an indemnity basis with an enhanced rate of interest and, thirdly, how the costs of the investigation leading to the proceedings should be assessed? Although, the parties shed much ink in the production of their skeleton submissions, in my view the analysis and answers to these questions are straightforward.

The costs of the proceedings other than quantum

3.  As is explained in the Kam Kwong[1] decision a declaration of an infringement of the Competition Ordinance, Cap. 619 (“Ordinance”) cannot be ordered by consent. It is necessary for the Tribunal to be satisfied that there has been an infringement of the Ordinance – in the present case of the FCR. If this is uncontroversial it is done by the parties agreeing a statement of facts that are said by the Commission to constitute the alleged infringement. Commonly, the amount of the penalty is also agreed. The Tribunal considers the statement of agreed facts and the Parties submissions and unless the Tribunal identifies a reason to do otherwise makes the proposed declaration and penalty. In each case that has been dealt with in this way to date the respondent has been ordered to pay the costs. This is unsurprising. Even if a respondent has conceded at the outset that it has infringed the Ordinance unless the matter is disposed of by an infringement notice under Division 2 of Part 4 of the Ordinance proceedings must be commenced before the Tribunal to obtain a declaration. This being the case one would expect the respondent to pay the Commission’s costs of the proceedings. The circumstances in which this might not occur is if the Tribunal is satisfied that the matter should have been disposed of differently, probably by an infringement notice.

4.  Although, there was discussion before me as to whether Prudential had conceded liability sufficiently early and clearly that resolution of the complaint should have been reached more quickly and cheaply, it was not argued before me that at the outset Prudential made it clear that given the small penalty that it believed the Tribunal would impose bringing proceedings was disproportionate and the matter should have been determined by an infringement notice. Prudential’s submission was framed as follows in [15] of its skeleton. “At all material times, Prudential accepted that it contravened the FCR in the manner pleaded by the Commission. It only reserved the right to make submissions on the quantum of the pecuniary penalty”. This is not the same as contending at the outset that given (A) the early concession of a contravention and (B) the penalty would be small and significantly less than the costs of coming before the Tribunal; proportionality required the matter to be dealt with by an infringement notice. Although, I agree with Prudential that it was apparent by September 2021 (the proceedings commenced on 20 January 2022) that it accepted liability and there is little in the Commission’s pedantic point that it was not clear that liability was accepted under sections 91 and 92 of the Ordinance, Prudential did not respond constructively to the Commission’s initial correspondence between July and October 2018 and the prospect of an infringement notice being used to resolve the matter without recourse to the Tribunal was lost. This being the case the costs of having to bring the proceedings to obtain an order from the Tribunal should be paid by Prudential. That having been said it seems likely that most of the costs were incurred in dealing with the penalty. In my view the correct costs order is that:

(1)  The Commission pays Prudential the costs of and incurred in relation to the determination of the penalty including the costs of the hearing on 29 November 2023, to be taxed if not agreed.

(2)  Prudential pays the Commission the costs of the proceedings other than the costs covered by order (1) hereinabove, to be taxed if not agreed.

Sanctioned Payment

5.  On 12 October 2023 Prudential pursuant to RHC O 22 made a sanctioned payment of HK$200,000, which comfortably exceeds the penalty of HK$104,000. Although, Competition Tribunal Practice Direction 1 (“CTPD 1”) provides in [25(e)] that RHC O 22 is applicable to proceedings before the Tribunal the Commission argues that in practice it cannot be. It says this because of the language of RHC O 22, r 22(1), which provides that if a sanctioned offer relates to the whole claim (as does the offer in the present case) and is accepted, the claim is stayed. The Commission argues that this mechanism does not work in competition proceedings. Only the Tribunal can impose a penalty. RHC O 22, r 22(1) presupposes that the nature of the proceedings allows an offeree to determine the outcome of the proceedings by accepting a settlement proposal with the consequence that the proceedings are ended without the involvement of the court. Thus, it can have no application in a case in which the Tribunal is required to determine an infringement of the law and impose a penalty.

6.  In an exchange with the Tribunal, Mr Joshua Chan appearing for Prudential suggested that a sanctioned offer could be framed in such a way that it recognised that a Kam Kwong application was required to bring the proceedings to an end and this is consistent with RHC O 22, r 22(2)(a). It would be something along the following lines. The respondent offers to (a) admit the alleged infringement, (b) pay a specified sum by way of penalty and (c) agree to an application being made to the Tribunal for an order using the Kam Kwong procedure. I would note at this juncture that this is not the form of the offer made by Prudential and, therefore, even if the argument is correct, it does not assist Prudential, but in my view, it is not correct. The argument is an attempt to shoehorn the proposed mechanism into a framework for which it was clearly not designed. In short, CTPD 1 [25(e)] needs to be changed as it is misleading.

7.  Prudential argued that if I took this view, I should make an order that mirrored the consequences of refusing a sanctioned offer, which exceeded the amount awarded by a court on the grounds that if a refusal of an offer justifies in a conventional suit between parties to civil litigation an enhanced award of costs and interest, by parity of reasoning the Tribunal should adopt the same approach in the exercise of its discretion on costs. However, proceedings before the Tribunal are not conventional civil litigation and the considerations are different. The Commission is a public body carrying out a statutory duty, which requires it to bring cases of infringement of the Ordinance before the Tribunal (unless the matter is suitable for disposal by an infringement notice) for the Tribunal to determine. The processes serve materially different purposes and the Commission is in a materially different position to a plaintiff or a counter-claiming defendant in a civil suit. There may be cases in which the Tribunal is satisfied that indemnity cost or enhanced interest should be awarded, but this is not one. It is not necessary or desirable that in this case I explore the characteristics of a case, which might justify so doing.

Costs of the investigation

8.  Section 96 of the Ordinance provides:

“Order to pay costs of Commission investigation

(1) The Tribunal may order any person who has contravened a competition rule to pay to the Government an amount equal to the amount of the costs of and incidental to any investigation into the conduct or affairs of that person, reasonably incurred by the Commission in connection with proceedings for the contravention.

(2) In this section—

      costs (開支) include fees, charges, disbursements, expenses and remuneration.”

9.  Prudential’s primary position is that if it is awarded the costs of the action, it follows that the Commission should be denied its claim for the costs of the investigation. I disagree. The investigation was necessary even if the way the Commission proceeded to obtain an order from the Tribunal was problematic. In any event, I did not award Prudential the costs of the action, so this point falls away.

10.  The Commission claims that the entirety of its costs of the investigation against the 12 implicated undertakings (HK$914,180) are recoverable and the costs should be apportioned between them equally resulting in, contends the Commission, Prudential paying HK$76,000. Prudential argues that this method of assessment is fundamentally flawed. Section 96 of the Ordinance only allows the Commission to claim the costs of and incidental to any investigation into the conduct and affairs “of the person”. The Commission cannot, therefore, claim costs, which relate to the investigation of other undertakings, which is the necessary consequence of the Commission’s proposed methodology in the present case, which assumes rather than proves, that all of its investigation costs are relevant in some way to each of the 12 undertakings. Further, it has not been demonstrated that all of its investigation costs were reasonably incurred and Prudential identifies two examples: (a) a claim for the costs of executing warrants (HK$206,698) and (b) external legal services (HK$568,439).

11.  Prudential invites the Tribunal to dismiss the claim for investigations costs on the grounds that the Commission has not discharged the statutory pre-conditions for recovering them. Alternatively, Prudential invites the Tribunal to award the costs on a summary basis. The Commission agrees to a summary assessment and both Prudential and the Commission, through counsel, agreed that a summary assessment would result in the Tribunal awarding an amount without reasons. The costs of a detailed assessment would, I anticipate, be out of proportion to the costs in issue. Presumably, this is at least part of the reason why Prudential’s secondary position is to invite the Tribunal to undertake a summary assessment.

12.  It seems to me obvious that Prudential should be ordered to pay the Commission a sum representing its investigation costs. Section 96(2) of the Ordinance defines costs as including fees, charges, disbursements, expenses and remuneration. In Competition Commission v W Hing Construction Co Ltd (No 3)[2] the President Lam J said:

“…It is for the Commission to justify why an order under section 96 should be made. The threshold may not be very high, but there ought to be some materials provided in advance of the hearing to show the heads of investigation costs claimed, what activities they cover, their very approximate amounts, how they constitute costs of and incidental to the investigation into the conduct or affairs of the respondents, and why they should be regarded as having been reasonably incurred by the Commission in connection with proceedings for the contravention. The precise quantum may be left for subsequent assessment, but the Tribunal should be provided with some evidential basis for the exercise of this discretionary power and the respondents should be given an opportunity to contest it.”

13.  Although, the parties agreement to a summary assessment renders the issue academic in the present case, the Commission in its written submissions contended that the investigation costs cannot be referred to assessment as a taxation by the Registrar and it will be helpful if I take this opportunity to say something about this question. In footnote 50 to the above-quoted passage from W Hing, the then President said “whether the assessment of investigation costs (as opposed to legal costs of the proceedings) can be carried out by the Registrar” was an open question. It appears that investigation costs cannot be taxed by the Registrar under RHC O 62 for the following reasons.

(1)  The taxation of costs by the Registrar is provided for in RHC O 62. It is clear that RHC O 62 only applies to the costs of proceedings (whether in the High Court or other tribunal or arbitration): RHC O 62, r 2(1) and (2). Although RHC O 62, r 12(1)(c) provides that the taxing master has power to tax “any other costs the taxation of which is directed by an order of the Court”, this must be read subject to RHC O 62, r 2, which defines the scope of the application of RHC O 62 itself.

(2)  The Tribunal’s power to award investigation costs under section 96 is different to its power to order the costs of the proceedings, which is provided for under section 144(1)[3].

(3)  The differing application of RHC O 62 to the costs of proceedings and investigation costs is not unusual. It also applies to proceedings before the Market Misconduct Tribunal (“MMT”), where the MMT is empowered to order the payment of investigation costs (section 257(1)(f)(ii) and (iii) of the Securities and Futures Ordinance (Cap. 571) (“SFO”) , but the Tribunal may only refer the costs of the proceedings for taxation by the Registrar under section 260(3). The MMT in Part II of the Mayer Report dated 5 April 2017 at [176]-[180] confirmed this interpretation of the similarly worded provisions in section 307N.

(4)  Consequently, as the investigation costs do not concern the costs of any proceedings, their assessment cannot be carried out by a taxing master under RHC O 62.

14.  The Commission has provided to Prudential evidence in support of the investigation costs it says it has incurred. I do not understand Prudential to suggest that either the items claimed were not incurred or that the Commission’s calculation is incorrect. The Commission’s submission is that the fairest way to assess costs is to apportion them equally amongst the undertakings whose involvement in price fixing in the hotels was the subject of one investigation. It has, however, in correspondence with Prudential’s solicitors and in a schedule appended to its written skeleton argument broken them down to some degree to show that some of them are directly attributable to the investigation of Prudential. This produces a sum of HK$138,033.54 of which HK$77,425.92 is translation costs. The Commission’s final proposal to Prudential in an attempt to agree the investigation costs was HK$52,000. Prudential submitted before me that HK$30,000 was an appropriate quantification.

15.  I assess the costs of investigation at HK$95,000.

16.  The costs order nisi of my Judgment dated 25 March 2025 be varied as the Schedule attached to this decision.

Schedule

1.  The costs order nisi made at paragraph 48 of the Judgment of the Honourable Mr Justice Harris dated 25 March 2025 be varied as below:

1)  There be an order pursuant to section 96(1) of the Competition Ordinance (Cap. 619) (“Ordinance”) that the 4^th Respondent shall pay to the Government investigation costs at the sum of HK$95,000 into the matters relating to the 4^th Respondent’s contravention of the First Conduct Rule within 28 days from the date of this Order, and provide documentary evidence of such payment to the Applicant within 7 days from the date of payment;

2)  There be an order that the Applicant shall pay the 4^th Respondent the costs of and incurred in relation to the determination of the penalty including the costs of the hearing on 29 November 2023, to be taxed if not agreed;

3)  There be an order that the 4^th Respondent shall pay the Applicant the costs of the proceedings other than the costs covered by order (2) hereinabove, to be taxed if not agreed; and

4)  There be an order pursuant to section 94(1) of the Ordinance that the 4^th Respondent do adopt and implement an effective compliance programme in accordance with the agreed terms set out in the attached appendix.

Competition Compliance – Document 1 [Edition: 02/09/2025]

Prudential Hotel (BVI) Limited (“HOTEL”)

Written resolution of all the Directors of the HOTEL

It is resolved: The HOTEL shall adopt and comply with the following ‘Competition Compliance Policy (the “POLICY”):

The HOTEL is dedicated to compliance with Hong Kong’s competition law and policy that aims to promote fair competition and an even playing field for the benefit of both businesses and consumers in Hong Kong.

The HOTEL will not engage in activity that has the effect of unlawfully limiting competition. All forms of anti-competitive or deceptive conduct or unfair advantage through manipulation, concealment, collusion, misrepresentation of material fact or otherwise are strictly prohibited.

Each employee has the responsibility to comply with and promote competition law. The HOTEL expects all employees to be on guard for situations where competitors or suppliers appear to behave in an anti-competitive manner and report any suspicions of infringement to the HOTEL’s appointed Competition Compliance Officer.

It is further resolved: The HOTEL shall adopt and implement the ‘Competition Compliance Programme’ (the “PROGRAMME”) marked “Document 2” attached.

Dated	2025
Signed:   ………………………	………………………
Printed name:   ………………………	Printed name:   ………………………
Printed name:   ………………………	Printed name:   ………………………
Printed name:	Printed name:

Competition Compliance – Document 2 [Edition: 02/09/2025]

Prudential Hotel (BVI) Limited (“HOTEL”)

Competition Compliance PROGRAMME

1.  The HOTEL will adopt and implement an effective competition compliance programme in the time period and manner set out in this document below (the “PROGRAMME”).

Circulation of the PROGRAMME materials

2.1  Within 28 working days from the date the PROGRAMME is approved by resolution of the Board of Directors, the HOTEL shall circulate by email copies of the following documents in the English and/or Chinese (as available and/or appropriate) languages to all existing executive staff, staff with ‘front of house’ roles and responsibilities, and staff with business dealings with external third party suppliers (identified as of 02/09/2025 by the list of “IDENTIFIED STAFF” (Annexure 1)) and instruct in the email that such documents should be studied.

2.1.2  The Competition Policy of the HOTEL approved by resolution of the Board of Directors.

2.1.3  The extract “Overview of The Competition Ordinance” published by the Competition Commission (Annexure 2).

2.1.4  The extract “What are the key competition law risks for your business” published by the Competition Commission (Annexure 3).

2.1.5  The PROGRAMME approved by resolution of the Board of Directors.

And with the email there shall be included a weblink to the webpage of the Hong Kong Competition Commission named ‘Legislation & Guidance’ with the instruction that it may be referred to for further information if required.

2.2  All IDENTIFIED STAFF (or equivalent) newly recruited at any time in the future shall be provided by email within 14 days of commencing employment with copies of the documents referred to in paragraph 2.1 with the instruction that such documents be studied along with a weblink to the webpage referred to in paragraph 2.1 with the instruction that it may be referred to for further information if required.

Competition Compliance Officer

3.  The HOTEL shall nominate and always maintain a Manager grade (or above) member of staff (currently as of 02/09/2025 the Human Resources Manager) as the ‘Competition Compliance Officer’ who shall be responsible for ensuring the requirements of the PROGRAMME are followed and who shall keep appropriate records so that this may be demonstrated to the Board of Directors on request.

Competition Compliance Policy

4.  The HOTEL shall adopt a competition compliance policy, in the form of a written resolution signed by its directors, detailing its commitment to compliance with competition law and that competition law compliance is the responsibility of all HOTEL staff (“POLICY”).

Staff Competition Law awareness and training

5.1  The POLICY shall be prominently displayed on a notice board in the staff changing or restroom facilities within the HOTEL.

5.2  All IDENTIFIED STAFF shall ensure that the staff who report to and/or work under them are aware of the POLICY and PROGRAMME and their importance.

5.3  All IDENTIFIED STAFF shall attend in person or review online in video form a presentation on competition law and the POLICY and PROGRAMME conducted by the HOTEL’s solicitors (the “PRESENTATION”). The PRESENTATION shall take place and be made available in video form online within 6 months and thereafter it shall be continually available in video form online to be reviewed by the IDENTIFIED STAFF on request.

5.4  All newly recruited IDENTIFIED STAFF (or equivalent) shall review online in video form the PRESENTATION within 3 months of commencing employment.

5.5  The Competition Compliance Officer shall maintain a record of the staff attendance at such PRESENTATION and ensure that all appropriate staff attend and if not report to the Board of Directors for further action.

PROGRAMME audit

6.1  Following every calendar year end the HOTEL’s solicitors shall review the records maintained by the Competition Compliance Officer and within 56 days certify to the Board of Directors whether the PROGRAMME has been followed and if not what further additional steps or actions are required.

6.2  The certification of the solicitors as above shall be provided by the HOTEL to the Competition Commission within 28 days thereafter.

6.3  In the event of the HOTEL making any substantive changes to the POLICY or PROGRAMME a copy showing the changes made will be provided to the Competition Commission within 28 days.

PRUDENTIAL HOTEL (BVI) LIMITED

Date:

Name:

Position Director