TELEVISION BROADCASTS LTD v. COMMUNICATIONS AUTHORITY AND ANOTHER

HCAL 176/2013

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 176 OF 2013

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TABLE OF CONTENTS

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J U D G M E N T

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I. INTRODUCTION

1.  This is an application for judicial review in connection with a finding of infringement of competition law in the broadcasting sector of Hong Kong.  On 19 September 2013 the Communications Authority (“Authority”) issued a decision (“the Decision”) under the Broadcasting Ordinance (Cap. 562) (“BO”) against Television Broadcasts Limited (“TVB”), the applicant herein.  TVB is the holder of a domestic free television programme service licence issued under the BO.

2.  The Authority found that TVB had infringed ss. 13(1) and 14(1) of the BO by adopting certain practices, and clauses in its contracts with artistes and singers, which had the purpose and effect of preventing, distorting or substantially restricting competition in the television programme service market in Hong Kong.  The Authority directed TVB to bring to an end the infringement and to undertake a number of actions to ensure compliance with this direction, and in addition imposed a financial penalty of HK$900,000 on TVB.

3.  Under s. 34 of the BO, a party subject to an adverse decision of this type may appeal to the Chief Executive in Council (“CEIC”).  TVB has lodged an appeal to the CEIC, who has decided, at TVB’s request, to suspend the appeal procedure pending the determination of the present judicial review proceedings.

4.  In this application for judicial review TVB challenges the legality of the Authority’s decision on a number of grounds as well as the compatibility of the statutory procedure with the Hong Kong Bill of Rights[1]. The application is opposed by the two respondents, namely, the Authority and the CEIC.  The Authority has made submissions primarily in relation to the grounds attacking the Decision itself, whereas the CEIC has confined himself to advancing submissions in defence of the statutory procedure.

5.  The provisions in the BO relating to competition, including in particular the rules on conduct contained in ss. 13 and 14, have been repealed[2] and in effect substituted by the relevant provisions found in the Competition Ordinance (Cap. 619) which fully came into force on 14 December 2015.  The present case including any appeal to the CEIC is likely to be the last competition case governed by the BO,[3] since, as I have been told, there is no other case pending in which these provisions are invoked.

II.  FACTUAL BACKGROUND

6.  In this section I set out the background which sets the context in which the Decision was made by the Authority.  The contents of this section are primarily adapted with modifications from the Decision, and are uncontroversial unless otherwise indicated.

Television broadcasting in Hong Kong

7.  The Hong Kong television broadcasting sector includes both Free to Air (“FTA”) television services and pay television services.  There were at all material times only two FTA broadcasters, namely TVB and Asia Television Limited (“ATV”).  They transmit 11 channels in Cantonese, Putonghua and English on digital terrestrial transmission including simulcasts of the main Cantonese channels (TVB Jade and ATV Home) and English language channels (TVB Pearl and ATV World) on analogue terrestrial transmission.  The channels broadcast a mix of self-produced and third party programming.  FTA broadcasters rely on advertising revenues for their funding.  Additionally Radio Television Hong Kong (“RTHK”) is a government funded broadcaster that produces programming which is broadcast on TVB, ATV and other pay TV channels.

8.  There are three main domestic licensed pay TV providers: Hong Kong Cable Television Limited, PCCW Media Limited and TVB Network Vision Limited.  Hong Kong Broadband Network also provides pay TV services, but since its service is provided over the Internet, it is exempted from the licensing regime of the BO.  These services providers offer a range of channels in return for subscriptions as well as selling advertising.

Television Advertising in Hong Kong

9.  In addition to providing entertainment and supplying information, television broadcasting also carries commercial advertising in Hong Kong.  The Authority estimated that in 2010, HK$80,000 million was spent on advertising in Hong Kong; of this, television advertising was the single biggest category of HK$28,000 million, or approximately 35% of the total.

Supply and demand of artistes in broadcasting in Hong Kong

10.  Based on the evidence it had seen, the Authority considered (though TVB disagreed) that there were a large number of relatively low value artistes, and a much more restricted supply of more “valuable” artistes in Hong Kong.  A small number of artistes tended to receive high levels of remuneration, with a long tail of artistes who received relatively low levels of remuneration.  Similarly, there were a small number of artistes who appeared to have a very high media profile and a long tail of artistes with a lower media profile.

11.  In Hong Kong, artistes usually sign contracts with TV broadcasters to perform in programmes produced by the TV broadcasters concerned.  It is not common for artistes who are not contracted with broadcasters to regularly work for Hong Kong broadcasters.  While some top artistes/singers may not need to sign any contracts for appearing on TV, the percentage is small.  Most of these high value artistes do not regularly perform in TV programmes, though they may occasionally appear in music programmes, variety shows, charitable events or award presentation ceremonies on television on a one-off basis instead of participating in dramas.

TVB’s contracts with artistes and singers

12.  During 2007 to 2010, TVB contracted with about 75% to 80% of all the artistes on contract with the main Hong Kong broadcasters.  A significant portion of singers also entered into contracts with TVB.  Although following a dispute between TVB and four record companies, the number of singers contracted with TVB fell by 39 in 2010, TVB still contracted with a majority of singers in 2010.

13.  TVB had entered into several main types of contract with artistes and singers, namely, one-show contracts, serial-based contracts, singer contracts, and other contracts which were considered to be “full time” contracts and not the subject of investigation by the Authority. The first 3 types of contracts, which the Authority referred to as “occasional use contracts” were the subject of the Authority’s investigation and eventually the Decision.  They may be further described as follows:

(1) “One-show contracts” refer to contracts between TVB and its artistes in which the artistes are only signed for a minimum one-show commitment during the contractual period.  TVB and the artistes agree that the artistes will appear in TVB’s shows if the need arises at agreed-upon rates.  These contracts contain a clause stipulating that TVB has no obligation to utilise the artiste during the contractual period.

(2) “Serial-based contracts” refer to contracts between TVB and its artistes in which the parties agree to a rate for a drama series of varying lengths.  For example, TVB may agree to pay an artiste a certain amount for a drama series of 20‑episode duration.  Again, serial-based contracts contain the no-obligation-to-use clause which absolves TVB from an obligation to use a contracted artiste during the contractual period.

(3) For “singer contracts”, singers are engaged on a show-by-show basis.  TVB and the singers agree that the singers will appear in TVB’s shows if the need arises at agreed-upon rates.  Again, singer contracts contain the no-obligation-to-use clause which absolves TVB from an obligation to use a contracted singer during the contractual period.

The relevant clauses and policies

14.  These three kinds of contracts contained certain clauses which were the subject matter of complaint to the Authority.  Three of these clauses in particular imposed restrictions on working for rival television programme producers, and their typical provisions may be described as follows:

Clause a	A clause imposing a consent requirement:
	This clause requires the artiste not to be engaged by or render any similar services to any other television programme services licensed in Hong Kong without the prior written consent of TVB.
Clause b	A clause mandating outright exclusivity subject to TVB consenting otherwise:
	This clause requires the artistes to be totally exclusive to TVB and prohibits him/her from being engaged by or rendering any services to any other television programme services licensed in Hong Kong without the prior written consent of TVB.
Clause c	A clause requiring the artiste (or singer) to give TVB prior notice:
	This clause requires the artiste to give TVB written notice not less than a prescribed period of time before he/she performs for any other person in Hong Kong.

15.  Another clause found in the contracts with artistes imposed the “no promotion” policy and the “no original voice policy”. The “no original voice policy” prohibits TVB’s contractual artistes’ original voice from being used in productions featuring their images broadcast by other local television stations.  It requires other stations to dub the voices of such artistes if they wish to acquire overseas productions featuring these artistes.  The “no promotion policy” prohibits TVB’s contractual artistes from appearing at the promotional activities of TV productions in which they star but which are broadcast by other local TV stations.  This means that even if a rival local TV station has acquired the rights to broadcast an overseas TV production featuring a TVB contracted artiste, the station will not be able to procure the presence of that artiste in local promotional activities for the production.

16.  This clause (designated Clause h in the Decision) typically prohibits the broadcast of the artiste’s original voice when a third party’s production featuring that artistes is released in another TV station and also prohibits the artiste’s attendance in promotional activities or other publicity functions for that production.

17.  As mentioned above, all the occasional use contracts with artistes contained a clause that TVB is not under an obligation to use the contracted artiste beyond the minimum which, for one-show contracts, would be one show.  This “no-obligation-to-use clause” is generally formulated to provide that TVB is not bound to make any use of the artiste’s services.

18.  The frequency with which these contract clauses appeared in TVB’s contracts with artistes and singers from 2007 to 2010 was found to be as follows:

19.  There are also some other clauses of lesser significance considered by the Authority which I shall omit from this account.

20.  In addition, the Authority found that TVB had at the material times maintained a policy, which was not encapsulated in any contractual provisions, whereby artistes on contract with TVB were not permitted to speak Cantonese when they appeared in the programmes of other TV stations in Hong Kong (“no Cantonese policy”).

Complaint and investigation

21.  On 10 December 2009, the Authority received a formal complaint from ATV against TVB, alleging that certain clauses in TVB’s contracts with its artistes and singers and certain informal policies and practices pursued by TVB violated ss. 13 and 14 of the BO.

22.  After preliminary investigation, the Authority decided on 28 August 2010 to launch a full investigation into some of the contractual clauses and policies alleged in ATV’s complaint.  On 10 September 2010, the Authority informed ATV and TVB of its decision to proceed to the full investigation stage and issued a press release on the same day.  The Authority decided that the full investigation would cover the following allegations –

“(a) exclusive occasional use artiste and singer contracts with harsh and unreasonable terms;

(b) prohibiting artistes on serial-based and one-show contracts with TVB from having their original voices when performing in other TV stations’ programmes (no original voice policy);

(c) prohibiting artistes on serial-based and one-show contracts with TVB from attending promotional activities of the productions of other TV stations which also featured the artistes concerned (no promotion policy);

(d) imposition of language restriction on artistes (artistes on contracts with TVB are prevented from speaking Cantonese in the programmes of other TV stations in Hong Kong);

(e) unwritten rules of retaliation;

(f) unfair advertising practices (one station buy policy); and

(g) requiring film companies that hire TVB artistes to undertake that the film would not be sold to other TV stations in Hong Kong.”

23.  From October 2010 to November 2011, the Authority collected evidence from various stakeholders to analyse whether the allegations were substantiated.  The actions taken during the information gathering process include: requesting information through written submissions from licensees; holding interviews with a licensee, record companies and singers; requesting information through written submissions from advertising agencies; and commissioning an economic consultant to define the relevant market and assess TVB’s market power and to develop an economic framework to assess the effects of TVB’s conduct.

24.  In December 2011, the Authority produced a draft report on which TVB was invited to make representations.  Between 2 May 2012 and 18 October 2012, TVB made a series of written representations to the Authority on the draft report.  Its representations included that the investigation had not conformed with the principles of natural justice and had relied on evidence which was of questionable probative value.  TVB also requested the Authority to provide it with complete access to the evidence in the Authority’s file.  As a “gesture of goodwill”, TVB had taken unilateral actions to remove certain exclusivity terms in its one-show and singer contracts[4] and had agreed not to sign or renew one-show contracts with artistes.

25.  Coincidentally, on 19 October 2012, just after TVB completed its written representations on the draft report, Au J in the Court of First Instance handed down his judgment in an application for judicial review brought by ATV against the Authority (HCAL 77/2012), quashing the Authority’s refusal to disclose to ATV the identities of the persons the Authority had interviewed in an investigation against ATV and the transcripts of the interviews.

26.  On 25 January 2013, the Authority issued a revised draft report to TVB for further representations.  On 21 and 25 March 2013, TVB made written representations to the Authority, largely repeating its earlier submissions, but also relying on the judgment of Au J in the ATV case as supportive of TVB’s allegations of procedural unfairness.  In addition, TVB requested an oral hearing.

27.  The oral hearing was scheduled for 20 May 2013. Shortly before the hearing, on 15 May 2013, the Court of Appeal handed down its judgment allowing the appeal from Au J’s judgment in ATV v Communications Authority (the Court of Appeal’s judgment is reported at [2013] 2 HKLRD 354). The Court of Appeal held that the Authority was an administrative agency and the investigation inquisitorial in character.  Having regard, inter alia, to the confidentiality provisions in ss. 26(5) and 27(1) of the BO, the concept of procedural fairness which was flexible did not require disclosure of the information sought by ATV in that case.

28.  In both its written and oral representations, TVB claimed that it was entitled to disclosure of all information, evidence and documents obtained by the Authority in the course of the investigation, and that the Authority had acted unlawfully, irrationally and unreasonably in failing to disclose certain materials for TVB’s consideration, including the unredacted ATV correspondence, full transcript/recording of the ATV interview, unredacted unnamed licensee correspondence and full transcript/recording of the record companies’ and singers’ interviews.  As to the substantive analysis of ss. 13 and 14, TVB submitted, inter alia, that the Authority lacked jurisdiction over the alleged conduct, that the Authority had failed properly to identify the relevant markets and the respective market positions of the players, that the market data on TVB’s advertising revenues was seriously flawed, that the upstream market was in fact wider than the available pool of talent as found by the Authority, that the scope and duration of the contractual restrictions on artistes and singers were limited, that the Authority had failed to show the contractual provisions had prevented other licensees from engaging artistes and singers, that there was no convincing evidence of any anti-competitive effect of TVB’s conduct, and that the proposed remedies were disproportionate.  TVB’s arguments and the Authority’s responses are summarised in Appendix B to the Decision.

29.  On 26 August 2013, at the request of the Authority, TVB submitted its further representations, which largely reiterated its earlier arguments, on the Authority’s draft responses to TVB’s representations relating to the definition of the upstream market and the assessment of market power.

30.  On 19 September 2013, the Authority issued the Decision, upholding the complaints referred to in §22(a)-(d) above and rejecting those in §22(e)-(g).  It imposed a financial penalty on TVB and made orders requiring it to act or refrain from acting in certain ways.  The orders are set out in §§53-55 below.

III. LEGAL AND REGULATORY FRAMEWORK

31.  Prior to April 2012, the Broadcasting Authority was the statutory body responsible for regulating the broadcasting industry in Hong Kong under the BO.  On 1 April 2012, the Authority was established under the Communications Authority Ordinance (Cap. 616).  The functions of the previous Broadcasting Authority and the Telecommunications Authority were merged in the Authority, which has the combined role of regulating the broadcasting and telecommunications industries in accordance with the BO, the Telecommunications Ordinance (Cap. 106), the Unsolicited Electronic Messages Ordinance (Cap. 593) and the Broadcasting (Miscellaneous Provisions) Ordinance (Cap. 391) (formerly known as the Broadcasting Authority Ordinance).

32.  The Authority’s statutory functions include the enforcement of the competition provisions in the BO, namely, ss. 13 and 14, which provide as follows:

Section 13

“(1) Subject to subsections (4) and (5), a licensee shall not engage in conduct which, in the opinion of the Authority, has the purpose or effect of preventing, distorting or substantially restricting competition in a television programme service market.

(2) The Authority may consider conduct to fall within subsection (1) as including, but not limited to-

(a) direct or indirect agreements to fix the price in a television programme service market;

(b) conduct preventing or restricting the supply of goods or services to competitors;

(c) direct or indirect agreements between licensees to share any television programme service market between them on agreed geographic or customer lines;

(d) limiting or controlling production, markets, technical development or investment;

(e) applying dissimilar conditions to equivalent agreements with other trading parties, thereby placing them at a competitive disadvantage;

(f) making the conclusion of agreements subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such agreements.

(3) Subject to subsection (4), a provision in an agreement is void in so far as it provides for or permits, whether directly or indirectly, conduct which contravenes subsection (1).

……”

Section 14

“(1) A licensee in a dominant position in a television programme service market shall not abuse its position.

(2) A licensee is in a dominant position when, in the opinion of the Authority, it is able to act without significant competitive restraint from its competitors and customers.

(3) In considering whether a licensee is dominant, the Authority shall have regard to relevant matters including, but not limited to-

(a) the market share of the licensee;

(b) the licensee’s power to make pricing and other decisions;

(c) any barriers to entry to competitors into the relevant television programme service market;

(d) such other relevant matters as may be stipulated in guidelines concerning the test of dominance issued under section 4 by the Authority in consultation with the licensees in the relevant television programme service market.

(4) A licensee who is in a dominant position is deemed to have abused its position if, in the opinion of the Authority, the licensee has engaged in conduct which has the purpose or effect of preventing, distorting or substantially restricting competition in a television programme service market.

(5) The Authority may consider conduct to fall within the conduct mentioned in subsection (4) as including, but not limited to-

(a) predatory pricing;

(b) price discrimination, except to the extent that the discrimination only makes reasonable allowance for differences in the costs or likely costs of supplying the service or other matter;

(c) making the conclusion of agreements subject to acceptance by other parties of terms or conditions which are harsh or unrelated to the subject of the agreement;

(d) discrimination in the supply of services to competitors.”

33.  Where the Authority determines that there has been a breach of these competition provisions, it may direct the licensee to cease the infringing conduct and to take remedial steps under s. 16, which provides:

“The Authority may, by notice in writing served on a licensee-

(a) require the licensee to cease and desist on and after a date specified in the notice from conduct specified in the notice as conduct which the Authority states in the notice that it is of the opinion that it contravenes section 13(1) or 14(1);

(b) direct the licensee to take such steps as are specified in the notice, and within the period specified in the notice, as the Authority considers appropriate for the purpose of securing, or assisting the securing of, the licensee’s compliance with that section.”

34.  In addition, there is a power to impose financial penalties by virtue of s. 28, which provides:

“(1) Subject to this section, the Authority may, by notice in writing served on a licensee, require the licensee to pay the financial penalty specified in the notice where that penalty may be imposed by virtue of this section.

(2) The Authority may impose a financial penalty on a licensee if it is satisfied that the licensee contravened-

(a) a licence condition;

(b) a requirement under this Ordinance which is applicable to it;

(c) a direction, order, or determination, under this Ordinance which is applicable to it; or

(d) a provision in a Code of Practice which is applicable to it.

(3) The financial penalties imposed under this section shall not exceed $200,000 for the first occasion on which a penalty is imposed, $400,000 for the second occasion on which a penalty is imposed, and $1,000,000 for any subsequent occasion on which a penalty is imposed.

(4) Where the Authority considers that if it were to impose a financial penalty under subsection (3) it would not be adequate for a breach of section 13(1) or 14(1)-

(a) the Authority may-

(i) within 3 years of the commission of the breach; or

(ii) if the breach comes to the notice of the Authority within 3 years of its commission, within 3 years of it so coming to the notice of the Authority,

whichever is the later, make an application to the Court of First Instance; and

(b) upon such application, the Court of First Instance may, without prejudice to any powers conferred on the Authority by any provision of this Ordinance or any regulation made thereunder or any licence condition, impose upon the licensee who has committed the breach a financial penalty of a sum not exceeding 10% of the turnover of the licensee in the relevant television programme service market in the period of the breach, or $2,000,000, whichever is the higher, and also specify when any such financial penalty is due for payment.

……

(8) The Authority shall not impose a financial penalty in respect of a contravention by a licensee of a requirement under this Ordinance where the licensee has been convicted of an offence in respect of the contravention.”

It can be seen that the financial penalty provided for by s. 28(1) – (3) may be imposed for a number of contraventions not limited to breach of ss. 13 and 14, whereas the higher penalty in s. 28(4) may only be imposed for a breach of ss. 13 and 14.

35.  A licensee aggrieved by a decision of the Authority under the BO may appeal to the CEIC in accordance with s. 34(1), which provides:

“(1) Subject to the provisions of this section, a licensee (including a person seeking to be a licensee) aggrieved by-

(a) a decision of-

(i) the Authority in the exercise of a discretion conferred on it under this Ordinance or the Broadcasting (Miscellaneous Provisions) Ordinance (Cap 391) (including a decision to specify a condition in a licence);

(b) anything contained in a direction, order, or determination, under this Ordinance; or

(c) anything contained in a Code of Practice,

may appeal by way of petition to the Chief Executive in Council, not later than 30 days beginning on the date of the relevant decision, the issue or making of the direction, order, or determination, or the publication of the Code of Practice, as the case may be.”

36.  S. 35 provides:

“(1) In determining an appeal under section 34, the Chief Executive in Council-

(a) may receive information and advice from the Authority or any other person he considers appropriate; and

(b) shall afford the licensee concerned a reasonable opportunity to make representations on such information and advice, if any, received.

(2) The Chief Executive in Council may determine an appeal by confirming, varying or reversing the decision, direction, order, or determination, appealed against or, where appropriate, by directing that the relevant provision of the Code of Practice be amended as specified by him.”

37.  In addition, s. 15(2)-(4) of the BO provides for a private law cause of action against a licensee for, inter alia, breach of the competition provisions in the BO, as follows:

“(2) A person sustaining loss or damage from a breach of section 13(1) or 14(1), or a breach of a licence condition, determination or direction relating to that section, may bring an action for damages, an injunction or other appropriate remedy, order or relief against the licensee who is in breach.

(3) No action may be brought under subsection (2) more than 3 years after-

(a) the commission of the breach concerned referred to in that subsection; or

(b) the imposition under section 28 of a penalty in relation to the breach,

whichever is the later.

(4) For the avoidance of doubt, it is hereby declared that a breach of section 13(1) or 14(1) occurs when the Authority forms the opinion referred to in section 13(1) or 14(4) respectively.”

IV. THE AUTHORITY’S DECISION

38.  The Decision is a lengthy document with 278 paragraphs and 2 appendices, containing the analysis, reasoning and findings of the Authority as well as the orders made and directions given by the Authority against TVB as a result.  To put TVB’s challenge in context, it is necessary to set out below some of the Authority’s findings. 

39.  All of the main local television broadcasters show a range of general entertainment channels and some genre- or demographic-specific channels which broadcast self-produced programming aimed at the Cantonese-speaking Hong Kong market.[5]

40.  The most popular programmes in Hong Kong were “general entertainment” (such as drama, comedy, lifestyle, game show).  Of these, drama and comedy programmes were the most important drivers of audience ratings and therefore advertising revenue.  Other genres of programmes are unlikely to be a relevant substitute for dramas and comedies.  A television operator would be likely to face a fall in viewership if it relies on programmes other than dramas and comedies.[6]

41.  Both types of programming (drama and comedy) by their nature require input from artistes.[7]

42.  Artistes and programmes from outside Hong Kong are less popular than local artistes and programmes.  The vast majority of the top 200 most popular programmes in Hong Kong reviewed by the Authority were Hong Kong produced programmes.  For a variety of reasons, overseas artistes are in general not effective substitutes for local artistes.  Broadcasters would be likely to lose viewers if they switch to programmes and artistes from outside Hong Kong as alternatives.[8]

43.  While there are new artistes/singers who can gain wide popularity within a short time, the percentage is small and they seldom take a leading role in general entertainment programmes.  Therefore, aspiring or inexperienced artistes are unlikely to be full substitutes for experienced and trained artistes.[9]

44.  The pool of key talent for general entertainment consists mainly of artistes and singers on contract with Hong Kong broadcasters.  It is unlikely that a local broadcaster could significantly rely on overseas artistes, aspiring or inexperienced artistes/singers, or artistes not currently on contract with broadcasters.[10]

45.  During 2007-2010, TVB had contracted with a significant proportion of all the artistes on contract with the main Hong Kong broadcasters and also singers.[11]

46.  The television programme service market is a two-sided market, in which there are two interrelated groups of consumers, the viewers and the advertisers.  On the viewers side, the relevant geographic market is the entire territory of Hong Kong.[12] The relevant product market is no greater than all TV viewing, without ruling out the possibility of a smaller market of FTA TV.  The Authority proceeded on the basis that the relevant market is that of all TV viewing, which is more favourable to TVB than the possible narrower market of FTA TV (i.e. excluding pay TV).[13] On the advertisers side, the relevant market is TV advertising in Hong Kong.[14]

47.  TVB is dominant in the market for “All TV viewing”, regardless of whether FTA viewing constitutes a separate market or not.[15] TVB is also dominant in the market of television advertising in Hong Kong.[16]

48.  By a number of different means, TVB has imposed restraints on the ability of local artistes and singers to work for rivals,[17] i.e.:

(1) prohibiting artistes or singers who have existing serial-based, one-show or singer contracts with TVB from, or requiring such artistes or singers to seek consent from or notify TVB for, appearing on or providing services to other television stations in Hong Kong;

(2) prohibiting artistes who have existing serial-based or one‑show contracts with TVB from, or requiring such artistes to seek consent from TVB for, appearing on other television stations in their original voices or attending promotional activities of other television stations for television programmes and drama productions featuring those artistes; and

(3) requiring, formally or informally, its singers and artistes to refrain from speaking Cantonese on other television stations in Hong Kong.

49.  TVB had through the operation of the contract clauses in question imposed de facto exclusivity on singers and artistes, because they considered requesting TVB’s consent futile or they feared that seeking consent would be detrimental to their careers.[18]

50.  Because of the no-obligation-to-use clause, TVB was not obliged to and did not in fact fully engage a significant number of artistes and singers on occasional use contracts with it.  Given the low per-show fee for many of the one-show artistes and singers, this enabled TVB to “warehouse” them at a low cost to itself.[19]

51.  TVB’s exclusivity clauses are augmented by other clauses and policies, including the no original voice policy and the no promotion policy, as well as the no Cantonese policy.[20]

52.  Limiting to a material degree the extent to which rival broadcasters can obtain key inputs into their self-produced programmes has the effect of making rivals less able to expand their output and compete with TVB.  In the absence of TVB’s restrictions, rivals would have greater access to artistes and singers.  They would be able to obtain higher quality inputs and this would make their self-produced programmes requiring artistes’ and singers’ input more attractive to viewers and, in turn, advertisers.  This would enable them to generate increased revenues and improve their competitive position versus TVB.[21]

53.  The requirements that that Authority actually imposed on TVB pursuant to s. 16 of the BO were set out in §§276 and 277 of the Decision.  As the premise, in §274 of the Decision the Authority found that:

“… TVB has committed an infringement of sections 13(1) and 14(1) of the BO by adopting the following practices during the period from 2007 to 2010 in the circumstances set out in this Decision:

(a) prohibiting artistes or singers who have existing serial‑based, one-show, or singer contracts with TVB from, or requiring such artistes or singers to seek consent from or notify TVB for, appearing on or providing services to other TV stations in Hong Kong;

(b) prohibiting artistes who have existing serial-based or one-show contracts with TVB from, or requiring such artistes to seek consent from TVB for, appearing on other TV stations in their original voices or attending promotional activities of other TV stations for TV programmes and drama productions featuring these artistes; and

(c) requiring, formally or informally, its singers and artistes to refrain from speaking Cantonese on other TV stations in Hong Kong.

The Authority is of the opinion that TVB’s various exclusive clauses (Clauses a – g set out in Chapter VII), and the no original voice, no promotion and no Cantonese policies have the purpose and effect of preventing, distorting or substantially restricting competition in the relevant market by impairing rival TV stations’ ability to compete with it.  In particular, the Authority finds that, through its contractual provisions (including the no-obligation-to-use clause) and various formal and informal policies, TVB has imposed a system of exclusivity over artistes and singers which actually and potentially forecloses rivals’ legitimate access to an essential input for TV programme production.  Such foreclosure has produced and has the potential to continue to produce a significant detriment to the end consumers of TV viewers by causing a deterioration of quality of rivals’ programme offerings. …”

54.  After imposing a financial penalty of HK$900,000 on TVB in §275 of the Decision, the Authority directed TVB in §276:

“to forthwith bring to an end the infringement referred to in paragraph 274 above, and refrain from repeating or engaging in any act or conduct which has an equivalent purpose or effect to that referred to in paragraph 274.”

55.  In §277 of the Decision, the Authority further required that TVB, inter alia:

“(a) within three months (i.e. on or before 18 December 2013), communicate to all artistes and singers who have current serial‑based, one-show or singer contracts with TVB that TVB abandons the infringing contractual clauses and policies described in paragraph 274 above and make it clear to all artistes and singers concerned that any artiste or singer who acts in a manner which is inconsistent with the proscribed contractual clauses and policies will not be treated as being in breach of contract to TVB;

(b) within two weeks (i.e. on or before 2 October 2013), issue a public statement (in both English and Chinese and with wordings to be agreed with the Authority) explaining and declaring that TVB will not require singers and artistes which it engages to refrain from speaking Cantonese on other TV stations in Hong Kong; and

(c) within four months (i.e. on or before 18 January 2014), provide a full report to the Authority describing the steps taken by TVB to comply with this direction and including a signed statement by the Group General Manager of TVB confirming that the steps have been performed.”

V.  THE APPLICATION FOR JUDICIAL REVIEW AND ITS GROUNDS

56.  The original notice of application for leave to apply for judicial review (“Notice of Application”) contained 4 grounds.  Three new grounds (numbered 5 to 7) were raised by amendments proposed in August 2015.  At the beginning of the hearing I gave leave for the amendments to be made and for those grounds to be relied upon, there being no opposition to the addition of those grounds as such.  There was however an objection from the respondents to certain arguments in the skeleton argument of counsel for TVB. I shall refer to that dispute below so far as relevant.

57.  Seven grounds are advanced on behalf of TVB. The first two grounds attack the constitutionality of the statutory scheme having regard in particular to the appeal to the CEIC provided for in s. 34 of the BO.  The rest, Grounds 3 to 7, attack the contents of the Decision itself. The grounds, which I shall deal with sequentially below, may be broadly described as follows:

(1) Ground 1: it is unconstitutional for the statutory appeal mechanism to place a judicial function in the CEIC because under by virtue of the provisions of the Basic Law, judicial powers can only be exercised by the courts, not by the Executive Government.

(2) Ground 2: the statutory process fails to comply with the requirements of arts. 10 and 11 of the Hong Kong Bill of Rights.

(3) Ground 3: the Authority does not have jurisdiction to review practices outside of the television programme service market.

(4) Ground 4: the Authority erred in law in failing properly to identify the relevant upstream markets and in its substitutability assessment in relation to that market.

(5) Ground 5: the Authority failed to adopt a rational and correct approach to assessing and failed to conduct sufficient enquiry into TVB’s market position.

(6) Ground 6: the Authority applied the wrong standard of proof in reaching the conclusion that the relevant conduct had the purpose or effect of preventing, distorting or substantially restricting competition in a television programme service market and has reached that conclusion on the basis of manifestly inadequate evidence.

(7) Ground 7: lack of proportionality in the remedial measures adopted.

VI.  GROUND 1 – USURPATION OF JUDICIAL FUNCTIONS BY CEIC

58.  Counsel for TVB did not advance any submission in support of Ground 1.  On the contrary, relying on s. 64(4) of Interpretation and General Clauses Ordinance (Cap. 1) (“IGCO”) (see §123 below), counsel submitted the CEIC would not be exercising judicial power in determining an appeal from the Authority under s. 34 of the BO.  Ground 1 may therefore be taken to have been abandoned by TVB as a separate ground of challenge.

VII.  GROUND 2 – NON-COMPLIANCE WITH ARTICLES 10 AND 11 OF BILL OF RIGHTS

59.  Art. 10 of the Hong Kong Bill of Rights (which I shall refer to below simply as “Article 10”), which takes effect under the Hong Kong Bill of Rights Ordinance (Cap. 383), provides:

“All persons shall be equal before the courts and tribunals. In the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law. …”

Article 10 is in terms identical to art. 14(1) of the International Covenant on Civil and Political Rights (“ICCPR”) and is as such given constitutional force by art. 39 of the Basic Law.

60.  Art. 11 of the Bill of Rights (“Article 11”) provides:

“(4) Everyone convicted of a crime shall have the right to his conviction and sentence being reviewed by a higher tribunal according to law.”

This provision is identical to art. 14(5) of the ICCPR and thus also has constitutional status.

61.  As submitted by counsel for TVB, the issues that arise under Ground 2 are as follows:

(1) whether the Decision constitutes the determination of a criminal charge against TVB;

(2) if so, whether the requirements of Article 11(4) are satisfied;

(3) whether the Decision constitutes a determination of TVB’s “rights and obligations in a suit at law”;

(4) if so, whether the statutory scheme as a whole satisfies Article 10 – this question may in turn be divided into three sub-issues:

(a) do the proceedings before the Authority constitute a hearing before a tribunal and if so, whether it is an independent and impartial tribunal;

(b) does the appeal to CEIC constitute a hearing before a tribunal and if so, whether it is an independent and impartial tribunal;

(c) if Article 10 is not satisfied by the proceedings before the Authority and/or the CEIC, whether such deficiency is cured by the availability of judicial review by the High Court.

Whether determination of criminal charge

62.  There is no dispute that whether the Decision involves the determination of a criminal charge within the meaning of Article 11 has to be approached having regard to three matters, sometimes called the Engel criteria after the case Engel v The Netherlands (No 1) (1976) 1 EHRR 647, namely, (1) the classification of the offence under domestic law; (2) the nature of the offence; and (3) the nature and severity of the potential sanction.  These criteria are independent and not cumulative: Wong Tak Wai v Commissioner of Correctional Services [2010] 4 HKLRD 409 §88.

63.  Proceedings which may result in the imposition of a substantial penalty for wrongful conduct will involve the determination of a criminal charge unless they have a character which is neither criminal nor penal: Koon Wing Yee v Insider Dealing Tribunal (2008) 11 HKCFAR 170 §§37-38.  However, as Sir Anthony Mason NPJ pointed out in that case at §37:

“Disciplinary proceedings, which do not concern the public at large, usually have such a non-criminal, non-penal character. Proceedings under regulatory legislation whose purpose is essentially protective rather than punitive and deterrent may also have such a character, a matter to be discussed at greater length later in these reasons (see paras 59 and 60). So also with proceedings that have a preventative rather than a punitive or deterrent purpose. Likewise, proceedings for a penalty which is compensatory in nature have a non-criminal and non-penal character.”

64.  In the present case, the infringement of ss. 13 and 14 is not characterised as a criminal matter under the BO itself.  The internal classification is non-criminal.  This factor, albeit an important consideration, is only a starting point and has substantially less weight than the second and third factors: Koon Wing Yee, supra, at §§32 & 62.

65.  So far as the second Engel criterion is concerned, counsel for TVB drew attention to a number of decisions in other jurisdictions.  In Societe Stenuit v France [1992] ECC 401 the European Commission of Human Rights[22] opined that an infringement of the (French) Prices Ordinance, which contained provisions to maintain free competition within the French market, should be classified as criminal for the purposes of art. 6 of the European Convention on Human Rights (“ECHR”) because, inter alia, the Ordinance “affected the general interests of society normally protected by criminal law” (see §62).

66.  In Case C-235/92P Montecatini SpA v Commission [1999] ECR I-4575 at §176, the European Court of Justice took the view that infringements of European competition law were criminal in nature for the purposes of art. 6 of the ECHR “given the nature of the infringements in question” as well as the nature and severity of the penalties.

67.  The position in the United Kingdom follows that in the European Union.  In Napp Pharmaceutical Holdings Ltd v Director General of Fair Trading [2001] CAT 3 at §69; [2002] CAT 1 at §98, it was conceded – a concession with which the Competition Commission Appeal Tribunal agreed – that proceedings for financial penalties under the Competition Act 1998 were criminal in nature for the purposes of art. 6 of the ECHR; see also Office of Fair Trading v [Not named pursuant to paragraph 2.2 of Practice Direction – Application for a warrant under the Competition Act 1998] [2003] EWHC 1042 (Comm) at §6; Argos & Littlewoods v Office of Fair Trading [2004] CAT 24 §§159-166; [2006] EWCA Civ 1318 at §§18 & 162-163.

68.  In Case E-15/10 Posten Norge AS v EFTA Surveillance Authority [2012] EFTA Court Report 246 at §88, the EFTA Court[23]also held that having regard to the nature of the infringements and to the potential gravity of the ensuing penalties, the proceedings for infringement of art. 54 of the EEA Agreement by an abuse of dominant position fell within the criminal sphere for the purposes of art. 6 of the ECHR.  As regards the nature of the offence, the Court noted (at §90) that “the stigma attached to being held accountable for an abuse of a dominant position is not negligible”.

69.  On this basis, TVB argued that a finding of infringement of ss. 13 and 14 of the BO was a serious matter and carried stigma.  TVB did not, however, submit that the second criterion would of itself be sufficient to render the proceedings criminal.  Indeed, it accepted that but for the imposition of a financial penalty, Article 11 would not be engaged in proceedings for breach of ss. 13 and 14. 

70.  In this context it should be noted that in contrast with the offence of insider dealing considered in Koon Wing Yee, a breach of the competition law provisions in the BO is not necessarily “dishonest misconduct” (c.f. Koon Wing Yee at §46), albeit even insider dealing is not regarded as necessarily criminal, as Luk Ka Cheung v Market Misconduct Tribunal [2009] 1 HKLRD 114 shows.

71.  Furthermore, it is to be recalled that the jurisprudence in this area is “fact-sensitive” (see Koon Wing Yee, supra, §28) and decisions of the courts of other jurisdictions cannot be transplanted to Hong Kong without a careful examination of the social and legal context in which they were made.  In the present case, two important distinctions from the authorities referred to by TVB need to be borne in mind. First, the prohibition found to have been infringed by TVB is contained in the BO and applies to and only to licensees, i.e. holders of licences granted under s. 8 of the BO to provide various types of television programme service.  Ss. 13 and 14 do not impose restrictions on the public at large; indeed they do not apply other than to a definite and very limited class of persons who have obtained the special privilege of being able to broadcast television programmes in Hong Kong.  The prohibition applies not to every commercial or economic activity but to the television industry.  Not every market in that industry is protected by those provisions but only a relevant television programme service market. 

72.  This distinction is reinforced by an examination of the history of these provisions.  Prior to the enactment of the BO, there was no statutory competition law provision in the predecessor statute, the Television Ordinance (Cap. 52).  Instead, a “free competition” clause was inserted in all commercial television broadcasting licences which prohibited a licensee from entering into any agreement or arrangement which would restrict competition in relation to the establishment, provision or operation of any telecommunication or broadcasting service.  A financial penalty could be imposed for breach of licence conditions generally under s. 37 of the Television Ordinance.  While ss. 13 and 14 of the BO are now found in the statute instead of the licences, the class of persons to whom they apply has not been expanded.

73.  As such the competition law provisions in the BO seem to me to have a heavy disciplinary and regulatory character.  They concern specific and a very limited number of entities who are specially qualified to practise in a regulated industry.  That industry is regulated for the protection of the public and is regulated by the Authority not so much as a general criminal law enforcement agency but as a regulator of that industry.

74.  The decision of the European Court of Human Rights in OOO Neste St Petersburg v Russia (App no. 69042/01, decision of 3 June 2004) shows the relevance of this point.  There proceedings were brought in Russia against the applicants under the Law on Competition and the Restriction of Monopolies in the Commodity Markets.  The applicants argued that the courts had determined a “criminal charge” against them.  In relation to the second Engel criterion, the Strasbourg Court said (at p 10):

“In this connection, the Court observes, first, that the Competition Law applies only to ‘relations which influence competition in commodity markets’ (section 2), and therefore is of a restricted, not universal, application.

……

Lastly, freedom of market competition is a relative, situational value and encroachments on it are not inherently wrong in themselves.”

In the result, taking into account that the powers of the authority to make orders fell into the regulatory and compensatory category, the Court concluded the applicants were not charged with a criminal offence for the purpose of art. 6 of the ECHR.

75.  The fact that a provision is directed towards a special group of persons as opposed to all citizens is of course not conclusive, as the prisoners cases of Ezeh & Connors, supra, at §103 and Wong Tak Wai, supra, show.  It is nevertheless a relevant indicator of the nature of the offence.

76.  The second distinction is that at all times material to this case no cross-sector competition law was in force in Hong Kong which proscribed or controlled anti-competitive conduct generally.  The Competition Ordinance (Cap. 619), enacted in June 2012, only came into full effect recently on 14 December 2015.  At the time of the impugned conduct in question (2007 to 2010) and even at the time of the Decision (September 2013), anti-competitive conduct or agreement and abuse of dominant position were not generally prohibited in this society.  The corollary is that a finding of infringement of the competition provisions of the BO did not carry with it the same stigma or obloquy as it would under a general competition law representing a pervasive societal norm of acceptable behaviour.

77.  Turning to the third Engel criterion, it is to be noted that the maximum financial penalty under s. 28(3) of the BO is HK$1 million, whereas the maximum under s. 28(4) is 10% of the turnover of the licensee in the relevant television programme service market in the period of the breach, or HK$2 million, whichever is higher.  The actual penalty imposed on TVB was HK$900,000.

78.  Counsel for TVB submitted that in assessing whether any proceedings involved the determination of a criminal charge, one has to look at the maximum penalty under the scheme: Ezeh & Connors v UK (2004) 39 EHRR 1 at §120; Hall v Commissioner of Correctional Services [2015] 2 HKLRD 917 at §11; Campbell and Fell v UK (1985) 7 EHRR 165 at §69.  Counsel for the respondents did not dissent from this as a general proposition.  The question arises, however, as to whether the relevant maximum penalty for present purposes is that under s. 28(4) as TVB contended, or the sum of HK$1 million under s. 28(3) as the respondents contended.

79.  TVB argued that under s. 28(4), the role of the Court of First Instance is limited to the assessment of the appropriate financial penalty on the basis of the breach found by the Authority.  The penalty provided for in s. 28(4) is therefore the penalty that may potentially flow from a determination by the Authority without any further independent adjudication on liability by any other body, and is therefore the relevant maximum penalty for the purposes of applying the third Engel criterion.

80.  I am unable to accept this submission.  I confess that I have found s. 28(4) a strange creature.[24]  It appears to confer a discretionary power (by using the word “may”) on the Court of First Instance, upon application by the Authority, to impose a financial penalty on a licensee, but it is not entirely clear what the nature of such an application is and what matters the court can take into account.  TVB argued that the court would be bound to sentence without inquiring into the merits of the “conviction”.  In my view the language of s. 28(4) does not categorically preclude such inquiry.  If in an appropriate case Article 11 is brought into play because of the potential penalty under s. 28(4), then I would have thought the court would be entitled, if not bound, to inquire into the merits of the “conviction” if that is what the provisions of Article 11 require in the circumstances of that case. 

81.  TVB, relying on the language of s. 13(1) of the BO, submitted that a breach only occurred upon the Authority forming the relevant opinion.  TVB also relied on the phrase “occurs when” in s. 15(4) as suggesting that the question of breach is inextricably linked to the Authority’s opinion.  It was argued that, therefore, the court in an application under s. 28(4) would have no jurisdiction to re-open the question of whether there had been an infringement.  However, it is to be noted that s. 14(1) does not depend on Authority’s opinion.  S. 14(4), which does refer to the Authority’s opinion, operates to deem certain conduct as an abuse of dominant position but does not purport to be an exhaustive definition of breach of s. 14(1).  As to s. 15(4), it may be relevant to the bringing of a private law action under s. 15(2) but it is not necessary to construe it as binding upon the Court of First Instance in a determination of penalty under s. 28(4).

82.  In my view, considerations of justice suggest that the higher penalty provided for in s. 28(4) is not a penalty to which a broadcaster is potentially vulnerable as a result of the determination by the Authority under ss. 13 and 14 without a further determination by the Court of First Instance capable of extending to all such matters as the needs for a fair hearing may require.  It follows that in assessing the character of the determination by the Authority under the third of the Engel criteria, the relevant maximum penalty is that under s. 28(3), i.e. HK$1 million.  In any event, if Article 11 was engaged solely because of s. 28(4), and the system was thereby rendered unconstitutional (but not otherwise), then it seems to me the appropriate remedy would be to strike down s. 28(4) alone, which would be of no assistance to TVB in the circumstances of this case.

83.  Counsel for TVB referred to the legislative materials leading to the enactment of s. 28, which mentioned an intention to provide “deterrent effect”.  But the same materials also suggested that the mechanism for imposing a higher penalty under s. 28(4) was added in order to provide “sufficient deterrence” against anti-competitive behaviour, implicitly recognising that the penalty of HK$1 million under s. 28(3) did not, or could not, primarily serve a deterrent purpose.  As the Court of Final Appeal held in Koon Wing Yee, supra, at §73, the “punitive” and “protective” purposes are not mutually exclusive.  A potential order that has deterrent effect may not render the proceedings leading to it criminal if that effect is “incidental and subservient” to the purpose of protection of the public or a relevant class of it.

84.  The scope of application of the fine under s. 28(3) is wide.  It is not limited to a breach of ss. 13 and 14, but may be imposed for a breach of, inter alia, any licence condition or a provision in a relevant code of practice[25]: see s. 28(2)(a) & (d).

85.  The maximum amount of the fine itself under s. 28(3) is variable.  The limit is HK$200,000 for the first occasion, HK$400,000 for the second occasion and HK$1,000,000 on any subsequent occasion.  In my opinion, the amount of the fine, even at the highest of HK$1 million, is in the scheme of things not a very substantial figure.  The advertising revenue of the television industry in Hong Kong in 2010 was approximately HK$28 billion and the annual turnover of TVB between 2007 and 2010 ranged from HK$3.98 to HK$4.68 billion.  If one is to ask the question, posed by the Supreme Court of Canada in R v Wigglesworth [1987] 2 SCR 541 at 561 (applied in Guindon v R [2015] SCC 41 at §46), whether the fine is one “which by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within [a] limited sphere of activity”, the answer is in my view clearly in the negative.

86.  That said, the Engel criteria have to be considered together and the smallness of a fine does not “divest an offence of its inherently criminal character”: Oztürk v Germany (1984) 6 EHRR 409 §54.

87.  The confluence of the above factors shows, in my view, that the penalty under s. 28(3) pursues primarily the aim of ensuring compliance by the limited class of television broadcasting licensees with the variety of obligations imposed on them either in the licences, codes of practice or other applicable directions or requirements, thereby protecting the public and in particular the users of television programme service.  Any deterrent effect it has is secondary and incidental and does not clothe the penalty or the proceedings leading to it with a criminal character.

88.  In conclusion it follows that the proceedings concerned in the present case are not to be characterised as criminal for the purposes of Article 11.  They are directed primarily at regulatory concerns and do not have as their main object a deterrent or repressive effect on economic undertakings generally or retribution for a wrong done to society as a whole.

89.  I am fortified in that conclusion by the decision in I-Cable Webserve Ltd v Telecommunications Authority (unreported, CACV 329/2008, 11 June 2009) in which the Court of Appeal considered the nature of an infringement of s. 7M of the Telecommunications Ordinance (Cap. 106) which prohibited misleading or deceptive conduct.  S. 36B provided that the Telecommunications Authority may issue directions to a licensee requiring it to take action to comply with the provisions of that Ordinance.  S. 36C(3) empowered that authority to impose financial penalties of a similar magnitude to those in s. 28(3) of the BO.  S. 36(4), which is similar to s. 28(4) of the BO, envisaged an application to the court for financial penalties of higher amount.  The actual fine imposed in that case was HK$100,000.  The Court of Appeal concluded that the effect of the provisions in question was “regulatory or disciplinary” and that contravention of s. 7M was not a criminal offence.  While the decision is not binding on me, since the provision considered there was not similar in nature to ss. 13 and 14 of the BO but was directed to consumer protection in a wider sense (see §5), it nevertheless showed that a prohibition applicable only to licensees under that Ordinance with a sanction similar to that under the BO was properly to be characterised as non-criminal for the purposes of the Bill of Rights.

Whether Article 11(4) is satisfied

90.  Assuming, contrary to my conclusion above, that the proceedings are criminal in nature, two aspects of Article 11 have been raised: the requirement of Article 11(4) and the standard of proof.  I shall consider the issue of the standard of proof under Ground 6 below.

91.  Article 11(4) confers on the person concerned the right to have the decision reviewed by a higher tribunal.  This has been described as the safeguard of a “second tier of judicial scrutiny”: Lau Cheong v HKSAR (2002) 5 HKCFAR 415 at §164.  The equivalent provision in the ECHR is to be found in art. 2 of Protocol No. 7 to the ECHR.

92.  I agree with the submission of Mr Yu SC for the CEIC that if the overall process up to and including judicial review in this court is sufficient to comply with Article 10 as a first-tier hearing, then since there is a right of appeal from this court to the Court of Appeal which for these purposes has the same jurisdiction, Article 11(4) would be satisfied. Accordingly it seems to me that TVB’s argument based on Article 11(4) raises no additional question than what is already raised by its argument based on Article 10.

Whether Article 10 is engaged

93.  Whether Article 10 is engaged turns on the question of whether the process concerned involves a determination of TVB’s “rights and obligations in a suit at law”.  This phrase is to be given a generous interpretation: Lam Siu Po v Commissioner of Police (2009) 12 HKCFAR 273 at §24 per Bokhary PJ.  As Ribeiro PJ pointed out in the same case (at §§62-65), the phrase is to be given the same meaning as the concept of “civil rights and obligations” in art. 6 of the ECHR.  The scope of the concept of civil rights has been greatly expanded by the European courts over the years, perhaps beyond what the original framers of the ECHR had in mind, as explained by Lord Hoffmann in Runa Begum v London Borough of Tower Hamlets [2003] 2 AC 430 at §§28-31 and R  (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2003] 2 AC 295 at §§77-88.  The general enquiry is whether the process involves determination of a serious or genuine dispute of a civil right or obligation available (or arguably available) within the domestic law of the jurisdiction concerned.

94.  There is no doubt in my mind that Article 10 is engaged in this case.  The proceedings lead to a final determination of a dispute over whether TVB acted unlawfully by breaching the statutory prohibition against anti-competitive conduct.  TVB was ordered to abandon certain clauses and policies (see §277 of the Decision quoted above).  Its relevant private law rights under existing contracts with artistes and singers were brought to an end by the order made under s. 16, and possibly avoided automatically by virtue of s. 13(3) (see §310 below); see the seminal case of Ringeisen v Austria (No. 1) (1971) 1 EHRR 455 itself in which art. 6(1) of the ECHR was held applicable to an administrative decision which was decisive for the enforceability of the relevant contract for sale of land.  TVB’s freedom to enter into future contracts was also restricted by the decision and order of the Authority.  These are civil rights of the classic kind identical to those determined by ordinary courts in suits concerning the enforceability of contractual clauses in alleged restraint of trade. 

95.  In addition a private action for damages or other relief may be brought against TVB by third parties for any damage sustained as a result of TVB’s breach of s. 13 or 14.  S. 15(4) declares that “a breach of section 13(1) or 14(1) occurs when the Authority forms the opinion referred to in section 13(1) or 14(4) respectively”, suggesting that a finding of infringement by the Authority itself constitutes the fact of breach in an ensuing civil suit brought under s. 15(2), leaving outstanding only the questions of causation, remoteness, and quantification of loss. 

96.  The possible (and in this case actual) sanction for infringement includes also the financial penalty imposed on TVB which, by virtue of s. 29(1) of the BO, is recoverable by the Government as a civil debt. 

97.  Having regard to all these matters, it is in my view plain that the process under consideration involved the determination of a serious and genuine dispute of TVB’s “rights and obligations in a suit at law” for the purposes of Article 10.  It is unnecessary to decide whether the imposition of financial penalty alone (which I have found to be of a regulatory or disciplinary rather than criminal nature) constitutes the determination of TVB’s civil rights and obligations: c.f. Lam Siu Po at §§91-92. 

Whether Article 10 has been complied with

98.  Article 10 is of fundamental importance in the constitutional set-up of Hong Kong.  As Ribeiro PJ pithily put it in Lam Siu Po at §67, “Article 10 gives effect to the rule of law”.  The guarantee provided by the equivalent art. 6(1) of the ECHR has been called the principle of effective judicial protection.[26] In the present context it requires that the determination of TVB’s civil rights and obligations be made by or subject to the sufficient control of a judicial body. 

99.  TVB contends Article 10 is not satisfied because: (i) the Authority itself is not an independent and impartial tribunal; (ii) the CEIC upon an appeal from the Authority under s. 34 of the BO is likewise not such a tribunal; and (iii) the Court of First Instance upon an application for judicial review of the Decision does not possess full jurisdiction in the sense required in this case.

Whether the Authority is an independent and impartial tribunal

100.  The first question is whether the Authority itself is an independent and impartial tribunal within the context of Article 10 for the purposes of the determination of an infringement of ss. 13 and 14 of the BO.  Independence in this context connotes independence of both the executive and the parties: Wong Tak Wai at §38-39; Ringeisen at §95.  Impartiality requires not only that the tribunal be free of subjective prejudice or bias, but also that it be impartial from an objective viewpoint: Kleyn v Netherlands (2004) 38 EHRR 14 at §191.  While independence and impartiality import different concepts, the two are closely linked: Wong Tak Wai, at §117 per A Cheung J; Alconbury at §42 per Lord Slynn; Kleyn at §192.  I shall consider both concepts together in the present case. 

101.  Counsel for TVB submitted that the Authority is not independent and impartial for a number of reasons.  First, the Authority comprises in part two senior Government officers with executive responsibilities in relation to the communications sector.  The Authority’s members include, as they must,[27] a “public officer”, who at all material times was Ms Susie Ho Shuk-yee, Permanent Secretary for Commerce and Economic Development (Communications and Technology).  She was (and still is) the Vice-Chairman of the Authority whilst at the same time leading a government department intimately concerned with policy development in the field which the Authority regulated.  In addition, the Director-General of Communications, who heads the Office of the Communications Authority (“OFCA”) which is a government department supporting the Authority, is also required to be a member of the Authority.[28] 

102.  As the Authority submitted in response, however, the two government officials are a small minority in a body that must consist in addition of between 5 and 10 persons who are not public officers.[29]  Further, there is nothing to suggest that the Director-General, who merely heads the OFCA, has any other function than supporting the Authority.  I do not think that the mere presence of a civil servant on a statutory body with the sole responsibility of providing administrative support to that body undermines its independence or impartiality.

103.  Secondly, TVB relied on the degree of control which the Chief Executive has over the appointment of the Authority’s members.  In particular, a member holds office for a period not exceeding 3 years from the date of the appointment, as specified by the Chief Executive.[30]  In my view this submission raises no more than a highly theoretical possibility of influence. The grounds for removal of the Authority’s members are circumscribed and not in the absolute discretion of the Chief Executive.[31]  I accept Mr Chan SC’s submission for the Authority that the mere fact that the members are appointed by, and hold office the term of which is determined by, the Chief Executive does not mean that the Authority lacks independence for present purposes: see Campbell and Fell v United Kingdom (1985) 7 EHRR 165 §§78-80.

104.  Thirdly, TVB argued that the availability of an appeal from the Authority’s decision to the CEIC under s. 34 of the BO means that the Authority is not a tribunal because it had been held in Van de Hurk v Netherlands (1994) 18 EHRR 481 at §45 that:

“… the power to give a binding decision which may not be altered by a non-judicial authority to the detriment of an individual party is inherent in the very notion of a ‘tribunal’, as is confirmed by the word ‘determination’ … This power can also be seen as a component of the ‘independence’ required by Article 6(1).”

An appeal to the CEIC may, however, be brought only by a licensee aggrieved by a decision of the Authority.  It is inconceivable that such an appeal will result in an alteration of the decision to the detriment of the licensee.  The Authority’s decision in a matter such as the present is not one that falls within the description in Van de Hurk.

105.  Fourth, and in my view of far greater significance, is TVB’s submission that the Authority is not independent and impartial because it is a “policy making body” with an “advisory role” and numerous statutory functions other that of investigating and determining allegations of breach of the competition provisions, some of which are in tension with that function.  They include:

(1) tendering advice to the Secretary for Commerce and Economic Development on any legislation, legislative proposals and regulatory policies relating to telecommunications, broadcasting, anti-spamming or activities connected with the telecommunications or broadcasting sectors;[32]

(2) submitting proposals and recommendations to the CEIC with respect to technical, programme and advertising standards of television and sound broadcasting for the making and amendment of regulations under the BO or the Telecommunications Ordinance (Cap 106);[33]

(3) giving consideration to any application for a domestic free television programme service licence or pay programme service licence and providing recommendations thereon to the CEIC,[34] and further advising the CEIC as to the conditions to be imposed in respect of such licences;[35]

(4) granting in its own right non-domestic television programme service licences and licences in respect of any other licensable television programme service,[36] and deciding upon the conditions to be imposed in respect of such licences;[37]

(5) administering the provisions of broadcasting licences of all types;[38] and

(6) securing proper standards of television and sound broadcasting with regard to both programme content (including advertisements) and technical performance of broadcasts including, without limitation, restrictions on the time of day when programmes and advertisements may be provided, whether for the same or different licensees or broadcasts;[39]

(7) conducting inquiries into such matters as may be referred to it by the CEIC and to report the conclusions of such inquiries to the CEIC.[40]

106.  It is to be noted that in performing its functions, the Authority is required by law[41] to have regard, so far as relevant, to, inter alia, “the fostering of an environment that supports a vibrant communications sector” and “the promotion of competition … in the communications market”.

107.  Counsel for TVB submitted that these functions which involve setting policy, recommending legislative changes and granting or recommending the grant of licences in the broadcasting sector in Hong Kong are inconsistent with the responsibility dispassionately to assess and adjudicate upon the guilt or innocence of a major industry participant accused of anti-competitive conduct. 

108.  The question of independence and impartiality is not a dogmatic one to be answered on a theoretical basis.  As Lord Hoffmann pointed out in Alconbury at §110, a tribunal may be more or less independent, depending upon the question it is being called upon to decide. 

109.  A body does not necessarily lose impartiality merely because it carries out advisory functions in addition to the determination of civil rights and obligations.  Compliance with Article 10 does not depend on a rigid rule for the segregation of functions.  The question turns on the circumstances presented by the particular case.  In Kleyn v Netherlands, supra, for example, the Administrative Jurisdiction Division of the Council of State of the Netherlands had to deal with objections to railway routing raised under a procedure provided for in the Transport Infrastructure Planning Act by persons whose homes or premises were located in the immediate neighbourhood of the proposed railway route.  The persons whose objections were ultimately rejected complained that the Administrative Jurisdiction Division was not independent and impartial because the Council of State also had the function of giving advisory opinions on draft legislation and had given its opinion on the Transport Infrastructure Planning Bill.  The Grand Chamber of the European Court of Human Rights observed that

“the consecutive exercise of advisory and judicial functions within one body may, in certain circumstances, raise an issue under Art. 6(1) of the Convention as regards the impartiality of the body seen from an objective viewpoint. In this context the Court reiterates that it is crucial for tribunals to inspire trust and confidence.”

The Court however found that while the Plenary Council of State had advised on the Transport Infrastructure Planning Bill, which laid down draft procedural rules for the decision-making process for the planning of new major transport infrastructure, the applicants’ appeals were directed against the routing decision, a decision taken on the basis of the procedure provided for in the Act.  The advisory opinions and the applicants’ appeals could not be regarded as involving “the same case” or “the same decision”.  The advice given by the Council of State could not reasonably be interpreted as expressing any views on, or amounting to a preliminary determination of, any issues subsequently decided in the routing decision (see §§199-201).  On the facts of that case the Court found that the applicants had no objectively justified fears as to a lack of independence and impartiality of the Administrative Jurisdiction Division.

110.  In Kleyn the challenge was raised against a judicial body, which had the usual safeguards of independence.  The complaint arose from the part it played in giving an advisory opinion on legislation.  I do not read the decision as laying down an abstract and elusive test of whether the advisory and judicial function fell within the “same case”.  The true test is one grounded in the need to inspire and maintain public confidence in the adjudicatory process: namely whether a fair-minded and informed observer, with knowledge of the relevant facts, would conclude there is a reasonable apprehension of bias: see Wong Tak Wai, §41.  In the present case the Authority was called upon to decide whether TVB breached the statutory prohibition in ss. 13 and 14 by engaging in conduct that had the purpose or effect of preventing, distorting or substantially restricting competition in a television programme service market, or in conduct that amounted to an abuse of a dominant position in such market.  If there was a breach, the Authority also had to decide whether to impose a financial penalty and its amount, as well as whether to direct TVB to cease and desist from the conduct in question and to direct it to take steps in order to comply with ss. 13 and 14.  These are not questions of policy or expedience, but questions requiring the determination of legal liability.

111.  The formulation, promotion and adoption of broadcasting policy including licensing and competition policies in that sector is fundamentally different from the judicial function.  The former is an executive and administrative process depending on the policy objectives taking into account a wide range of considerations including social and political factors.  The adjudicatory function in contrast is confined by the available evidence, guided by the relevant rules and principles of law, aimed at deciding legal rights and obligations, and carried out with complete detachment from the outcome other than the achievement of a result that is fair and just to the parties.

112.  The administration of competition law rules often involves the ascertainment of the relevant market, appraisal of the market power of an undertaking as well as its rivals, and assessment of the effect of the conduct or practice in question on the market.  In the present case the question whether ss. 13 and 14 had been infringed by TVB could not properly be answered without finding what the relevant market was, what the market shares of TVB and its rivals were over time, the probability of potential competition (either from players in related markets or start-ups) against the existing licensees and in particular TVB, what difficulties or barriers existed against entry into the market, what market power TVB wielded, and the effect of the relevant conduct of TVB on actual and potential competition in the market.

113.  It seems to me plain that there is significant potential overlap between these questions and the considerations that the Authority had constantly to take account of, and the views it needed to form, as a policy advisory body in the broadcasting field in proper discharge of the myriad of functions mentioned earlier.  In order to advise the CEIC, for example, whether to liberalise and reduce concentration in the broadcasting market, the Authority would have to form views on the existing state of competition and distribution of market shares and market power.

114.  In the context of the competition provisions in the BO, to vest the determination of breach of ss. 13 and 14, embodying all these questions connected with the state of competition in the market, in an authority whose mandate it is to invigorate the broadcasting market and in particular to promote competition within it, and whose function it is to advise the Government on related policies, does in my view give rise to a lack of appearance of impartiality in the mind of a fair-minded and informed observer. Objectively viewed – and I say this without intending in any way to impugn the professionalism and dedication of those in the Authority responsible for the Decision – there is legitimate doubt whether a decision on ss. 13 and 14 by such an authority is one free from influence by policy considerations and untainted by views formed by the Authority in performance of its other functions.

115.  For example, an objective observer would note that in the Decision the Authority took into account the potential impact of TVB’s conduct on new entrants to the market, in terms of the increase in the initial sunk cost of entry (§§140, 206-209, 213).  §140, for instance, states:

“… If access to popular artistes is denied for one reason or another, a new TV station will need to expend substantial resources to identify and groom new artistes, who may not turn out to be popular. This further increases the initial sunk costs of entry of a new entrant. It is possible for a new entrant to acquire content from other sources. Content need not be self-generated. However, there are limits to this strategy and it is likely that any successful entrant into the TV sector in Hong Kong will need to produce some content of its own to cater to the local audience.”

He would also observe that the sanction imposed on TVB, which was intended by the Authority to have the effect of releasing artistes and singers from the restrictions in their contracts with TVB, would reduce barriers to entry into the television broadcasting market and thereby benefit any new market entrants.  These matters would seem to him to have apparent connection with the Authority’s policy-advisory function concerning the opening-up of the broadcasting industry and its recommendatory function under the BO in relation to the issue of FTA licences.

116.  In this context Mr Yu SC on behalf of the CEIC objected to any reliance being placed on the actual recommendation made by the Authority to the CEIC in October 2011 for 3 additional domestic FTA TV licences to be issued to other parties, which was accepted in part by the CEIC in October 2013 who announced “in-principle” approval for the issue of 2 new licences.  This was referred to by TVB’s counsel but not mentioned in the Notice of Application or the evidence.  I exclude this incident from my consideration but it seems to me to be no more than an illustration of the lack of objective impartiality which is inherent in the decision-making structure.

117.  Furthermore, the concurrence of the Authority’s policy-making, advisory and recommendatory roles with its enforcement and decision-making roles in relation to ss. 13 and 14 has to be viewed in conjunction with the nature of the decision-making process undertaken by the Authority in a competition law infringement case.  The Authority receives the complaint, carries out a preliminary enquiry and decides whether the case or any part of it merits full investigation; it then gathers further evidence, commissions and instructs consultants to produce expert reports, evaluates the materials, deals with the defences and objections raised by the licensee, and finally determines the question of infringement and decides upon the appropriate sanction and order.  The process has been said to be administrative and inquisitorial, with the Authority acting successively as the investigator, the prosecutor and the judge: ATV v Communications Authority [2013] 3 HKLRD 618 at §§73 and 109; (2013) 16 HKCFAR 773 at §5. 

118.  With this comingled role being performed by the executive’s policy adviser on the broadcasting market, an objective observer may legitimately doubt whether it could decide the issues solely on their legal and factual merits with the detachment and objectivity required by Article 10, uninfluenced by any policy considerations which in my view have no role to play in the adjudication of “guilt” or “innocence” in terms of contravention of the statutory prohibition in ss. 13 and 14.

119.  This does not mean that an administrative agency can never be entrusted with the task of making a first instance decision of infringement of competition rules.  As a matter of fact such “administrative model” has been adopted in certain jurisdictions including the European Union and the United Kingdom.  But as far as I am aware it has not been suggested in any such jurisdiction that the administrative agency qualifies in itself as an independent and impartial tribunal within the meaning of any provision equivalent to Article 10.  Indeed it has been held by the European Court of Justice that because of its administrative nature and procedure, the European Commission, in finding competition law infringement and imposing sanctions, is not even a tribunal within the meaning of art. 6 of the ECHR: Van Landewyck v Commission [1980] ECR 3125, §§80-81; Musique Diffusion Française v Commission [1983] ECR 1825, §7.  This reflects the purpose of art. 6 in requiring that disputes over civil rights should be decided by or subject to the control of a judicial body.  Whether the existing institutional set-up of the European Union for competition infringement decisions is compatible with the required respect for the fundamental right to fair trial is still the subject matter of some debate.

120.  In the United Kingdom, the view was taken that to ensure art. 6 of the ECHR is satisfied, the appeals from the administrative enforcement bodies to the Competition Appeal Tribunal are to be conducted as full hearings on the merits with such relevant evidence as any party wished to adduce, witnesses being cross-examined if appropriate: Argos Ltd v Office of Fair Trading [2006] EWCA Civ 1318 at §18.[42]

121.  I conclude therefore that while it is not a breach of Article 10 to have the Authority as the first instance decision-maker, the Authority did not, as indeed it could not, in and of itself, satisfy the requirement of an independent and impartial tribunal for the purpose of this case.

Whether the CEIC on an appeal under s. 34 is an independent and impartial tribunal

122.  TVB submitted that the potential appeal to the CEIC under s. 34 of the BO cannot “cure” the lack of independence and impartiality of the Authority.  A number of points have been taken.

123.  First, the CEIC is an inherently political entity.  As the apex of the Executive Government of Hong Kong, its chief function is policy-making and exercise of executive power.  It is by law prohibited from exercising judicial or quasi-judicial powers when considering an “appeal”: s. 64(4) of the IGCO.  That sub-section provides:

“(4) The Chief Executive in Council, when considering any appeal or objection to him (whether by way of petition or otherwise, and whether such appeal or objection is made by virtue of any Ordinance or otherwise) shall act in an administrative or executive capacity and not in a judicial or quasi-judicial capacity and shall be entitled to consider and take into account any evidence, material, information or advice in his absolute discretion.”

124.  As Hartmann J (as he then was) observed in Yau Kwong Man v Secretary of Security [2002] 3 HKC 457 at §38, under the Basic Law, the legislature cannot place judicial power in the hands of the executive.  S. 64(4) is therefore entirely consistent with this principle which precludes the CEIC from acting in any judicial or quasi-judicial capacity.  The corollary of this is that the CEIC only considers an appeal under s. 34 of the BO in an administrative or executive capacity.  The nature of such a process has been described in Wade & Forsyth, Administrative Law (10^th ed) at p 34, in a passage quoted in part by Reyes J in PCCW Media Ltd v Broadcasting Authority (unreported, HCAL 97/2005, 1 December 2005) at §19 as follows:

“A judicial decision is made according to rules. An administrative decision is made according to administrative policy. A judge attempts to find what is the correct solution according to legal rules and principles. An administrator attempts to find what is the most expedient and desirable solution in the public interest. … [T]he mental exercises of the judge and administrator are fundamentally different. The judge’s approach is objective, guided by his idea of the law. The administrator’s approach is empirical, guided by expediency.”

125.  Similarly, in B Johnson & Co (Builders) Ltd v Minister of Health [1947] 2 All ER 395, 399, cited with approval in Alconbury at §§60, 75, 139 and 175, Lord Greene MR, referring to the decision of a government minister to confirm a compulsory purchase order under the Housing Act 1936, stated:

“That decision must be an administrative decision, because it is not to be based purely on the view that he forms of the objections, vis-à-vis the desires of the local authority, but is to be guided by his view as to the policy which in the circumstances he ought to pursue.”[43]

126.  The nature of the CEIC’s decision is underlined by the last clause of s. 64(4) of the IGCO which states that when considering any appeal, he is entitled to consider and take into account any evidence, material, information or advice in his absolute discretion, and also by s. 35(1)(a) of the BO which states that determining an appeal under s. 34, the CEIC may receive “advice” from the Authority (albeit the licensee must be afforded an opportunity to make representations on any such advice). 

127.  There are a number of provisions in the laws of Hong Kong that create appeals to the CEIC but they generally relate to matters pertaining to the formulation of policy or the exercise of administrative or policy-oriented discretion.  In providing for an appeal to the CEIC from a finding of infringement of legal prohibition and an order affecting contracts with third parties and imposing financial penalties, however, s. 34 of the BO appears to be unique.  It is unclear to what extent the CEIC, without acting at least in a quasi-judicial capacity, which it is proscribed by s. 64(4) from doing, can dispassionately evaluate the evidence, objectively find facts, correctly determine the law[44] and apply the law to the facts found in the determination of the legal rights and obligations of TVB, without regard to considerations arising from policy, expediency or public interest. 

128.  It follows from the nature of the appeal, which amounts to a review not necessarily based only on law and evidence but also on the expediency of the decision challenged, that in the context of this case the CEIC does not in itself offer the guarantees of a tribunal that possesses the requisite independence and impartiality.

129.  Further, TVB submitted that in an appeal under s. 34, the CEIC is not independent of the executive because it is the executive.  The concrete demands of independence however depend on the circumstances.  Thus, for example, in Wong Tak Wai, Kwan JA held that the Commissioner of Correctional Services, albeit part of the executive, had sufficient independence in hearing appeals (coupled with judicial review by the court) to remedy the apparent bias that affected the determinations of prison disciplinary proceedings by prison superintendents.

130.  TVB also submitted that the CEIC lacks objective impartiality for the same reasons that affect the Authority, namely, its role in the formulation of policy in relation to the broadcasting sector (in relation to which the CEIC, through the Secretary for Commerce and Economic Development, is advised by the Authority).  In particular, whereas the Authority advises the Secretary on policies in the broadcasting sector, the CEIC is the body that sets the policies.  It is also the CEIC who grants FTA domestic television licences upon the recommendation of the Authority.[45]  This should be seen together with the fact that the Executive Council is first and foremost a policy organ.  Art. 54 of the Basic Law states that it is an organ for assisting the Chief Executive in policy-making.  The CEIC is the executive of Hong Kong.  In dealing with an appeal he is required to act in an administrative or executive capacity.  He cannot be criticised for taking into account policy considerations for under s. 64(4) he is entitled to take into consideration any material or advice in his absolute discretion.

131.  For the reasons explained above in relation to the Authority, I find this sufficient to affect the appearance of impartiality of the CEIC for the purpose of considering an appeal by TVB under s. 34.  The appeal would essentially be an appeal to the executive from a decision by its adviser on market and competition policies involving questions closely related to such policies.

132.  There are in addition a few subsidiary points raised by TVB.  TVB submitted that the CEIC is not independent from the parties because in an appeal under s. 34, the submission to the CEIC synthesising the appeal and the arguments will be prepared by the Commerce and Economic Development Bureau. 

133.  The procedure of an appeal to the CEIC is explained in the evidence.  There are two kinds of such appeal, appeal by way of petition (which is the kind of appeal under s. 34 of the BO) and appeal otherwise than by way of petition.  An appeal otherwise than by way of petition is governed by the Administrative Appeals Rules (Cap. 1A), which, inter alia, provides for a right for the appellant to be present (see r. 7).  An appeal by petition is in contrast dealt with on paper, unless the CEIC appoints a committee for the purpose of hearing the appeal (rr. 9 & 11).  The evidence is that appeals under s. 34 have never been referred to a committee and there is no suggestion that a referral in this case would be likely. 

134.  In an appeal dealt with in writing, the memorandum for the CEIC is prepared by the Bureau Secretary unless the Bureau Secretary’s decision is being appealed against.  In a case such as the present, since the appeal under s. 34 is not against the decision of the Secretary for Commerce and Economic Development himself, it seems that the brief to the CEIC would be prepared by the Secretary for Commerce and Economic Development.  I do not think however that this necessarily results in a lack of independence in every case.  The compilation process could be a mechanical exercise.  The evidence suggests that the appellant will be given the opportunity to see any adverse material and to give his comment.  There is no warrant for a general conclusion in the abstract that the role of the Secretary in preparing the memorandum would inevitably remove or reduce the independence of the CEIC.

135.  TVB also complained that the Secretary for Commerce and Economic Development, the direct superior of the Authority’s Vice‑Chairman, sits on the Executive Council as an ex officio member.  Given the established system in the Executive Council for the avoidance of conflict of interests, it seems to me that it cannot be said, in advance of an appeal to the CEIC, that it would necessarily lack independence because of the presence of the Secretary for Commerce and Economic Development.

136.  Finally, TVB submitted that the appeal to the CEIC does not comply with Article 10 in at least two specific respects: the CEIC will not in general give reasons for its decision and its hearing of the appeal will not be in public. While the general practice of the CEIC is not to give reasons, there is nothing to prevent it, and in a specific case fairness may require it, to give reasons.  TVB’s criticism is therefore at best premature.  As to the second deficiency, the confidentiality principle, according to the CEIC’s own witness, is a cornerstone of the proceedings of the Executive Council.  It is likely that the appeal to the CEIC will not be conducted in public.  It does not follow, however, that the overall process viewed as a whole would necessarily fall foul of the public hearing requirement in Article 10: see Lam Siu Po, §19, per Bokhary PJ.

137.  For the reasons on the earlier points, however, I conclude that an appeal to the CEIC under s. 34 of the BO does not satisfy the requirements of Article 10.

Whether the court upon judicial review is a court of full jurisdiction

138.  There is no dispute that compliance with Article 10 is assessed by examining whether the process as a whole satisfies the requirements of Article 10.  As Ribeiro PJ put it in Lam Siu Po at §109, Article 10

“does not require every element of the protections conferred to be present at every stage of the determination of a person’s rights and obligations, but only that such protections should be effective when the determination is viewed as an entire process, including as part of that process such appeals or judicial review as may be available”.

139.  Sometimes called the “curative principle”, the notion that subsequent control by a judicial body that has full jurisdiction and provides the protection of Article 10 may render the entire process compliant has been stated by Kwan JA in Wong Tak Wai, supra, at §67 as follows:

“Simply stated, this principle means that decisions which do not comply fully with procedural fairness requirements can be cured, if the person affected has recourse to a further hearing or appeal which itself provides fairness. It is well established in the case law of the European Court of Human Rights that the requirements of article 6(1) of the ECHR are satisfied if either the initial decision-making body is independent and impartial, or it is subject to subsequent control by a judicial body that has full jurisdiction and does provide the guarantees of article 6.”

140.  This principle does not apply to certain decisions, such as findings of breaches of “hard-core” criminal law, which must properly be entrusted to the judicial branch of government even in the first instance, so that the possibility of an appeal, however full its scope, is insufficient to compensate for the lack of independence and impartiality on the part of the primary decision-maker: see De Cubber v Belgium (1984) 7 EHRR 236: Runa Begum, at §42, per Lord Hoffmann.  It has not been suggested by TVB, however, that the present case falls within that category.

141.  For present purposes, therefore, it will be sufficient if there is an available avenue for appeal or review to a judicial body that has “full jurisdiction” over the administrative decision.  “Full jurisdiction” does not necessarily mean jurisdiction to make the decision de novo or re-examine the merits of the case in full but “jurisdiction to deal with the case as the nature of the decision requires”: Alconbury, at §87; Lam Siu Po at §§116 & 122. 

142.  The effect of s. 64(3) of the IGCO (see §168 below) is that an aggrieved party such as TVB may avail itself of an application for judicial review of the Authority’s decision without being required to exhaust the avenue of appeal to the CEIC: Gurung Bhakta Bahadur v Director of Immigration [2001] 3 HKLRD 225, 233.  The issue is whether this court, upon this application for judicial review, has full jurisdiction such that the overall process may be regarded as compliant with Article 10.

143.  Non-compliance with Article 10 has featured as a major complaint from the outset of these proceedings.  Prior to its amendment, however, TVB’s Notice of Application did not spell out why the availability of judicial review does not cure the non-compliance with Article 10 in the process leading to the Decision, although it contained copious quotations from authorities on the issue.  By an amendment proposed in August 2015, which I allowed at the commencement of the hearing, TVB averred that:

“The availability is not sufficient to satisfy the requirements of Art. 11(4), since a court on judicial review will not consider substantively the sufficiency of the evidence, or review the factual dimensions of the case.”

144.  Although framed with reference to Article 11(4), I think that the averment is relevant also to Article 10 and it would be artificial to preclude TVB from relying on the same averment for the purpose of the latter provision.  In assessing the “factual dimensions” however I accept the respondents’ submission that certain matters raised in counsel’s skeleton argument for TVB which did not feature at all in the Notice of Application should not be taken into account, for example, that actual interview records (as opposed to summaries) had not been provided to TVB and that there were questions of correctness of expert opinion.

145.  In my judgment, however, this does not preclude the court from taking account of the nature of the Decision and the ways in which TVB seeks to impugn it in this judicial review, especially under Ground 6, which is dealt with below.  It is plain that the central question of whether TVB’s conduct had an anti-competitive purpose or effect has always been contentious.  In particular, it is apparent from the debate on Ground 6 that a critical issue was whether the contractual clauses concerned had given rise to de facto exclusivity.  The Authority accepted the contractual clauses in question did not categorically preclude artistes and singers from working for TVB’s rivals but by a process of inference found that in practice the clauses imposed “de facto exclusivity”, resulting in significant foreclosure of key inputs such as artistes or singers.  Another conclusion that has always been contentious and is still being attacked by TVB is the effect of such foreclosure on competition in the television programme service market.  The Authority concluded that TVB’s conduct had at least the likely effect of restricting competition in the TV viewing market.  It is further apparent from Ground 4 that a dispute existed as to the scope of the upstream market and, in particular, whether one should exclude from the “available pool of talent” new or aspiring artistes and singers.  These findings are put in issue by these Grounds in the way they have to be put in issue in judicial review proceedings, e.g. based on allegations of absence of evidence or irrationality.

146.  It is well established that judicial review is not a full merits review or appeal: the court is concerned with the lawfulness, not the wisdom or correctness in fact or policy, of an administrative decision.  A court upon judicial review has power to quash a decision based on a finding of fact or inference from the facts which is perverse or irrational, or where there was no evidence to support it, or where it was made by reference to irrelevant factors or without regard to relevant factors: Runa Begum, §99.  But the court cannot make the decision itself and substitute its own findings of fact for those of the decision-making body.  In Chu Hoi Dick v Secretary for Home Affairs (HCAL 87/2007, 10 August 2007), at §1, Lam J (as Lam VP then was) stated:

“In judicial review, the court is concerned with the legality of administrative decisions. The court can examine whether an administrative decision has been made in accordance with the relevant legislative provisions and other common law principles securing the procedural and substantive fairness of the process. However, the court cannot substitute its own view as regards what decision should be made. Provided that the administrative decision is one a minister or an executive body can lawfully make, the court cannot interfere.”

147.  The curative principle cannot be defined rigidly or applied mechanically.  Whether judicial review (in the common law sense) suffices for Article 10 purposes depends on the circumstances of the case.  No previous decision in a different context can be directly applied to produce the answer.  In the leading case of Bryan v United Kingdom (1995) 21 EHRR 342 at §45, the European Court of Justice referred to the need, in assessing the sufficiency of the review, to have regard to matters such as the subject matter of the decision appealed against, the manner in which that decision was arrived at, and the content of the dispute, including the grounds of challenge; see also Lam Siu Po at §131.

148.  There are statements in the authorities suggesting that the more a matter amounts to a question of policy or expediency, the less it is necessary for the reviewing court to be able to substitute its own opinion for that of the decision maker; and, conversely, the more a matter turns on a disputed question of fact, and the less safeguards there exist in the original process, the less likely it is that a limited scope of review will be accepted as sufficient for the purpose of Article 10 or its equivalent: Alconbury at §117 per Lord Hoffmann.

149.  In Runa Begum at §§37-40, 58-59, however, Lord Hoffmann expressed the view that “a spectrum of the relative degree of factual and discretionary content” is too uncertain to be adopted as the test. His Lordship preferred to characterise the question as one of “whether, consistently with the rule of law and constitutional propriety, the relevant decision-making powers may be entrusted to administrators”.  Notwithstanding this, subsequent cases have shown that the fact-policy dichotomy remains a relevant factor.  Thus in Tsfayo v United Kingdom (2009) 48 EHRR 18, a political asylum seeker was granted housing and council tax benefit but failed to renew her application on an annual basis as required.  The application she subsequently submitted to the relevant administrative board was successful in relation to prospective benefit, but was rejected so far as backdated benefit was concerned.  Entitlement to arrears of benefit depended on the claimant establishing “good cause” for applying late.  The European Court of Human Rights held that the board which had to decide the question, comprising of elected councillors from the same local authority which would have had to pay the claimed benefit if awarded, lacked structural independence and the process overall including the availability of judicial review by the High Court failed to comply with art. 6 of the ECHR.  Bryan was explained as a case where the inspector was called upon to exercise his discretion on a wide range of policy matters and where any finding of disputed facts was “merely incidental to the reaching of broader judgments of policy or expediency which it was for the democratically accountable authority to take” (§§43-46).

150.  In R (Wright) v Secretary of State for Health [2009] 1 AC 739 at §23, Baroness Hale explained:

“What amounts to ‘full jurisdiction’ varies according to the nature of the decision being made. It does not always require access to a court or tribunal even for the determination of disputed issues of fact. Much depends upon the subject-matter of the decision and the quality of the initial decision-making process. If there is a ‘classic exercise of administrative discretion’, even though determinative of civil rights and obligations, and there are a number of safeguards to ensure that the procedure is in fact both fair and impartial, then judicial review may be adequate to supply the necessary access to a court, even if there is no jurisdiction to examine the factual merits of the case. The planning system is a classic example (Alconbury); so too, it has been held, is the allocation of ‘suitable’ housing to the homeless (Runa Begum); but allowing councillors to decide whether there was a good excuse for a late claim to housing benefit was not: Tsfayo v United Kingdom …”.

151.  In the present case the decision that the Authority was required to make cannot be said to be one of policy or expediency.  It is not a matter of administrative discretion involving the weighing and balancing of competing interests including the public interest, nor a matter guided by policy objectives, nor in my view a matter of regulatory policy.  The determination under ss. 13 and 14 is in my view a far cry from a “classic exercise of administrative discretion”.  It is a finding of liability for breach of a statutory prohibition and a decision on the sanction for such culpable conduct with decisive effect on the contractual rights of TVB.

152.  The questions involved are primarily questions of fact and of interpretation and appraisal of facts.  The ultimate questions are whether TVB’s conduct had the purpose or effect of preventing, distorting or substantially restricting competition in a television programme service market, and whether TVB had a dominant position in such a market which it abused.  These are matters of fact and degree determination of which requires the proper evaluation of a large amount of evidence, the establishment of subsidiary facts and the carrying out of potentially complex economic assessment.  Moreover it cannot be said that these questions are “merely incidental” to some much broader judgment of policy or expediency; they provide the essential basis for the adjudication.

153.  The rights affected by the Decision in the present case include civil rights sounding in private contract law customarily adjudicated upon by the civil courts.  The safeguards that are necessary cannot be divorced from the context in which the relevant questions have to be decided.  As stated above, the Decision was the culmination of an administrative process in which the Authority had acted as investigator, prosecutor and judge. 

154.  A factor that has been taken into consideration in European jurisprudence is whether the decision falls within “specialised areas of the law” (Bryan, at §47).  What was meant was not some special law subject such as carriage of goods by sea.  In using this phrase “the court had in mind … those areas of the law such as regulatory and welfare schemes in which decision-making is customarily entrusted to administrators”: per Lord Hoffmann in Runa Begum at §56.  Competition law, whilst a relatively new area of law in Hong Kong, is not to be regarded as such a specialised area in this sense as to have to be left in the hands of administrators.  By June 2012 the cross-sector Competition Ordinance (Cap. 619) had been enacted which places the adjudicatory function in respect of competition law infringement in a tribunal that has the status, composition and attributes of a superior court of record.[46]  It is also to be noted that the Telecommunications (Competition Provisions) Appeal Board established under s. 32M of the Telecommunications Ordinance (Cap. 106) for the purpose of hearing appeals from the Authority (formerly the Telecommunications Authority) on competition infringement decisions was not required to be composed of persons with special experience or knowledge of the industry.  Instead, the only eligibility stated in the statute was that the Chairman and Deputy Chairman of that appeal board had to be eligible to be appointed a judge of the High Court.  That appeal board was entitled, on appeal, to decide any question of fact and law.

155.  Further, the Authority was, in my view as stated earlier, lacking in objective impartiality as a decision-maker because of its concurrent policy, advisory and executive roles.  The objectively justified concern is that this could infect the independence of judgment in relation to the findings that the Authority needed to make in an imperceptible manner which could not be adequately scrutinised or rectified by judicial review: see Wong Tak Wai, at §77.  In Lam Siu Po at §123, Ribeiro PJ said:

“Where the original determination is marred by a lack of impartiality or by unfairness, the court of full jurisdiction may have to quash that determination to ensure compliance. The fact that the reviewing court is itself impartial or will itself act fairly may not be sufficient since the original defects may have resulted, for instance, in skewed factual findings or materials wrongly excluded, preventing the court from fully addressing the decision in the manner demanded.”

156.  In Wong Tak Wai, Kwan JA took the view, essentially, that the first instance adjudicating officer, a superintendent, lacked structural independence because of the conflict of responsibilities.  On that footing her Ladyship concluded that judicial review alone would not have been sufficient to make the process overall Article 10-compliant:

“77. Mr. Kwok submitted that where the core issue before the Superintendent was a dispute as to primary fact, the apparent bias of the tribunal would not be cured by judicial review, as the lack of independence on an institutional level might infect the independence of judgment in the finding of primary fact in an imperceptible manner which could not be adequately scrutinised or rectified by judicial review. The High Court on a judicial review has no jurisdiction to reach its own conclusion on the primary facts, as it does not have power to rehear or weigh the evidence, or substitute its own views as to the applicant’s credibility.

78. I would agree that in this situation, judicial review, without more, does not afford full jurisdiction and does not cure the breach of article 10 or the lack of independence and impartiality at the first stage of the process before the Superintendent. …”

Stock VP and A Cheung J, who differed with Kwan JA solely on the premise of her reasoning and considered that there was no apparent bias on the part of an adjudicating superintendent (see §§2-6, 116, 144), were otherwise in complete agreement with her Ladyship.

157.  The same concerns apply in the present case.  Even leaving aside any question of credibility of the interviewees’ evidence, the findings made by the Authority are determinations of questions of fact and degree.  On a judicial review they are not susceptible to challenge except on the limited grounds referred to above.  TVB is not entitled to ask this court to review all the evidence or underlying facts and form its own views on the disputed questions.  For example, under Ground 6, TVB challenges the Authority’s findings that there was de facto exclusivity imposed by the contract clauses in question and that TVB’s conduct had the requisite restrictive effect on competition in the market, on the basis that there is no evidence to support them.  Under Ground 4 TVB attacks the Authority’s findings on the scope of the available pool of talent on the ground, inter alia, that it had failed to take into account relevant evidence.  The court’s task on this judicial review is to assess whether there is evidence capable in law of supporting those conclusions and whether relevant matters have been overlooked or ignored as alleged.  If there is sufficient evidence for the matter to go to the trier of fact, and relevant factors have not been neglected, the court does not decide whether they are findings that should in its view be made on the totality of the evidence.

158.  The analysis above is in my view consistent with European jurisprudence on compliance with art. 6 of the ECHR in competition cases.  In A. Menarini Diagnostics Srl v Italy (Case 43509/08, judgment of 27 September 2011), an independent regulatory authority in charge of competition investigated the applicant company for unfair competition and eventually fined the company €6 million for unfair competition.  All the company’s appeals to the administrative court and the Consiglio di Stato were rejected.  On the argument that the process failed to comply with art. 6 of the ECHR, the second Chamber of the Strasbourg Court held (as stated in the official English summary):

“… As a result, the role of the administrative courts had not been limited simply to verifying lawfulness. They had been able to verify whether, in the particular circumstances of the case, the AGCM had made proper use of it powers. They had been able to examine whether its decisions had been substantiated and proportionate, and even to check its technical findings. Moreover, the review had been carried out by courts having full jurisdiction, in so far as the administrative court and the Consiglio di Stato were able to verify that the penalty was fit the offence, and they could have changed it if necessary. In particular the Consiglio di Stato, had gone beyond a ‘formal’ review of the logical coherency of the AGCM’s reasoning and made a detailed analysis of the appropriateness of the penalty, having regard to the relevant parameters, including its proportionality. The decision of the AGCM had thus been reviewed by judicial bodies having full jurisdiction.”

159.  The Menarini decision, as I understand it, does not support a general proposition that judicial review, in the common law sense of the term, with its inherent and attendant limitations, is necessarily a sufficient review of an administrative decision of competition law infringement to render the overall system compliant with art. 6 of the ECHR.  On the contrary, the Strasbourg Court emphasised that the reviewing court should have power to decide on all aspects of fact and law and if necessary reformulate the decision on both facts and law.[47]

160.  At the level of the European Union, competition law infringement decisions are made and sanctions imposed in the first instance by the European Commission after an administrative process, albeit subject to safeguards for the observance of the rights of the defence in the process before the Commission (such as access to the case file).  Actions for annulment of the Commission’s decisions in competition cases are brought in the first instance before the General Court, which can subsequently be appealed to the Court of Justice on points of law.  With the acceptance by the European Union that the equivalent protection to that provided by art. 6 of the ECHR applies to its processes (see art. 47 of the Charter of Fundamental Rights of the European Union, which came into force at the end of 2009), the question of whether competition law enforcement within the European Union satisfies the requirements of art. 6 has become a much discussed topic, raising inter alia the question of the intensity of review by the General Court of the Commission’s decisions.[48] 

161.  In Kone Oyj v Commission (judgment of 24 October 2013) at §22, the Court of Justice, referring to what it had said earlier in Schindler Holding Ltd v Commission (judgment of 18 July 2013) at §35, explained the Menarini decision in these terms:

“… the European Court of Human Rights has held that, in administrative proceedings, the obligation to comply with Article 6 of the ECHR does not preclude a ‘penalty’ from being imposed by an administrative authority in the first instance. According to the European Court of Human Rights, compliance with that provision requires, however, that decisions taken by administrative authorities which do not themselves satisfy the requirements laid down in Article 6(1) of the ECHR be subject to subsequent review by a judicial body that has full jurisdiction. The characteristics of such a body include, according to the same judgment of the European Court of Human Rights, the power to quash in all respects, on questions of fact and law, the decision of the body below. The judicial body must in particular have jurisdiction to examine all questions of fact and law relevant to the dispute before it (judgment of the European Court of Human Rights in A. Menarini Diagnostics S.R.L. v. Italy, no. 43509/08, 27 September 2011, § 59).”

162.  In Case C-386/10P Chalkor AE Epexergasias Metallon v Commission (judgment of 8 December 2011) [2013] ECR-I-13085, the Court of Justice said of a review of legality by the courts of the European Union of the Commission’s decision (at §54):

“Not only must those Courts establish, among other things, whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it”

Furthermore, the Court added that:

“The review of legality is supplemented by the unlimited jurisdiction which the Courts of the European Union were afforded by Article 17 of Regulation No 17 and which is now recognised by Article 31 of Regulation No 1/2003, in accordance with Article 261 TFEU. That jurisdiction empowers the Courts, in addition to carrying out a mere review of the lawfulness of the penalty, to substitute their own appraisal for the Commission’s and, consequently, to cancel, reduce or increase the fine or penalty payment imposed …”

The response of the European courts has thus far been that the review of legality (pursuant to art. 263 of the Treaty on the Functioning of the European Union (“TFEU”)) coupled with the “unlimited jurisdiction” of the courts in penalties cases (pursuant to art. 31 of Regulation No. 1/2003 and art. 261 of the TFEU)[49] are sufficient to meet the requirements of art. 47 of the Charter of Fundamental Rights of the European Union.

163.  Nevertheless, there has been academic comment that the leeway given by the General Court to the Commission such as by limiting its review to “manifest error of appraisal” in certain cases raises serious doubts as to the adequacy of the Union’s procedures.[50]  In this area of developing jurisprudence, it will not be surprising to see a shift towards more intrusive review by the General Court of the Commission’s findings of competition infringement. 

164.  More recently, in Case T-56/09 Saint-Gobain Glass France SA v Commission (judgment of 27 March 2014), where the applicant raised a plea of illegality against Council Regulation No. 1/2003 on the implementation of the rules on competition, on the ground that the combination in the Commission of the function of investigation and the power to impose penalties for infringements constituted a breach of the right to an independent and impartial tribunal, the General Court, after referring to Menarini, described (at §79) the attributes of a judicial body exercising “unlimited jurisdiction” in this context as follows:

“… Among the characteristics of a judicial body of that type is the power to vary in all respects, in fact and in law, the decision taken by the body below. Thus, review by the court or tribunal, in such cases, cannot be limited to verifying the ‘procedural’ legality of the decision for review, as it must be in a position to assess the proportionality of the choices of the competition authority and to verify its technical assessments.” (emphasis added)

The court held (at §85) that the review by the General Court of the legality of a Commission decision finding an infringement of competition law rules and imposing a fine was

“of such a nature as to allow the General Court to assess the correctness in law and in fact of any accusation made by the Commission in competition proceedings”.

165.  It should also be noted that arts. 93–95 of the Rules of Procedure of the General Court[51] provide that court with the power to summon and examine witnesses (although the power has in practice rarely been exercised).

166.  In contrast, the machinery of judicial review in Hong Kong is decidedly concerned with the lawfulness of a decision, not its correctness as such in fact or in merits and, for the reasons already given, seems to me to fall short of the requirement of a court of full jurisdiction for the purpose of the curative principle in this case.

167.  Counsel for the CEIC, referring to the grounds advanced by TVB in this application, submitted that TVB’s complaints against the Decision are all matters which can be fully ventilated in judicial review. With respect, that is not to the point.  It is not surprising that the grounds put forward for the present proceedings are capable of being fully dealt with in judicial review – they have to be.  On a judicial review of factual conclusions, any attack has to be confined to grounds such as irrationality or absence of evidence.  The very point is that TVB is unable, in this application for judicial review, to ask the court to review the evidence generally, draw its own inferences and substitute its own conclusions on the issues.

168.  Further, it is doubtful if judicial review can cure the inadequacies of an appeal under s. 34 of the BO.  S. 64(3) of the IGCO provides:

“(3) The conferring by any Ordinance of a right of appeal or objection to the Chief Executive in Council shall not prevent any person from applying to the High Court for an order of mandamus, certiorari, prohibition, injunction or any other order, instead of appealing or making an objection to the Chief Executive in Council, where an application for such an order would lie, but no proceedings by way of mandamus, certiorari, prohibition, injunction or other order shall be taken against the Chief Executive in Council in respect of any such appeal or objection to the Chief Executive in Council or any proceedings connected therewith.”

169.  The latter part of this sub-section is, on its face, an ouster of judicial review in relation to the decision of the CEIC on appeal.  The CEIC accepts that, notwithstanding s. 64(3) of the IGCO, the appeal to it under s. 34 of the BO is subject to judicial review as to the lawfulness of the process, citing Gurung Bhakta Bahadur v Director of Immigration, supra.  However, what Hartmann J stated in that case (on an interlocutory basis) was that because of s. 64(3), any judicial review of the decision of the CEIC on appeal is limited to situations where he has acted outside of his jurisdiction or committed an error which is of such a nature that the decision is a nullity.  Whether or not that is indeed the effect of s. 64(3) was not argued before me but assuming it is, the scope of any judicial review would be even more limited.  It is difficult to see how a court upon such a review of the CEIC’s decision in the present context could be regarded as a court of “full jurisdiction”.

General points and conclusion on Ground 2

170.  Counsel for the CEIC, relying on the observation of Lord Hoffmann in Runa Begum at §59, submitted that the court should be “slow” to hold as unconstitutional a statutory scheme devised by the legislature.  It is, in this context, pertinent to note the reasons for devising the present appeal structure as recorded in the Report of the Bills Committee on the Broadcasting Bill as follows:

“Some members have suggested setting up an appeal body, similar to that for the telecommunications industry, to deal with decisions relating to competition provisions and also to cover objections or complaints in relation to licensing matters. The Administration has responded that unlike the Telecommunications Authority, BA is an independent body comprising unofficial members. An appeal channel is already provided for as appeals can be made to the Chief Executive in Council (clauses 33 and 34), whose decision is judicially reviewable. Moreover, the Administration has already agreed to introduce CSAs to enable BA to hold public hearings for extension, renewal, suspension and revocation of licence. With these measures, the Administration is of the view that the appeal channels are adequate and a separate appeal body is not necessary. However, a member maintains the view that an independent appeal body should be established.”

171.  The decision on the present structure appears therefore to have been based on the suppositions that (i) the Authority itself is an independent tribunal; (ii) the CEIC is constitutionally capable of exercising judicial powers in an appeal from the Authority; and (iii) decisions of the CEIC on such appeals are subject to full judicial review.  For the reasons stated above, none of these assumptions can in my view be taken at face value.  Further, during the second reading of the Broadcasting Bill, the Government already foreshadowed a subsequent comprehensive review which would include the question whether it was necessary to set up a separate appeal mechanism for the competition provisions.

172.  Counsel for the CEIC also prayed in aid the theme of continuity from the pre-existing system before 1997 that underlies the Basic Law, emphasised in Luk Ka Cheung v Market Misconduct Tribunal at §§32-36, as a reason for upholding the statutory structure in the BO.  But, first, the observations of the court in that case were made in the context of discussing the approach to the doctrine of separation of powers, and the interpretation of the concept of “judicial power” in the Basic Law; they were not made in the context of fundamental rights.  Secondly, the Hong Kong Bill of Rights Ordinance only came into force in June 1991, and the pre-existing structure under the Television Ordinance had never been tested for compatibility with the protected rights.  To give primacy to continuity could emasculate the provisions of the Bill of Rights.  Thirdly, the regime under the BO is in material respects not simply a continuation of the system under the Television Ordinance.  In particular, the orders that can be made by the Authority under s. 16 of the BO appear to be far wider than the direction that could be issued by the Broadcasting Authority under s. 34 of the Television Ordinance.[52]

173.  In conclusion, the available routes of challenge are in my judgment inadequate to protect TVB’s right under Article 10 to a fair and public hearing by an independent and impartial tribunal in the determination of its rights and obligations in a suit at law.  Neither the Authority nor the CEIC is an independent and impartial tribunal, and judicial review by the High Court does not constitute a review by a tribunal with full jurisdiction, capable of curing any earlier non-compliance in this case.  It follows that the Decision has to be set aside for infringement of Article 10. 

174.  There is force in the CEIC’s submission, however, that a general declaration that ss. 28 and 34 of the BO are unconstitutional is inappropriate.  Those sections deal with a range of other possible situations including breach of licence conditions and of codes of practice which are not the subject of these proceedings.  I therefore decline to grant such general declaration.

175.  In case I am wrong in my conclusion on Ground 2, I shall proceed to deal with Grounds 3 to 7 which seek to attack the Decision itself.

VIII. GROUND 3 – NO JURISDICTION TO REVIEW PRACTICES OUTSIDE OF THE TELEVISION PROGRAMME SERVICE MARKET

176.  By Ground 3, TVB contends that the Authority does not have jurisdiction to review practices outside of the television programme service market.  This contention bifurcates into two points.

Lack of jurisdiction

177.  First, it is said that the competition provisions in ss. 13 and 14 of the BO are targeted in terms at the “television programme service market”.  Although this phrase is not defined in the BO, the phrase “television programme service” is defined in s. 2(a) and means, primarily and subject to certain exceptions:

“the provision of a service that includes television programmes for transmission by telecommunications-

(A) that are readily accessible to, or made available to, the general public in or outside Hong Kong; or

(B) to persons, in 2 or more specified premises, simultaneously or on demand, whether on a point-to-point or a point-to-multipoint basis, or any combination thereof, having equipment appropriate for receiving that service”

It is contended that the competition provisions apply only to conduct in the television programme service market and do not apply to conduct in other markets.  In particular, they do not apply to the upstream market for the supply of services by artistes and singers.  It is said that therefore the Authority lacks jurisdiction to review TVB’s conduct in the upstream market of the supply and demand of artistes’ services.

178.  I have no hesitation in rejecting this contention.  S. 13(1) does not require the conduct in question to be conduct in the television programme service market itself, provided that it has the purpose or effect of harming competition in that market.  The examples of conduct set out in s. 13(2) make it clear that there is no intention to confine the scope of the provision as submitted.  Thus, for instance, while “conduct preventing or restricting the supply of goods or services to competitors” (s. 13(2)(b)) typically takes place at an upstream market for the supply and demand of goods or services required for the production of television programmes, it is expressly included in s. 13(2) as an example of conduct that may fall within s. 13(1).

179.  Likewise, in the case of s. 14, which prohibits abuse of dominant position by a licensee, the effect of s. 14(4) is to align the analysis with that under s. 13, so that for the purposes of s. 14 the relevant conduct is also not confined to that committed in the television programme service market provided it has the purpose or effect of preventing, distorting or substantially restricting competition in that market.

Failure to examine link to television programme service market

180.  The second argument is that there must be a link between the restriction in the upstream market of artistes’ services and competition in the downstream television programme service market before the Authority has any jurisdiction under ss. 13 and 14 of the BO.  It must be shown that the conduct in question has the purpose or effect of preventing, distorting or substantially restricting competition in the downstream television programme service market in order for the Authority to have jurisdiction in the matter. 

181.  That much is not in dispute.  What TVB contends is that the Authority has not focussed on the correct question and has carried out no analysis of the extent to which TVB’s conduct in the upstream market has either the purpose or effect of preventing, distorting or substantially restricting competition in the downstream television programme service market.

182.  In my view it is not correct to say that the Authority has failed to examine the question on which its jurisdiction hinges. It is clear that the Authority was well aware that the ultimate question concerned the purpose or effect of harming competition in the television programme service market rather than in some other market.  Thus, in the Decision, the Authority stated:

“90. Since artistes are a necessary input to popular programmes such as dramas and comedies, a TV operator would likely face a fall in viewership for its programmes if it relies solely on inputs other than dramas and comedies, and that, by denying other TV operators’ access to a large number of local popular artistes, TVB artificially reduces their competitiveness in producing more attractive programmes with more popular artistes.”

“202. TVB’s various exclusivity clauses and the associated no original voice policy, the no promotion policy and no Cantonese policy (to be discussed in the next sections) in one way or another have the effect of limiting to a material degree the extent to which rival broadcasters can obtain key inputs into their self-produced programmes for which artistes services are a key input and this has the effect of making rivals to TVB less able to expand their output and compete with TVB. In the absence of these restrictions rivals would have greater access to artistes. They would be able to obtain higher quality inputs and this would make their self-produced programmes requiring artistes’ input more attractive to viewers and in turn advertisers. This would enable them to generate increased revenues and this would improve their competitive position versus TVB.”

At §40 of Appendix B to the Decision, the Authority stated that:

“by denying other TV operators’ access to a large number of local popular artistes, TVB artificially reduces their competitiveness in producing more attractive programmes with more popular artistes”.

183.  Plainly, as it seems to me, the Authority has not lost sight of the focus of the prohibition in ss. 13 and 14.  Ground 3 must therefore fail.

184.  Whether or not the evidence available and analysis performed is adequate in law to support any rational conclusion that TVB’s conduct in the upstream market has had the requisite purpose or effect is a different question which will be addressed under Ground 6.

IX.  GROUND 4 - FAILURE TO IDENTIFY THE RELEVANT UPSTREAM MARKET AND ERROR IN THE SUBSTITUTABILITY ASSESSMENT IN RELATION TO THAT MARKET

185.  Ground 4 also contains two main contentions, as follows:

(1) First, TVB contends that consistently with international best practice and its own Guidelines, the Authority should have defined the relevant upstream market since the allegation was that conduct in such market harmed competition in the downstream television programme service market.  The Authority erred in failing to do so.

(2) Secondly, the Authority’s analysis undertaken in place of definition of the upstream market is flawed because:

(a) it excluded from the available pool of talent new or aspiring artistes and singers; in doing so the Authority failed to take into account TVB’s evidence that many of its popular and less popular artistes had started their career without prior training; and

(b) it excluded from the available pool of talent artistes not currently contracted with Hong Kong television broadcasters; in doing so the Authority failed to take into account TVB’s evidence that every year many artistes graduate and become available to all broadcasters.

Failure to define relevant upstream market

186.  Competition law is in general concerned with the conduct of firms with market power in a particular market.  In order to assess the market power of a firm or firms, or to assess the effect or potential effect of their conduct on competition, it is customary, and often necessary, to define the market concerned.

187.  Ss. 13 and 14 of the BO are in particular concerned with protecting competition in a television programme service market.  In considering whether certain conduct has the purpose or effect of preventing, distorting or substantially restricting competition, and in considering whether a licensee occupies a dominant position, it is almost inevitably necessary to define the television programme service market in question. 

188.  There is no dispute that the Authority did define the relevant market in that sense.  Its conclusions and reasons are set out in Chapter VI of the Decision.  As summarised in §46 above, the Authority found that there were two relevant markets: the “all TV viewing market” and the “TV advertising market”, and that TVB was dominant in both markets.

189.  There is equally no dispute that the Authority did not carry out a formal market definition exercise in relation to the upstream market of the supply of services by artistes and singers for the production of television programmes.  TVB submitted that it was wrong for the Authority not to have done so.

190.  As I understand its submission, TVB did not go so far as to contend that a market definition exercise in relation to a market upstream of the relevant television programme service market is required as a matter of law.  There is no such general mandatory requirement in competition law.  As a matter of principle, I do not see why it is essential formally to define the upstream market in every case where it is alleged that conduct in the upstream market has foreclosed input for the relevant downstream market and impaired competition there.

191.  Even under s. 14 of the BO, the dominant position referred to is not a dominant position in an upstream or related market but in the relevant television programme service market.  As is made clear by s. 14(4), conduct that is deemed to amount to abuse of dominant position can take place in an upstream or related market provided it has the necessary anti-competitive purpose or effect in relation to the relevant television programme service market.  It is not necessary to define the upstream market in the present case in order to establish that TVB had a dominant position.

192.  Nor is a formal market definition exercise in relation to the upstream market of the supply of services by artistes and singers essential from an economics viewpoint on the evidence in this case. The Authority was at all material times advised by a firm of external economic experts, who identified the following as the appropriate economic framework for analysis:

“In order for these restrictions to have an effect on competition, they would have to apply to an important input needed by rivals to produce programming in a downstream market. Further, they would have to apply to a significant proportion of the available supply of the input.”

The expert evidence received by the Authority was thus that it had to examine the available supply and the proportion of it affected by contractual restrictions with TVB.  This approach was adopted by the Authority in its Decision.  TVB had not at any stage produced any countervailing economic expert evidence to suggest that this was not a permissible or appropriate approach.

193.  TVB’s main argument here is that the omission of a formal market definition exercise in relation to the upstream market is contrary to the “Guidelines to the Application of the Competition Provisions of the Broadcasting Ordinance” (“Guidelines”), which were issued by the Authority itself pursuant to s. 4 of the BO, in particular the italicised part below of §31 of the Guidelines which states:

“The key to the prohibition on anti-competitive conduct and abuse of dominance is the requirement to establish that the conduct of a licensee has the purpose or effect of preventing, distorting and substantially restricting competition in a television programme service market. Since the scope of the prohibitions specifically covers the downstream television programme service market or markets (please refer to paragraphs 13 and 14 above), the process of market definition primarily involves the identification of a downstream market(s). However, conduct in an upstream or related market may affect the relevant downstream market, which also requires establishing (as the case may be) the relevant upstream or related market(s).” (emphasis added)

194.  In addition, TVB relied on §26 of the Guidelines, which states:

“26. The framework for competition analysis is currently based on international best practice and applies a sequential methodology comprising three broad stages:

(a) Stage 1: Defining the relevant market in which the party(ies) (more specifically, the product(s)) under review operate;

(b) Stage 2: Assessing market competition to identify whether the party(ies) have market power …; and

(c) Stage 3: Assessing whether the conduct under review has the purpose or effect of preventing, distorting or substantially restricting competition in the defined television programme service market.”

195.  It seems to me that §26 of the Guidelines is primarily intended to deal with the relevant market in which the impact of the impugned conduct on competition is to be assessed.  It is clear that the Authority did apply this approach in relation to the relevant television programme service market and the purpose and effect of TVB’s conduct as regards competition in that market.

196.  The Guidelines do not proclaim that the approach in §26 is to be applied to an ancillary market in which the impugned conduct took place which might in turn have an anti-competitive purpose or effect within the relevant television programme service market.

197.  Furthermore, §27 of the Guidelines makes it clear that the three stages set out in §26 are not to be regarded as “separate, self-contained exercises”, that the purpose of defining the relevant market is “to provide a framework within which to analyse the operation of competition – market definition is not an end in itself” and that “the [Authority’s] central focus remains in evaluating whether the alleged anti-competitive conduct has, or is likely to have, an anti-competitive effect”.  §33 of the Guidelines advises that the approach to market definition is a “conceptual framework” not to be applied “mechanically”.  Licensees are forewarned that the Authority “would not necessarily follow each step indicated … in every case”. 

198.  So far as the Authority’s practice is concerned, in five previous competition complaint cases that involved exclusivity arrangements in an upstream market, the Authority had considered that the relevant markets were the downstream television programme service markets in two of these cases.  The upstream markets were not defined in those two cases.[53] 

199.  Further, while it did not come to a formal market definition for the upstream market, the Authority did conduct a substitutability analysis in determining the size of the available pool of talent and the available choices of artistes for producers of television programmes in Hong Kong.  Such an assessment of substitutes is what underpins any market definition exercise.  As stated in Appendix B to the Decision at §33:

“While formal market definition is not a necessary step to establish that input foreclosure can have a harmful effect on competition, the Authority’s approach in assessing the likely substitutes available to broadcasters in the report is consistent with a market definition. When the Authority considers the “available pool of talent”, the Authority has taken into account the substitutes available to broadcasters. … The Authority’s approach in defining the “available pool of talent” considers the substitutes available to broadcasters in the event that the supply of artistes is restricted. It is analogous in approach to a formal definition of markets, and it focuses on the precise competition concern at hand, which is whether TVB can restrict supply of important inputs to the detriment of competition and consumers. …”

200.  Accordingly I reject the contention that the Authority had taken an approach contrary to its own Guidelines or erred in law or in principle in not conducting a separate formal market definition exercise in relation to the upstream market of the supply of services by artistes and singers.

Alleged errors in substitutability assessment

201.  In its second contention under Ground 4, TVB submitted that the Authority unreasonably excluded from its definition of the “available pool of talent” new or aspiring artistes and singers and must be presumed to have failed to take account of TVB’s evidence that many of its popular and less popular artistes had started their career without prior training.

202.  An examination of the Decision shows however that the Authority did address that evidence.  The evidence was referred to in Appendix B at §44 and the Authority set out its reasons in §46(b) of Appendix B:

“… while there are new artistes/singers in the industry who can gain wide popularity within a short time, the percentage is small and they seldom take a leading role in general entertainment programmes, particularly dramas. It seems unlikely that a local TV broadcaster could rely significantly or solely on inexperienced or aspiring artistes to participate in general entertainment programmes to drive ratings and advertising revenue. Also, … among the 80 artistes whom TVB claimed to be “main artistes” performing in TVB’s ten highest-rated serial dramas in 2011 and 2012, five had their contracts with TVB commencing in 2009 or later. Among those five artistes concerned, two have acting experience before joining TVB, while the remaining three have little or none. In other words, only three of the 80 “main artistes” … in the highest-rated dramas as identified by TVB in 2011 and 2012 had three years or less of acting experience as at 2011, and none of them were first leading artistes in the dramas concerned. This shows that it takes time to nurture new talent, who gradually build up expertise and media profile over a number of years to become artistes playing leading roles in dramas. Therefore, aspiring or inexperienced artistes should not be included as part of the pool of available artistes.”

203.  On behalf of TVB Ms Rose QC submitted that it is not unheard of in the entertainment industry for relatively unknown persons to enjoy a meteoric rise to stardom.  But, with respect, the question is not whether it is possible in Hong Kong for someone to gain immediate fame in the entertainment industry.  As the economic consultant explained, in general, artistes need to learn a range of skills relevant to their work on television, and may need to develop and build a media profile.  The question as the Authority saw it was whether a local television broadcaster could rely significantly or solely on this as a source of artistes to participate in general entertainment programmes which were the main driver of ratings and advertising revenue.  It seems to me that the Authority’s negative conclusion on this is not the subject of any sustained attack on admissible grounds.

204.  TVB also complains that the Authority excluded from the “available pool of talent” artistes not currently contracted with Hong Kong television broadcasters and therefore must be presumed not to have taken into account TVB’s evidence that every year, hundreds if not thousands of artistes graduate from schools and training centres and become available to all broadcasters. 

205.  Again the Decision shows that the Authority did take this into account.  Specifically, as regards artistes not currently contracted with Hong Kong television broadcasters, Appendix B to the Decision stated at §46(c):

“… it is not a common phenomenon for artistes who are not contracted with broadcasters to regularly work for Hong Kong broadcasters. … Under the current arrangement, artistes usually sign contracts with TV broadcasters to perform in programmes produced by the TV broadcasters concerned. While some top artistes/singers may not need to sign any contracts for appearing on TV, the percentage is small. The Authority also observes that most of these high value artistes seldom perform or do not regularly perform in TV programmes, though they may occasionally appear in music programmes, variety shows, charitable events or award presentation ceremonies on TV on a one-off basis instead of participating in dramas. While there are high value artistes who are not under contract with TVB, it is noted that such artistes also tend not to sign any contract with any local TV broadcasters. The evidence supplied by TVB does not suggest that there is a significant pool of suitably qualified artistes who are currently not contracted with a broadcaster. It seems unlikely that a local broadcaster could rely significantly or solely on high value artistes not under contract with any TV broadcasters to participate in general entertainment programmes to drive rating and advertising revenue.”

206.  As for newly graduated artistes, they are presumably included within the category of new or aspiring artistes which the Authority did not consider to be a significant source of the available pool of talent, for the reasons given in §46(b) of Appendix B to its Decision, as quoted above.  There is no basis to infer that the Authority had failed to take into consideration TVB’s evidence about the number of such graduates.

207.  Ms Rose QC further submitted that the Authority’s analysis was flawed because it did not identify the pool of all available artistes in Hong Kong.  There was evidence, however, of the number of contracts that the main Hong Kong broadcasters had with artistes and proportion claimed by TVB of artistes contracted with Hong Kong broadcasters (albeit it was redacted).  The Authority found that TVB had contracted with about 75% to 80% of all the artistes on contract with the main Hong Kong broadcasters.[54]  Coupled with the point that it was not common for artistes not contracted with broadcasters to work regularly for Hong Kong broadcasters (see §205 above), it seems to me that TVB could not fairly allege any legal error in the Authority’s reasoning in this respect.

208.  For these reasons I conclude that the second contention in Ground 4 also fails.  TVB has failed to establish any error of law or principle in relation to the Authority’s analysis of the available pool of artistes.

X.  GROUND 5 – FAILURE TO ADOPT A RATIONAL AND CORRECT APPROACH TO ASSESSING AND FAILURE TO CONDUCT SUFFICIENT ENQUIRY INTO TVB’S MARKET POSITION

209.  Ground 5 is a new ground added by amendment.  By it TVB attacks the Authority’s assessment of its market power. 

210.  It is not in dispute that a proper assessment of market power is critical to a sound finding of conduct infringing ss. 13 or 14 of the BO.  As summarised in §46 above, the Authority considered that the television programme service market was a two-sided market, reflecting the supply of services by television broadcasters to viewers and to advertisers respectively.  It defined the relevant viewing market as the market for “all TV viewing”.  It considered there were similarities in the type of content broadcast on FTA TV and on pay TV, which suggest that FTA TV and pay TV were substitutes for each other and hence in the same viewing market.[55] 

211.  In assessing TVB’s market power the Authority identified market share as the “first and foremost” factor (§132).  The Authority focussed on TVB’s share of viewers and found:

“In terms of market share as measured by viewership, TVB had a 66% share in the all TV viewing market in 2010. More importantly, TVB’s large market share has persisted over time. Its share in the all TV viewing market has remained above 60% between 2006 and 2010.”

On this basis the Authority concluded that TVB was dominant in that market and also dominant in the market of television advertising in Hong Kong.

Irrationality

212.  TVB challenges the Authority’s reasoning in coming to this finding.  There are two main points under this ground.  First, TVB contends that it was irrational for the Authority to assess TVB’s market share by reference solely to its share of viewers, and that it ought at least to have taken into account TVB’s share of the total revenues derived by broadcasters in the market, and then considered whether its share of revenue was suggestive of market power.  The Authority’s methodology was irrational because FTA broadcasters seek to maximize their viewership to attract higher advertising revenues (on which they rely for their funding) whereas pay TV broadcasters (who depend less on advertising revenue) seek to maximize their subscription fees.

213.  Market share is often taken as one of the indicators of market power.  It gives one a glimpse of the state of existing competition within the market.  Examined over time, it provides some evidence of the structure of the market and the competition faced by a particular firm. The relevance of market share was explained by the European Court of Justice in Hoffmann-La-Roche v Commission [1979] ECR 461 (at §41) as follows in the context of finding dominance:

“An undertaking which has a very large market share and holds it for some time, by means of the volume of production and the scale of the supply which it stands for – without those having much smaller market shares being able to meet rapidly the demand from those who would like to break away from the undertaking which has the largest market share – is by virtue of that share in a position of strength which makes it an unavoidable trading partner and which already because of this secures for it, at the very least during relatively long periods, that freedom of action which is the special feature of a dominant position.”

214.  The Authority explained its approach in focussing on viewership shares in the Decision at §135 as follows:

“Market shares are one way to measure market power but in markets with heterogeneous products (such as FTA TV and pay TV), there can be different ways to measure market share, and the way best suited to assess a firm’s ability to exercise market power will depend on the nature of the competition being studied. In the case of TVB, the Authority considers that its ability to exercise market power is best reflected in its share of viewers, since TVB’s business model is to provide programming for free to consumers in order to attract viewers and thereby generate advertising revenues. If TVB has market power, it would be able to behave independently of its rivals and ultimately consumers. Therefore, if it is able to reduce the quality of its programming without a significant impact on loss of viewers to other channels, and thus on its revenues, this would be an indication of the extent of market power. …”

215.  As a first observation, as Mr Hoskins QC pointed out on behalf of the Authority, while pay TV broadcasters derive substantial revenue from user subscription fees, it does not follow that they have no interest in maximising their viewers levels.  The more people who want to watch their programmes, the more subscribers they will have.  Share of viewers is therefore a relevant metric in relation to both FTA and pay TV broadcasters.

216.  Secondly, in my view there is nothing illogical in the Authority’s approach.  The question of market power is ultimately about constraints – constraints from the ability profitably to raise prices or, in this case where television programmes are broadcast free of charge, constraints from the ability profitably to reduce production cost or the quality of television programmes.  S. 14(2) of the BO defines dominance in terms of the ability “to act without significant competitive restraint from its competitors and customers”.  A principal concern of advertisers is number of viewers. Since what drives its revenue as an FTA broadcaster is primarily viewership, the constraints for TVB would naturally arise from concerns over the number of viewers.  If TVB had a high share of viewership in the market and was able to act independently of its rivals without suffering any significant drop in viewership, that would be indicative of its market power.  In the words of the economic consultant engaged by the Authority, actual viewing choice is “the relevant metric for understanding the degree to which TVB’s viewers would switch away from its channels to other channels in response to a decline in the quality of TVB’s programmes”.

217.  Revenues in the form of subscription fees reflect customers’ willingness to pay for extra pay TV channels.  If, despite increasing subscription revenues for pay TV broadcasters which would suggest increasing take up of pay TV in Hong Kong, TVB managed to maintain its viewers share, that would be some indication of its market power.  On the other hand, the revenue-based approach advocated by TVB may well exaggerate the competitive constraint that pay TV broadcasters placed on TVB’s ability to exercise market power.  On the evidence a significant proportion of viewers (possibly 40% of all households in 2009) did not have a pay TV subscription.  They would not necessarily respond to a small drop in quality of TVB’s programmes by switching to pay TV given cost and other considerations.

218.  Thirdly, the Authority found that TVB was dominant also in the television advertising market.  This finding was based, among other things, on TVB’s share of advertising revenue (§150).  Prior to the Decision, TVB submitted to the Authority that the evidence on revenues it proposed to rely upon was flawed, but there is no challenge against this finding in these proceedings.

219.  For these reasons I reject the contention that the Authority was irrational in taking TVB’s viewers share as a means of measuring its market power in the market for all TV viewing.

220.  To put the point in context, it should be noted further that the Authority’s finding of market power in that market was not based solely on TVB’s share of viewers in absolute terms, but also upon other factors including, in particular, (i) the fact that TVB’s market share was significantly higher than its rivals’ (being, in 2010, more than 4 times as large as that of its nearest competitor and more than twice as large as that of its competitors combined);[56] (ii) high barriers to entry,[57] and (iii) the absence of any real countervailing buyer power.[58]

Failure to inquire into effect of reduction in quality of programmes

221.  The second main point taken by TVB under Ground 5 is that the Authority failed to undertake an inquiry into the effect on TVB’s viewership of a reduction in the quality of its programmes – a matter which the Authority recognised as relevant.

222.  TVB’s argument is based on the reference to reduction in quality in §135 of the Decision as quoted above but, in my view, takes that sentence out of context.  The Authority was not there suggesting an empirical exercise which could or should be conducted to gauge whether TVB had relevant market power.  Rather, it was postulating what market power would enable TVB to do in the relevant market.  Market power describes an ability to act.  Possession of market power does not necessarily mean that the firm in question has in fact taken such action, such as increased the price of goods beyond their marginal cost or, in this case, lowered the quality of television programmes (and implicitly production cost) to increase its profit.

223.  As the Authority explained in an earlier part of its Decision in connection with the definition of the market:

“empirical data on TV programmes in Hong Kong does not allow the Authority to determine consumer reaction to a drop in the quality of TV programmes. Drop in quality is subjective and often difficult to quantify”.[59]

For that reason, the Authority has not in this case quantitatively applied the “hypothetical monopolist test” (also known as the “Small but Significant, Non-Transitory Increase in Price” or SSNIP test)[60] in order to ascertain the relevant market.

224.  The Authority has addressed the question whether TVB possessed market power, i.e. the ability to act without significant competitive restraint from competitors, consumers or suppliers (see Guidelines §47).  In assessing TVB’s market power, the Authority has followed the approach indicated in the Guidelines (at §48), which states that in most cases, no singlepiece of evidence can provide a reliable indicator of the degree of competition in a market.  It is normally necessary to look at a range of factors in order to build up a picture of the operation of competition in that market, including market shares (and the degree of concentration or distribution of shares between firms) and any changes in these shares over time, the potential for entry and exit from the market, including the existence and scale of any barriers to market entry, the extent of countervailing buyer power and the presence of supplier countervailing power.  TVB has advanced no argument to suggest that this approach is in any way erroneous. 

225.  In my judgment, for these reasons the second contention under Ground 5 is misconceived and should be rejected.

XI.  GROUND 6 – APPLICATION OF WRONG STANDARD OF PROOF IN CONCLUDING TVB’S CONDUCT HAD THE PURPOSE OR EFFECT OF PREVENTING, DISTORTING OR SUBSTANTIALLY RESTRICTING COMPETITION AND REACHING THAT CONCLUSION ON MANIFESTLY INADEQUATE EVIDENCE

226.  Ground 6 is also a new ground added by amendment.  The main contentions in this Ground are made under three heads summarised as follows which I shall deal with in turn:

(1) First, TVB contends that the evidence relied upon by the Authority was incapable of founding the conclusions drawn by the Authority as to the anti-competitive purpose or effect of TVB’s conduct.

(2) Secondly, TVB contends, on the footing that the proceedings before the Authority amounted to the determination of a criminal charge within the meaning of Article 11, that the applicable standard of proof in such proceedings is proof beyond reasonable doubt.  The Authority wrongly failed to apply that standard and applied a lower standard instead.

(3) Thirdly, even if the criminal standard of proof did not apply, cogent and compelling evidence was required in the light of the serious nature of the allegations.  The Authority failed to direct itself in accordance with this requirement.

Manifest inadequacy of evidence

227.  As set out in the Notice of Application, TVB’s attack on the evidential foundation of the Decision is targeted at three aspects: (1) the Authority’s conclusion that the contractual clauses concerned had given rise to de facto exclusivity; (2) the conclusion that the no-obligation-to-use clause was intended to foreclose access to a wider pool of artistes; and (3) the conclusions as to the effect of such foreclosure on competition in the television programme service market.  I shall deal with these aspects in turn.

De facto exclusivity

228.  As set out above, the Authority considered that while the contractual clauses in question did not, in form, absolutely preclude artistes and singers from working for TVB’s rivals (as they by and large allowed such work with the consent of TVB), in practice and in reality the clauses imposed “de facto exclusivity”, resulting in a significant degree of foreclosure that limits rivals’ access to key inputs such as artistes or singers (see generally the Decision §§158-173).  In particular, the Decision stated:

“161. … while Clauses a, b and c are slightly different in nature, they all to varying degrees exert foreclosing effect by substantially restricting rivals’ access to artistes and would therefore have the capability of foreclosure …”

“172 … It seems likely that the possible explanation for the lack of rejected approval by other local TV stations for TVB’s artistes/singers is that the artistes and singers were aware of the futility of the request and hence did not bother with it. It also seems likely that many of them may fear retaliation by TVB, such as being denied opportunities to appear on TVB’s programmes or given fewer number of prizes in TVB’s awards presentations …”

“173. … even though it is theoretically possible for TVB artistes/singers to obtain consent from TVB to appear on rival local TV stations, in reality, the consent clauses in the artiste and singer contracts impose de facto exclusivity. …”

229.  TVB attacks this conclusion as being based on manifestly inadequate evidence.  As I understand the submissions, it is not disputed that, as a matter of fact, the artistes and singers who contracted with TVB on the clauses in question did not ask TVB for consent to work for rival broadcasters and did not work for rival broadcasters.  The essence of the dispute was whether this state of affairs had been imposed or substantially contributed to by the clauses.

230.  To assess this ground it is necessary to canvass the evidence relied upon by the Authority.  There are principally three categories of evidence on this point.  First, there are undisputed data concerning the artistes and singers and applications for consent:

(1) Some of the artistes who had contracted with TVB were very popular in Hong Kong.  For example, all of the leading artistes starred in the top 200 television programmes in Hong Kong in 2010 were engaged by TVB.  Some of them were on occasional use contracts.  The Authority reasoned that there must have been demand for TVB’s artistes from the other local TV stations during the four-year period of 2007‑2010.

(2) During the period between 2007 and 2010 inclusive, TVB received a total of 41 applications to perform outside work from artistes on one-show or serial-based contracts.  TVB received no application from singers and only one notification for singers to appear on other television broadcasters.  The breakdown of the applications is as follows:

Number of outside work applications received
	One-show artistes	Serial-based artistes	Singers
2007	1	4	0
2008	8	4	0
2009	8	2	0
2010	3	11	0

The Authority considered these to be “staggeringly low” numbers given the large number of one-show, serial-based and singer contracts TVB had during this period (being 275, 315, 281 and 172 in 2007, 2008, 2009 and 2010 respectively).

(3) While all of these 41 applications were approved by TVB, none of them involved artistes working for TVB’s rival stations in Hong Kong.  Many of these applications were for work for public organisations such as the Hong Kong Police, Hong Kong Arts Festival, Hong Kong Arts Development Council and the Hong Kong Olympics Committee, or for Mainland broadcasters.

(4) There were a significant number of artistes under relevant contracts with TVB who were not fully engaged by TVB and who would have been fully capable of rendering their services to rival local TV stations.  Quantitatively, between 39% and 73% of artistes on one-show contracts during 2007 to 2010 and between 93% and 100% of those on singer contracts performed fewer than 30 shows a year with TVB.  That would be equivalent to working slightly less than once a fortnight, which should leave an artiste with time available to devote to other projects.  In fact, one-third to one-half of those on singer contracts with TVB during those years had a utilisation rate of only 0 to 1 show per year.

231.  The Authority received evidence from other licensees:

(1) ATV reported at least two instances where the singers contacted by ATV refused to appear on its programmes for fear of reprisal by TVB and nine instances which might have been the results of the restrictions.

(2) Another licensee[61] reported 10 instances where TVB artistes declined invitations to appear in its programmes between 2008 and 2010 as a result of the restraints imposed by TVB.  The licensee stated that “[i]n most of the cases, we simply have not approached the artistes knowing that they would decline our offers since they are either in a contractual relationship with TVB and/or are very mindful of possible harm to their relationship with TVB if they are to accept an opportunity from [us].” Instead, the licensee commissioned independent programmes to circumvent TVB’s restrictions. 

(3) Another licensee stated that “[i]t is common knowledge in the industry that TVB has leveraged its market power to limit the willingness or ability of artistes to appear in non‑TVB shows” and that “many alleged practices have been in the market so long that there exists a huge risk that the concerned would take such practices as the norm and consider them acceptable to this industry.”

232.  The Authority also conducted interviews with certain record company executives and singers.  The Decision (§218) records:

“… both singers and record company executives interviewed by the Authority have informed the Authority that TVB contracted singers do not perform for other local TV stations. A record company executive informed the Authority that its company had not made use of the consent mechanism because it was understood that consent would only be granted for RTHK TV productions. A singer also said that although there was a consent mechanism laid down in the contract, singers would not seek consent in practice. It is not possible for him/her to perform on other local TV stations at all. One record company executive and one singer also told the Authority that singers do not accept interview requests by ATV. All these interview testimonies suggest that TVB maintains a consent mechanism that amounts to de facto exclusivity and these exclusivity clauses have a direct foreclosing effect by preventing rival stations’ access to its contracted artistes and singers. …”

233.  In addition, the Authority relied upon TVB’s own statement in its submissions[62] to the Authority that “certain clauses in our standard contracts appear to restrain the free movement of artistes between television stations in Hong Kong”, but “such clauses are justifiable and necessary to prevent unhealthy competition between television stations”.  TVB gave an example of TVB and ATV both broadcasting the same Taiwanese drama “Judge Pao” in 1994, and stated “[o]ne way to prevent such unhealthy competition is to engage an artiste on an exclusive basis so that rival television stations could not produce same or similar programmes with the same artiste within a relevant period of time”.  TVB stated that for that reason, it had imposed contractual clauses such as that requiring TVB’s prior consent before an artiste could work for another television station in Hong Kong.  TVB argued that ATV and other television stations have engaged in the same practice, i.e. restraining artistes from serving or appearing on other television stations.  Ms Rose QC complained that it would be taking the letter out of context to treat it as a general admission of an anti-competitive purpose on the part of TVB.  Nevertheless, it seems to me that the Authority was entitled to take it as part of the evidence which overall indicated that the clauses in fact operated in such a way as to restrain artistes from serving TVB’s rivals.  The assertion that other broadcasters have the same practice does not assist TVB.  As a dominant player, there could be practices which were “off limits” to TVB even though they were not prohibited for other, non-dominant firms in the market.

234.  In advancing this ground of challenge, TVB pointed out that the Authority did not refer to any direct evidence from artistes themselves that the clauses had the alleged de facto foreclosure effects.  TVB drew attention to the fact that it had given consent to all artistes who had sought permission for outside work, and highlighted that the Authority itself described the evidence from rival broadcasters that artistes had been prevented by the clauses from working for them as “somewhat limited”. TVB also complained that the Authority referred to direct evidence only from two record company executives and two singers.

235.  TVB argued that the Authority was speculating in saying that there must have been demand for TVB’s artistes from rival television stations and that applications for permission to outside work were few in number because artistes were deterred by the restrictive clauses from seeking permission and because they were “aware of the futility of the request and hence did not bother with it” or “many of them may fear retaliation by TVB such as being denied opportunities to appear on TVB’s programmes or given fewer number of prizes in TVB’s awards presentations”.

236.  In approaching TVB’s challenge it is necessary to remind myself that this is not an appeal from the Authority but an application for judicial review which is concerned with the lawfulness of the Decision.  The question for me is not whether the evidence would be sufficient for this court to come to the same conclusion, still less whether the evidence could have been stronger, but whether no reasonable decision-maker in the position of the Authority properly directing itself could have arrived at that conclusion on the evidence, or in other words, whether the evidence is rationally capable of supporting the Authority’s conclusion.

237.  It is true that there is little direct evidence from artistes that they did no work for rival stations because of the contract clauses.  The Authority came to that conclusion by a process of inference from the objective facts.  Given the evidence, it was unlikely that there was no demand from rival stations for TVB’s contracted artistes and singers; and this is confirmed by the statements of ATV and other licensees. It was also highly unlikely that the artistes and singers were so fully engaged by TVB that they were not interested in or capable of appearing on other stations.  Many artistes and singers were used by TVB only for a low number of shows, and some artistes did apply for permission to appear in programmes for public organisations.  Ms Rose QC said it could be that artistes themselves had no wish to appear on other stations as their viewership levels were low.  But as Mr Hoskins QC submitted, it would be quite inherently unlikely that over a 4-year period there was not a single attractive proposal from rivals that an artiste would want to take up.

238.  The Authority was entitled to draw “inferences … that would, in the absence of any countervailing indications, normally flow from a given set of facts”: Napp Pharmaceutical Holding Ltd v Director General of Fair Trading [2002] CAT 1, §110.  The Authority could not of course speculate or choose arbitrarily from “conflicting inferences of equal degrees of probability so that the choice between them is a mere matter of conjecture”; it is however enough “if the circumstances appearing in evidence give rise to a reasonable and definite inference”: Bradshaw v McEwans Pty Ltd (HC of Aust., unreported, 27 April 1951), quoted in Luxton v Vines (1952) 85 CLR 352 at 358.  It is further to be borne in mind, consistently with the approach set out in §296 below, that the Authority had to look for inferences that were sufficiently compelling.  But it is the body of evidence relied upon, viewed as a whole, rather than any individual item of evidence examined in isolation, that must meet the necessary standard: Knauf Gips KG v Commission [2010] ECR I-6375, §47.

239.  In her submissions Ms Rose QC also queried the basis of the statements made by the interviewees and generally criticised the quality of the interview evidence, complaining inter alia that it was anonymous and no verbatim records or notes, as opposed to mere summaries, had been supplied to TVB.  As shown by the Court of Appeal’s decision in ATV v Communications Authority [2013] 2 HKLRD 354, however, the practice was not necessarily unfair.  Ms Rose also made separate points about the reliability of the interview evidence, such as how the tensions between the statements were reconciled, and queried which interviewees were considered credible and why.  In the absence of specific complaint in the Notice of Application, however, I do not think it would be right to take into account this kind of detailed qualitative criticism of the evidence.

240.  In my judgment, TVB has failed to show that the Authority’s conclusion on de facto exclusivity was wrong in law for lack of evidential support.

241.  Ms Rose QC further submitted that if there was de facto exclusivity, it was not proven to have arisen from TVB’s conduct. She argued that since the Authority made no finding of any policy of retaliation maintained by TVB against artistes for having performed for rival stations and since the evidence shows that TVB actually gave consent when requested, the artistes’ fear of reprisal and their belief that requests for consent would be futile could not be attributed to TVB’s conduct.  This argument cannot in my view be accepted.  The requirement of consent is a relevant restriction.  TVB’s conduct that imposed this restriction is its entering into the relevant occasional use contracts containing these clauses with artistes and singers.  The effect of that conduct has to be assessed in its economic and legal context, and that includes taking account of the actual conditions of the market.  An undertaking does not have to be responsible for all the objective conditions in the market before being found liable.

The no-obligation-to-use clause

242.  As stated above, the contracts in question all contained the no-obligation-to-use clause which means that under one-show contracts, TVB was only obliged to use the contracted artiste for a minimum of one show.  The Authority was critical of this state of affairs, concluding that

“given the unique nature of one-show contracts, which only commit TVB to deploy the artiste at issue in one show at minimum during the contractual period, and the low rate TVB pays many of these artistes, the Authority is of the view that TVB could have used these contracts expressly to tie up artistes to deny rivals’ access to them” (§175)

and

“the no-obligation-to-use clause together with the low per-show fee for many of these one-show artistes and singers allow TVB to sign them up on an exclusive basis at low cost to itself to foreclose rivals’ access to these artistes.” (§179)

243.  TVB complains that the Authority did not refer to any direct evidence for its conclusion that the no-obligation-to-use clause was intended to foreclose access to a wider pool of artistes and that its conclusion was speculative.

244.  The objective facts were not in dispute and were based on direct evidence. 

(1) The contracts in question all contained the no-obligation-to-use clause.

(2) Many artistes on one-show contracts and singers were very infrequently used by TVB (see §230(4) above).

(3) The agreed fee for the artistes for each show under the one-show contracts was low.  The details are set out in the Decision at §§176-177.  The vast majority of singers received only a nominal sum for each show performed in TVB.

It seems to me that entering into retainer with artistes and singers, whereby they became in reality prevented from working for rivals, without a concomitant obligation on the part of TVB to give them work, and where as a matter of fact they were little used by TVB, can tend to suggest that such retainer was preclusive in purpose.

245.  The essential point made by the Authority is that by virtue of the no-obligation-to-use clause, the economic cost to TVB of signing up a large number of artistes and subjecting them to the clauses in question was minimal.  The no-obligation-to-use clause was not of itself a free-standing restriction but was capable of reinforcing foreclosure of supply of artistes and singers to TVB’s rivals.  It was part of the system which enabled TVB to cast the net of one-show contracts wide.  In my opinion it is difficult to see how that conclusion can be faulted.

Effect on competition in the television programme service market

246.  TVB attacks the Authority’s conclusions as to the effect of foreclosure on competition in the downstream television programme service market.  In order to assess the arguments presented by TVB and the Authority it is necessary to examine, so far as relevant, the principles to be applied in assessing whether certain conduct has the purpose or effect of preventing, distorting or substantially restricting competition in a television programme service market within the meaning of the BO.

247.  The BO, in common with the competition law of many other jurisdictions, envisages two different kinds of infringement of its competition provisions, namely, infringement by purpose and infringement by effect.  In these proceedings it is common ground that the word “purpose” as used in s. 13(1) and 14(4) of the BO has the same meaning as the word “object” as used in art. 101(1) of the TFEU, which provides:

“The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market …”

248.  “Purpose” and “effect” are alternative requirements.  Where it is established that conduct has the purpose of preventing, distorting or substantially restricting competition in a relevant market, it can be concluded there is an infringement of the BO without having to consider the actual effects of the conduct on competition.  This seems to me clear both from the language of the BO seen in itself as well as seen against the international jurisprudence which evidently provided the model for s. 13(1) and s. 14(4) of the BO; see e.g. Case 56/65 Société Technique Minière v Maschinenbau Ulm GmbH [1966] ECR 235, 249.

249.  Where infringement by effect is alleged, in order to establish that certain conduct has the requisite effect of preventing, distorting or substantially restricting competition, the Authority submitted that it is sufficient to show that the conduct had the potential or capability to restrict competition; it is not necessary to show that it had the actual, concrete effect of restricting competition.  TVB took issue with this proposition, submitting that the Authority must conclude that the conduct has actually had that effect, and not merely that it may potentially do so or is likely to do so.  As such, this point has no bearing on the Authority’s finding of TVB’s infringement by purpose.

250.  This is ultimately a question of the interpretation of the BO but in construing the relevant provisions this court will in my view be assisted by an examination of the jurisprudence of the European Court of Justice given that the relevant language in s. 13(1) and s. 14(4) of the BO is plainly derived from the equivalent provisions of the TFEU.

251.  An examination of the decisions of the European Court shows that the position under European law is more consistent with the Authority’s submissions.  In Case C-7/95P John Deere Ltd v Commission [1998] ECR I-3111, the trade association of tractor manufacturers or importers in the UK operated an agreement among its members whereby information was exchanged enabling each competitor’s sales to be identified.  The Commission found that the agreement infringed art. 85(1)[63] and ordered the parties to put an end to the infringement.  The appellant appealed on the ground, inter alia, that art. 85(1) does not prohibit purely potential effects on competition.  It submitted that the Commission did not investigate whether, as a result of the information exchange in question, competition was actually restricted and that it had not established the existence of a negative effect on competition resulting from the exchange of information at issue.  The European Court of Justice held:

“76. According to the settled case-law of the Court, in order to determine whether an agreement is to be considered to be prohibited by reason of the distortion of competition which is its effect, the competition in question should be assessed within the actual context in which it would occur in the absence of the agreement in dispute (see, in particular, Case 56/65 Société Technique Minière [1966] ECR 337 and Case 31/80 L’Oréal v De Nieuwe AMCK [1980] ECR 3775, paragraph 19).

77. Article 85(1) does not restrict such an assessment to actual effects alone; it must also take account of the agreement’s potential effects on competition within the common market (see, to this effect, Case 31/85 ETA v DK Investment [1985] ECR 3933, paragraph 12, and BAT and Reynolds, cited above, paragraph 54). As the Court of First Instance correctly reiterated, an agreement will, however, fall outside the prohibition in Article 85 if it has only an insignificant effect on the market (Case 5/69 Völk v Vervaecke [1969] ECR 295, paragraph 7).

78. Consequently, the Court of First Instance was right to hold that the fact that the Commission was unable to establish the existence of an actual anti-competitive effect had no bearing on the outcome of the case.  …”

252.  A consistent line of decisions of the European Court of Justice has emphasised that in order to appraise the effects of agreements or practices in the light of the relevant article, it is necessary to take into consideration their actual context including in particular the economic and legal context in which the undertakings concerned operate, the nature of the goods or services affected, as well as the real conditions of the functioning and the structure of the market or markets in question.  This assessment is not restricted to actual effects but takes account of the potential effects of the agreement or practice in question on competition within the common market: Case 31/85 ETA Fabriques d’Ébauches SA v DK Investment SA, §12; Cases 142/84 and 156/84 BAT and Reynolds v Commission [1987] ECR 4487, §54; Case C-238/05 Asnef-Equifax v Asociación de Usuarios de Servicios Bancarios (Ausbanc) [2006] ECR I-11125, §§49-50; Cases C-215/96 and C-216/96 Carlo Bagnasco v Banca Popolare di Novara soc. coop. arl, §34; Case C-8/95P New Holland Ford v Commission, §§91-92; Case C-345/14 Maxima Latvija v Konkurences padome (judgment of 26 November 2015), §30.

253.  The position in relation to abuse of dominance under article 102 of the TFEU is similar.  In Case T-219/99 British Airways plc v Commission [2003] ECR II-5917 at §293, the European Court of First Instance held:

“… BA cannot accuse the Commission of failing to demonstrate that its practices produced an exclusionary effect. In the first place, for the purposes of establishing an infringement of Article 82 EC,[64] it is not necessary to demonstrate that the abuse in question had a concrete effect on the markets concerned. It is sufficient in that respect to demonstrate that the abusive conduct of the undertaking in a dominant position tends to restrict competition, or, in other words, that the conduct is capable of having, or likely to have, such an effect.”[65]

254.  In Case T-155/06 Tomra Systems ASA v Commission [2010] ECR II-04361 at §289, the General Court stated:

“… for the purposes of establishing an infringement of Article 82 EC, it is not necessary to show that the abuse under consideration had an actual impact on the relevant markets. It is sufficient in that respect to show that the abusive conduct of the undertaking in a dominant position tends to restrict competition or, in other words, that the conduct is capable of having that effect (Michelin II, paragraph 239, and British Airways v Commission, paragraph 293).”

255.  Reliance on potential or likely effect is readily understandable where there is concern that an agreement or conduct may exert a continuing or future effect on competition.  Few systems of competition law are so impotent as to afford no protection to the market until competition has been all but eliminated: see Case T-201/04 Microsoft Corporation v Commission [2007] ECR II-3619, §§561-563.  The kind of power such as the power to order an undertaking to cease and desist from certain conduct (as found in s. 16 of the BO) ought in principle to be capable of being exercised not only where its substantial restrictive effect on competition has been actualised but also where it is sufficiently anticipated and legitimately feared.

256.  It may be relevant to take account of potential effect not only where the agreement or conduct in question is very recent, but also, conversely, where it has been in place for a very long time.  In such a case the intrinsic difficulties in building a hypothetical counterfactual (i.e. an imagined situation in the absence of the alleged infringement) by reference to which the effects of the agreement or conduct in question are to be assessed may be such that it is impossible positively to establish any actual concrete effects, at any rate on a quantitative basis.  Thus it may be noted that in John Deere, the agreement for information exchange had been in force in some form since 1975, a fact which, according to the European Court of First Instance, could account for the Commission’s inability to establish actual anti-competitive effect on the market in question (see the Court of First Instance’s judgment, Case T-35/92 [1994] ECR II-957 at §61).

257.  In the present case it may be noted that the Authority received evidence that “many alleged practices have been in the market so long that there exists a huge risk that the concerned would take such practices as the norm and consider them acceptable to this industry” (see §217 of the Decision).

258.  Ms Rose QC submitted that the jurisprudence of the European Union has changed as a result of the decisions of the Court of Justice in Case C-67/13P Groupement des Cartes Bancaires v Commission and Case C-32/11 Allianz Hungária Biztosító Zrt v Gazdasági Versenyhivatal.  In these two cases, the Court dealt with the requirements for proving that an agreement infringed article 101(1) of the TFEU by object, and stated that where the analysis of a type of coordination between undertakings does not reveal a sufficient degree of harm to competition,

“the effects of the coordination should, on the other hand, be considered and, for it to be caught by the prohibition, it is necessary to find that factors are present which show that competition has in fact been prevented, restricted or distorted to an appreciable extent …” (see Groupement des cartes bancaires at §52).

259.  I do not think that in these two cases the European Court of Justice intended to alter its long established jurisprudence on infringement by effect as described above.  Both Allianz and Cartes Bancaires were “object” cases in which the Court was concerned to state the principles applicable for establishing that an agreement infringed article 101(1) by object.  In particular, Cartes Bancaires explained that a narrow interpretation is to be applied to the “by object” restriction in article 101(1).  In referring to the need to look at actual effects where an agreement cannot be said to fall within the category of restriction by object, the Court was contrasting such an agreement with true “object” cases where an examination of the types of coordination reveals “a sufficient degree of harm to competition that it may be found that there is no need to examine their effects”.  The Court was not concerned to say whether, where an evaluation of effects is necessary, the assessment is confined to actual as opposed to potential effects.

260.  This can be seen from the argument of the interveners in Cartes Bancaires (see §25 of the judgment) which was that the concept of infringement by object

“can apply only to agreements which, inherently, pursue an objective the very nature of which is so serious or harmful that the negative impact of the agreements on the functioning of competition is clear beyond doubt, there being no need therefore to assess their potential effects”. (emphasis added)

Thus the argument raised in support of the appeal assumed that an effects analysis extended to the potential effects of an agreement.  It is inconceivable that the Court would have decided to overthrow an established aspect of its jurisprudence by a side-wind, in the absence of argument, when the point was not even raised against the Commission.

261.  In my judgment ss. 13 and 14 of the BO should be given a similar interpretation.  Potential effects do not however mean presumed effects.  Effects, whether actual, potential or likely, have to be demonstrated by a cogent assessment of the effect of the agreement or practice in its proper context.  It is not an exercise conducted on a theoretical basis abstracted from the actual conditions in the market. 

262.  In the present case the Authority did not simply condemn TVB’s conduct on the ground that the imposition of exclusive supply obligations on artistes and singers was presumed to have anti-competitive effect.  The Authority actually analysed its likely effect in the actual economic and market context in Hong Kong.

263.  The Authority examined different genres of programming and analysed data on TV ratings to understand the types of programming that drove ratings.  It considered the volume of different types of programming broadcast and the time of the day during which different programming was shown.  The Authority found that the most popular programmes in Hong Kong were general entertainment programmes (as opposed to news, current affairs or documentary programmes), representing 72% of the sampled highest rated programme during peak times.  For example, the most popular dramas and comedies had more than 50% higher ratings than the most popular news or documentary programmes.[66]

264.  Based on the available data, the Authority assessed that dramas and comedies were the most important driver of ratings.  The Authority also considered other genres of programming (such as documentaries, news, movies, and sports), but was of the view that for most broadcasters these were unlikely to be an effective substitute for programmes featuring artistes.  In fact, while there were numerous channels not operated by ATV or TVB which are often niche or genre‑specific, their share of viewers is much smaller than general entertainment channels featuring artistes.[67]

265.  The Authority also took into account the extent to which ATV and TVB self-produced their programmes compared with content supplied by third party producers, and found that the majority of the most popular programming was self-produced whereas third party produced programming did not tend to attract the highest ratings.  Third party produced programmes only accounted for about 36% of all programmes in the Cantonese analogue channels of domestic FTA broadcasters. About two-thirds of them were acquired programmes from overseas and were not among the most popular programmes in Hong Kong.[68]

266.  General entertainment shows and in particular dramas and comedies by nature required input from artistes.  The Authority therefore assessed that artistes are an important and necessary input for popular programmes that are key drivers of ratings.[69]

267.  The Authority found that, since artistes were a necessary input to popular programmes such as dramas and comedies that drove significant viewership, a television operator would likely face a fall in viewership for its programmes if it relied solely on inputs other than dramas and comedies.[70]

268.  The Authority’s analysis focused on the extent to which TVB’s rivals’ access to artistes and singers had been foreclosed by TVB’s contractual clauses and policies.  It noted that, as the European Commission’s Guidelines on Vertical Restraints[71] point out, the negative effects on the market that may result from exclusivity of supply of input are “anticompetitive foreclosure of … other buyers by raising barriers to entry or expansion”.  The Authority assessed the restrictive effect of the conduct in question with reference to a number of factors mentioned in the Guidelines on Vertical Restraints,[72] whose relevance and importance obviously varies from case to case, including TVB’s market share[73], its rivals’ market shares[74], whether the relevant input was a differentiated intermediate product[75], the degree of foreclosure of supply[76], entry barriers at the supplier level[77], the duration of exclusivity[78], and the countervailing power of suppliers[79].

269.  The Authority also indicated that the exclusivity provisions in these singer contracts denied TVB’s rivals’ access to 90% of the singers in Hong Kong who otherwise would have been available to provide their services to the other TV broadcasters.  The Authority considered it highly likely that these singers were valued by the viewers, and thus the consumers (i.e. all the TV viewers) suffered as they were denied higher quality music programmes with their preferred singers.[80]

270.  The Authority concluded that by denying other television broadcasters access to a large number of local popular artistes and singers, TVB’s conduct had the likely effect of making its rivals less able to expand their output and compete with TVB or, in other words, reducing their competitiveness by preventing them from producing more attractive programmes involving more popular artistes.  As explained above, the Authority did not err in law in taking into account such “capability of foreclosure” (see Decision §§202-215). 

271.  In its Decision at §§216-220 the Authority set out under the heading “effect of foreclosure” its findings and observations with reference to the evidence of ATV, other licensees and interviewees.  The Authority received evidence that a licensee, one of TVB’s rivals, had to commission independent programmes to circumvent TVB’s restrictions, apparently.[81]  The Authority found that this approach imposed a higher cost on rival stations and was not an optimal competing strategy since, as the Authority’s investigation showed, the majority of the most popular programming was self-produced whereas third party programming did not tend to attract the highest ratings.  In addition such programmes might still be subject to the no original voice policy imposed by TVB.

272.  In addition the Authority considered that the effects of the exclusivity clauses were augmented by the no original voice clause, the no promotion clause and the no Cantonese policy.  There is no challenge against the Authority’s findings in relation to the effects of these restrictions.  It should be recorded that the Decision stated that:

(1) The no original voice policy had the effect of rendering rivals’ programmes featuring TVB’s occasional use artistes less appealing to television viewers.  There was evidence from ATV that re-dubbing had a negative impact on the appeal and popularity of these programmes because the artistes’ voice was part of their performance.  The policy also imposed direct cost on rivals by requiring them to dub acquired programmes.[82]

(2) The no promotion policy reduced the viewership of the programmes broadcast by TVB’s rivals resulting from their inability to procure the attendance of the leading cast members to promote it. The policy also imposed a direct cost on TVB’s rivals in the form of extra advertising and promotional expenses that they had to incur to promote a drama series as a result of their inability to promote the series effectively without the leading cast members.[83]

(3) The no Cantonese policy had the effect of reducing the quality of the interviews with singers on rival TV stations and making it more difficult for viewers to understand, thus impairing rivals’ ability to compete with TVB.[84]

273.  Having regard to the legal principles and the analysis that the Authority had carried out, I do not think it can be said that its conclusion on anti-competitive effect in the all TV viewing market was vitiated in law by the absence of evidence.

274.  Several specific points in the Decision have been singled out by TVB for criticism in this regard.  TVB pointed out that while the Decision stated that the anti-competitive impairment brought about by TVB’s conduct “will ultimately cause harm to consumers by resulting in … a deterioration of quality of rivals’ self-produced TV programmes for which artistes services are a key input,”[85] the Authority conducted no analysis of whether, or the extent to which, rivals’ programmes had indeed deteriorated in quality or, if they had, whether there were any alternative explanations to that of anti-competitive effect conduct on the part of TVB.

275.  Further, the Authority stated in the Decision, referring to §21 of the Application Guidelines, that restrictive clauses in artiste contracts may be anti-competitive if

“the restrictive terms in the agreement [are] repeated in a number of similar contracts affecting other artists; and the licensee in question [is] dominant in the relevant market.”[86]

The Decision[87] further referred to the European Commission Guidelines on Vertical Restraints 2010 OJ [2010] C 130/01 which stated (at §194) that:

“[w]here a company is dominant on the downstream market, any obligation to supply the products only or mainly to the dominant buyer may easily have significant anticompetitive effects.”

TVB complained that the Authority had failed to conduct any analysis of whether those potential anti-competitive effects were actualised in the present case. 

276.  It has to be borne that these paragraphs of the Decision dealt with the capability of TVB’s conduct to bring about foreclosure of supply of a necessary input for the service provided in the downstream market.  As explained above, the absence of a quantitative analysis of actual concrete effect in the downstream market is not fatal to the Authority’s conclusion.

277.  A similar point was raised about §219 of the Decision, which stated, under the heading of “Effect of Foreclosure”, that the exclusivity provisions in TVB’s singer contracts denied rivals access to 90% of the Hong Kong singers, resulting in harm to all the TV viewers in Hong Kong. The Decision cited the evidence of a record company executive, which TVB criticised as a bare statement of opinion without any objective support and as being manifestly inadequate to support the conclusion.  TVB argued that if the quality of programmes was the appropriate metric, the Authority could and should have conducted an analysis of the extent to which programme quality had indeed suffered.

278.  As explained above, the absence of a quantitative analysis of concrete effect is not necessarily fatal to the Authority’s conclusion.  A finding was made that the exclusivity provisions in TVB’s singer contracts denied rivals access to 90% of the singers in Hong Kong who would otherwise have been available to provide their services to other television stations.

279.  As for TVB’s criticism of the evidence supporting the conclusion that 90% of the singers otherwise available had been excluded, the figure was supported by the mutually corroborating evidence of 3 record company executives interviewed by the Authority who all gave that number.  No alternative estimate was advanced by TVB during the investigation, although it did point out that the number of singers contracted with TVB fell by 39 in 2010 because of a dispute it had with 4 record companies.

280.  The Authority’s analysis of the types of programmes that drove ratings in Hong Kong, the link amongst artistes, programme producers and broadcasters and the limited supply of key talent was legally sufficient, in my view, to demonstrate a link between restriction of supply of artistes’ and singers’ services in the upstream market and competition in the downstream television programme service market.

Standard of proof

281.  Counsel for TVB submitted that, on the basis that the proceedings involved the determination of a criminal charge within the meaning of Article 11, the applicable standard of proof is proof beyond reasonable doubt.  Counsel for the Authority submitted that irrespective of whether or not the proceedings before the Authority amounted to the determination of a criminal charge, the applicable standard of proof is the balance of probabilities.  Since I have rejected TVB’s premise (see §88 above), the point does not strictly arise for determination.  In deference to counsel’s arguments, however, and in case I am wrong in holding Article 11 has no application, I shall indicate my views below.

282.  I shall first examine overseas jurisprudence on this question and then deal with the question in the context of Hong Kong law especially in the light of the Court of Final Appeal’s decision in Koon Wing Yee v Insider Dealing Tribunal.

283.  In the European Union, the Court of Justice and the General Court approach cases before them on the basis of an “unfettered evaluation of evidence”, unconstrained by the various rules applicable in the national legal systems of member states: see e.g. Case T‑348/08 Aragonesas Industrias y Energia v Commission, judgment of 25 October 2011 at §98 and the case law cited.  In cases concerning horizontal agreements, the Court of Justice has held that the Commission must produce “sufficiently precise and coherent proof” or “firm, precise and consistent evidence” to support the existence of a cartel: Case 29 & 30/83 CRAM & Rheinzink v Commission [1984] ECR 1679 at §§16‑20; Case C-407/08P Knauf Gips KG v Commission [2010] ECR I‑6375 at §47.  It is however not necessary for every item of evidence to be probative in that way; it is sufficient if the body of evidence as a whole meets that requirement: see e.g. Knauf Gips KG, supra. Nevertheless there must be a sufficient basis for the decision and any reasonable doubt must be for the benefit of the undertaking in question according to the principle in dubio pro reo: see e.g. CRAM & Rheinzink v Commission, supra.  The standard required is the same in the case of a vertical arrangement as in respect of a case involving a horizontal agreement: Case C-260/09P Activision Blizzard v Commission [2011] 4 CMLR 964, §71.

284.  While the case law suggests giving the benefit of the doubt to the undertaking concerned, a precise standard of proof in probabilistic terms such as balance of probabilities or beyond reasonable doubt is not a concept espoused by the courts of the European Union, perhaps because such a notion is unfamiliar to continental civil law systems.  The pervasive requirement in those systems is generally that the level of proof must be one that is convincing to the court (“intime conviction”): see Eric Gippini-Fournier, “The Elusive Standard of Proof in EU Competition Cases”, in Claus-Dieter Ehlermann and Mel Marquis, eds., European Competition Law Annual 2009: Evaluation of Evidence and its Judicial Review in Competition Cases. The cases refer often to the “requisite” legal standard but do not define it in rigid terms revolving around degrees of likelihood.  Thus, in Case C-12/03P Commission v Tetra Laval BV [2005] ECR I-987 at §41, the Court of Justice said that while the Court of First Instance had stated that proof of anti-competitive conglomerate effects of a merger called for a precise examination, supported by “convincing evidence”, of the circumstances which allegedly produce those effects,

“it by no means added a condition relating to the requisite standard of proof but merely drew attention to the essential function of evidence, which is to establish convincingly the merits of an argument or, as in the present case, of a decision on a merger”.

Similarly, in Case-413/06P Bertelsmann and Sony v Impala [2008] ECR I-4951 at §§50 & 51, the Court of Justice said:

“50 … it is true that, as is apparent from the Court’s case-law, the decisions of the Commission as to the compatibility of concentrations with the common market must be supported by a sufficiently cogent and consistent body of evidence … and that in the context of the analysis of a ‘conglomerate-type’ concentration the quality of the evidence produced by the Commission in order to establish that it is necessary to adopt a decision declaring the concentration incompatible with the common market is particularly important …

51 However, it cannot be deduced from that that the Commission must, particularly where it pursues a theory of collective dominance, comply with a higher standard of proof in relation to decisions prohibiting concentrations than in relation to decisions approving them.  That case-law merely reflects the essential function of evidence, which is to establish convincingly the merits of an argument or, as in the case of the control of concentrations, to support the conclusions underpinning the Commission’s decisions (see, to that effect, Commission v Tetra Laval, paragraphs 41 and 44).”

In the same vein, the General Court has in Case T-53/03 BPB v Commission [2008] ECR II-1333 at §64 expressly rejected the notion that the Commission must adduce proof “reasonable beyond doubt” of the existence of infringement even in cases involving heavy fines.

285.  The common law, however, knows two separate and different standards of proof, and the distinction between them is “no mere matter of words”: Reifek v McElroy (1965) 112 CLR 517, 521, cited by Bokhary PJ in Solicitor (24/07) v Law Society of Hong Kong (2008) 11 HKCFAR 117 at §84.  The common lawyer is concerned to see that the appropriate yardstick is adopted at the outset to measure the evidence.  I turn therefore to the approach adopted in other common law jurisdictions.

286.  In the United Kingdom while it is accepted that a finding of competition law infringement involves the determination of a criminal charge for the purposes of art. 6 of the ECHR, the settled view is that the applicable standard of proof is the civil standard of balance of probabilities.  Thus in Napp Pharmaceutical Holding Ltd v Director General of Fair Trading [2002] CAT 1, the Competition Commission Appeal Tribunal held:

“101. However, as the Court of Appeal held in [Han v Commissioners of Customs and Excise [2001] 4 All ER 687], … the fact that Article 6 [of the ECHR] applies does not of itself lead to the conclusion that these proceedings must be subject to the procedures and rules that apply to the investigation and trial of offences classified as criminal offences for the purposes of domestic law …

102. Neither the ECHR itself nor the European Court of Human Rights has laid down a particular standard of proof that must be applied in proceedings to which Articles 6(2) or (3) apply, and still less that the standard should be that of ‘proof beyond reasonable doubt’, which is not a concept to be found in the domestic systems of many of the signatory States …

103. In our view it follows that neither Article 6, nor the Human Rights Act 1998, in themselves oblige us to apply the criminal standard of proof as established in domestic law in cases where the Director seeks to impose a financial penalty in respect of alleged infringements of the Chapter I or Chapter II prohibitions under the Act.

104. In our view the standard of proof to be applied under the Act is to be decided in accordance with the normal rules of the United Kingdom domestic legal systems. Neither party has cited to us any decided domestic cases which suggest that, in circumstances such as these, the criminal standard should be applied, nor invited us to apply by analogy certain civil situations where traditionally the criminal standard of proof is required (e.g. committal proceedings).

105. Infringements of the Chapter I and Chapter II prohibitions imposed by sections 2 and 18 of the Act are not classified as criminal offences in domestic law, in contrast, for example, to the criminal offences created under sections 42 to 44. Under section 38(8), penalties are recoverable by the Director as a civil debt. Directions are enforceable by civil proceedings under section 34. In our view the structure of the Act points to the conclusion that under domestic law the standard of proof we must apply in deciding whether infringements of the Chapter I or Chapter II prohibitions are proved is the civil standard, commonly known as the preponderance or balance of probabilities, notwithstanding that the civil penalties imposed may be intended by the Director to have a deterrent effect.

106. We add that in many cases under the Act the factual issues before this Tribunal will often relate to such matters as determining the relevant market, whether dominance exists, and assessing whether conduct characterised as an ‘abuse’ is economically justified.  Issues of that kind involve a more or less complex assessment of mainly economic data and perhaps conflicting expert evidence.  It seems to us more likely that Parliament would have intended us to apply the civil standard of proof to issues of this kind, rather than the time-honoured criminal standard of ‘proof beyond reasonable doubt’.”

287.  This approach was re-affirmed by the (UK) Competition Appeal Tribunal in JJB Sports v Office of Fair Trading [2004] CAT 17, where the Tribunal stated at §193:

“We also remind ourselves that many of the issues with which the Tribunal has to deal involve the appreciation or evaluation of economic questions, for example, whether an agreement “distorts” competition, the extent of the relevant market, whether dominance is established, whether certain conduct is “objectively justified”, whether an agreement satisfies Article 81(3) and so on. Under the 2004 Amendment Regulations, the question whether the Chapter I prohibition is infringed may now involve examining not only whether section 2 of the Act is satisfied, but also whether section 9 of the Act is not satisfied. Section 9 includes such concepts as “economic progress”, “allowing consumers fair share of the economic benefits”, and whether restrictions are “not indispensable”. In so far as the concept of “proof” is relevant at all, we see no sensible way of resolving such issues by the application of the criminal standard as conventionally understood.”

The Tribunal held in §§194-195 that the same standard applied to all issues arising under the relevant prohibitions (in Chapters I and II of the Competition Act 1998) whether the issue is one of “primary” fact or otherwise.  The High Court takes the same approach as the Competition Appeal Tribunal: see e.g. Chester City Council v Arriva [2007] EWHC 1373 (Ch), §10.

288.  It appears that the civil standard of proof is also adopted for the imposition of pecuniary penalties for contravention of competition law in a number of other common law jurisdictions, whereas the criminal standard is applied to hard-core cartel offences that might result in custodial sentence.  Thus in Australia, it appears that the balance of probabilities is the standard of proof for breaches of competition provisions (other than in relation to cartel offences): s. 140 of the Evidence Act 1995 (Cth); Miller’s Australian Competition and Consumer Law Annotated (2015 ed), p 718; S G Corones, Competition Law in Australia (6^th ed), p 873.  The same appears to be the case in New Zealand: see Commerce Act 1986, s. 79A(a).  In Canada, monetary penalties may be imposed for abuse of dominance where the standard of proof appears to be a balance of probabilities: Musgrove, Fundamentals of Canadian Competition Law (2^nd ed), pp 14 & 158.

289.  Indeed, Ms Rose QC frankly acknowledged that as far as she was aware, there is no jurisdiction that applies the criminal standard of proof beyond reasonable doubt in competition law infringement actions which can potentially result in the imposition of financial penalties (as opposed to custodial sentence for individuals).

290.  The question that arises on the present assumption that the process under the BO is criminal in nature for the purposes of Article 11 is whether any standard other than proof beyond reasonable doubt can, in the light of the Court of Final Appeal’s decision in Koon Wing Yee, be found to be applicable.  At §§86-103 of Koon Wing Yee, Sir Anthony Mason NPJ considered the requisite standard of proof in proceedings in the Insider Dealing Tribunal which he held to be criminal in nature by reason of the power to impose a very substantial financial penalty.  His Lordship noted (at §91) that neither the ECHR nor the ICCPR explicitly mandates a specific standard of proof and acknowledged that on the state of the available authorities it would not be justified to conclude that art. 6(2) of the ECHR mandated the standard of proof beyond reasonable doubt (§95). 

291.  However, his Lordship considered that the United Nations Human Rights Committee’s General Comment No. 13 on art. 14 of the ICCPR (as replaced and reinforced by General Comment No. 32), prescribed the standard of proof beyond reasonable doubt for proceedings classified as criminal.  At §103, his Lordship said:

“In my view, this Court should regard General Comment No.13, in so far as it prescribed the standard of proof beyond reasonable doubt, as the appropriate standard to be applied for the purposes of art.11 of the BOR before it was replaced by General Comment No.32 (which then reinforced the application of that standard). In this respect, my view is strongly fortified by the fact that in our criminal jurisprudence proof beyond reasonable doubt is the standard to be applied once proceedings have been classified as involving the determination of a criminal charge.”

292.  Does it follow that in all cases classified as criminal for the purpose of Article 11 the standard of proof beyond reasonable doubt must without exception be applied?  In Koon Wing Yee at §102, the Court of Final Appeal, referring to the opinion of the Privy Council delivered by Lord Woolf in Attorney-General of Hong Kong v Lee Kwong-kut [1993] AC 951, acknowledged that art.14 of the ICCPR and art.11(1) of the Bill of Rights permit

“a degree of flexibility which allows a balance to be drawn between the interest of the person charged and the state so that sensible and reasonable deviations in certain situations are not proscribed”.

293.  An analogous concept has been expressed by the European Court of Human Rights in Jussila v Finland (2007) 45 EHRR 39, recognising that the guarantees under the criminal head of art. 6 of the ECHR need not apply with equal force to all proceedings classified as “criminal” by reference to the Engel criteria.  Thus the Court, sitting as a Grand Chamber, held (at §43):

“… Notwithstanding the consideration that a certain gravity attaches to criminal proceedings, which are concerned with the allocation of criminal responsibility and the imposition of a punitive and deterrent sanction, it is self-evident that there are criminal cases which do not carry any significant degree of stigma. There are clearly ‘criminal charges’ of differing weight. What is more, the autonomous interpretation adopted by the Convention institutions of the notion of a ‘criminal charge’ by applying the Engel criteria have underpinned a gradual broadening of the criminal head to cases not strictly belonging to the traditional categories of the criminal law, for example administrative penalties (Öztürk, cited above), prison disciplinary proceedings (Campbell and Fell v. the United Kingdom, 28 June 1984, Series A no. 80), customs law (Salabiaku v. France, 7 October 1988, Series A no. 141-A), competition law (Société Stenuit v. France, 27 February 1992, Series A no. 232-A), and penalties imposed by a court with jurisdiction in financial matters (Guisset v. France, no. 33933/96, ECHR 2000-IX). Tax surcharges differ from the hard core of criminal law; consequently, the criminal-head guarantees will not necessarily apply with their full stringency (see Bendenoun and Janosevic, §46 and §81 respectively, where it was found compatible with Article 6 §1 for criminal penalties to be imposed, in the first instance, by an administrative or non-judicial body, and, a contrario, Findlay v United Kingdom, cited above).”

294.  It is notable that competition law is expressly mentioned in the above passage as falling outside the “hard core” of criminal law.  As stated above, other common law jurisdictions have, perhaps in recognition of the nature of the issues arising in competition law cases, adopted the civil standard of proof generally in competition cases.  While Sir Anthony Mason NPJ stated (in Koon Wing Yee at §102) that Lord Woolf’s statement quoted above

“is not to be understood, however, as suggesting that the substitution of the civil standard of proof for the criminal standard of proof in a proceeding classified as criminal would be a sensible or reasonable deviation”,

it is to be recalled that the Court of Final Appeal was there adjudicating upon an insider dealing case, and would not have been required to consider the implications of the nature of issues including economic analysis and assessment involved in competition law, as explained in JJB Sports and Napp.  As at present advised, I would be inclined to the view that his Lordship was not intending to preclude the application under any circumstances of the civil standard to any type of proceedings classified as criminal with reference to the Engel criteria, including competition law cases, which raise issues of a particular nature to which the application of the criminal standard has been found in certain jurisdictions to be inapt. 

295.  Having regard to the scheme of the BO as a whole, even assuming the proceedings against TVB were to be classified as a criminal charge under Article 11, I would be inclined to the view that the legislature intended that the standard of proof should be proof on a balance of probabilities.  Accordingly, if the point had arisen, I would have been inclined to reject TVB’s contention that the Decision was vitiated by a failure to adopt the standard of proof beyond reasonable doubt.

Requirement of cogent and compelling evidence

296.  On the assumption that the civil standard of proof applies, there is no dispute that “such standard is to be applied flexibly, factoring in the inherently greater improbability of serious misconduct as compared with lesser forms of misconduct, and therefore requiring the person bearing the burden of proving the allegation to prove it with evidence of a commensurate cogency”: Nina Kung v Wang Din Shin (2005) 8 HKCFAR 387 at §182; Solicitor (24/07) v Law Society of Hong Kong at §§72-75; Re H & Others (Minors) [1996] AC 563, 586G.  I accept that the consideration of whether TVB’s conduct had an anti-competitive purpose or effect and whether TVB abused a dominant position requires a careful and detailed inquiry.  I also accept that, given the consequence of the imposition of a financial penalty and loss of contractual rights, the case against TVB must be proved by commensurably cogent and compelling evidence.

297.  These are well established principles.  There is in my view nothing to show that the Authority failed to adhere to them in coming to the Decision.  The question is to be approached as a matter of substance and reality.  A linguistic scrutiny of the wording of the Decision is unlikely to be useful.  In my judgment, the Authority did not err in law by failing to adopt the Re H approach with respect to the findings challenged by TVB on this judicial review.

XII.  GROUND 7 – LACK OF PROPORTIONALITY IN THE REMEDIAL MEASURES ADOPTED

298.  In this Ground TVB contends that the remedy imposed by the Authority was disproportionate and irrational because it went beyond what was justified by the Authority’s conclusions or what was necessary to redress the anti-competitive harm that the Authority found.  There is no dispute on the principles which may conveniently be taken from the decision of the (UK) Competition Appeal Tribunal in Tesco plc v Competition Commission [2009] CAT 6 as follows:

“136. A useful summary of the proportionality principles is contained in the following passage from the judgment of the ECJ in Case C-331/88 R v Ministry of Agriculture, Fisheries and Food and Secretary of State for Health, ex parte Fedesa [1990] ECR I-4023, paragraph [13], to which we were referred by the Commission:

‘By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued’.

137. That passage identifies the main aspects of the principles.  These are that the measure: (1) must be effective to achieve the legitimate aim in question (appropriate), (2) must be no more onerous than is required to achieve that aim (necessary), (3) must be the least onerous, if there is a choice of equally effective measures, and (4) in any event must not produce adverse effects which are disproportionate to the aim pursued.”

299.  I have set out the Authority’s findings and orders in §§274, 276-277 of the Decision in §§53-55 above.  TVB examined the Authority’s reasoning which focussed on the use of the relevant clauses in combination systematically, and argued that a less wide order would have been sufficient to redress the perceived anti-competitive harm.  TVB submitted that the order made was therefore unnecessary and disproportionate.  In particular, TVB referred to the following less drastic remedies as possible substitutes:

(1) The vice identified by the Authority could be cured by a requirement that TVB make clear publicly that it will not engage in any “retaliatory” behaviour in relation to applications for consent, and will grant consent when reasonably requested.  There was no requirement for a blanket prohibition on the inclusion of consent requirements in TVB’s contracts.

(2) The vice of a system of exclusivity could be remedied by undoing the system, such as by a direction prohibiting the impugned practices to be adopted in combination, or with regard to more than a certain proportion of TVB’s commercial relationships.

(3) The vice flowing from the no-obligation-to-use clause could be remedied by a less onerous requirement, such as a requirement that such clauses be included only in serial‑based contracts.

300.  Further, TVB stated that by the time the Decision was made (i.e. September 2013), TVB had in fact removed any exclusivity clauses from its one-show contracts for artistes and singer contracts and had only retained them in serial-based contracts. 

301.  Finally, with regard to §278(b) of the Decision (set out below), TVB submitted that the Decision was vague and uncertain and left TVB in doubt as to what it could or could not do under the Decision.

302.  The differences between the parties were on examination smaller than they appeared.  The Authority did not dispute the principle of proportionality as applied to an order made under s. 16 of the BO.  Nor did it dispute that failure to adhere to that principle in the present context may constitute an error of law susceptible to review.  The Authority further confirmed that its finding of infringement had arisen from a “system of exclusivity” put in place by TVB by a combination of the clauses and policies in question, not from each individual type of contractual restriction taken in isolation.  The Authority had imposed the requirement in §277 in order to “wipe the slate clean”, and to ensure the monitoring and effectiveness of the remedies.  As to what TVB could do in future, the Authority referred to §278(b) of the Decision, which stated:

“as for the future conduct of TVB is concerned, it is for TVB, taking into account the principles set out in this decision, to decide for itself how it proposes to ensure compliance with the relevant laws …”

TVB is thus prohibited from putting back in place “a system of exclusivity over artistes and singers which actually and potentially forecloses rivals’ legitimate access to an essential input for TV programme production”.  The Authority has however expressly stated in its skeleton argument that “TVB is not barred from adopting in future any one of the offending clauses (or any terms of a similar effect) in any circumstances”, though it must take care to ensure that in doing so it does not give rise to an anti-competitive restriction.

303.  What is prohibited by s. 13(1) is conduct having the purpose or effect of preventing, distorting or substantially restricting competition.  What is prohibited by s. 14(1) is abuse of a dominant position – with conduct having the purpose or effect of preventing, distorting or substantially restricting competition being deemed by s. 14(4) to be an abuse. The notice that may be issued by the Authority under s. 16, containing an appropriate requirement (under s. 16(a)) and an appropriate direction (under s. 16(b)), backed by the sanction of a financial penalty and suspension and revocation of licence, must be aimed at enforcing such prohibition.

304.  The manner in which the power to impose requirements and issue directions under s. 16 should be exercised must necessarily depend on the circumstances of the case and in particular the nature of the infringement found.  It may include a requirement or direction to bring an end to the infringement of ss. 13 and 14 which is manifested in specific practices or situations.

305.  Where the infringement consists in conduct which is not an isolated act or acts, but a course of conduct or a scheme of restrictions involving various policies and contractual terms, there is potentially a tension between two interests.  On the one hand a notice issued by the Authority under s. 16 ought to be clear and unambiguous as to what the licensee is required to do and what it is to avoid in future.  On the other hand the Authority must respect the freedom of the licensee to organise its own affairs including its freedom to enter into contracts with artistes and singers provided that the competition law provisions in the BO are complied with. 

306.  So far as the future is concerned, the Authority was in my view entitled to order TVB, as it did in §276 of the Decision, to refrain from any act or conduct with the equivalent purpose or effect to that found to have infringed ss. 13 and 14, although such a direction does little more than declaring the requirement of ss. 13 and 14.  As was made clear in §278(b) of the Decision, TVB has the freedom of organising its own affairs in future within the limits of the statutory requirements.  This form of order is similar to that made in Case 34/92 Fiatagri v Commission [1994] ECR II-905 §39.  Read in the light of the Decision as a whole, there can in my view be no legitimate complaint of uncertainty.

307.  In my judgment, however, there is considerable force in TVB’s submission that in requiring TVB to abandon all relevant clauses and policies in relation to all artistes and singers who have current serial-based, one-show or singer contracts (§277(a)) and to abandon the no Cantonese policy (§277(b)), the Authority was imposing an order that was further than was necessary for bringing the infringing system to an end.  The Authority has not disputed that by removing certain components of the system, the remaining parts could potentially cease to infringe ss. 13 and 14.  But it has not explained, for example, why it was necessary to force TVB to abandon all restrictions in serial-based contracts if, by releasing all the artistes on one-show contracts, a significant proportion of the pool of available talent in Hong Kong would be made accessible to all competitors.

308.  TVB had in fact informed the Authority prior to the Decision that it had voluntarily removed certain exclusivity clauses in its singers’ contracts upon renewal and that it would not enter into or renew one‑show contracts with artistes.  This is plainly material to a consideration of the precise order to be made but appears not to have been sufficiently taken into account by the Authority in arriving at §277(a) and (b) of the Decision.  In contrast, the Authority did take account of TVB’s voluntary action in deciding not to impose the maximum level of financial penalty of HK$1 million.[88]

309.  Moreover the order in §277(a) and (b) seems to me to be inconsistent with the stance taken by the Authority in §278(b) that it was for TVB to work out for itself how to comply with ss. 13 and 14 in future. Mr Hoskins QC submitted that the effect of §277(a) of the Decision was to “wipe the slate clean” and that TVB was free to decide what practice or contracts to adopt thereafter.  But there is nothing in the BO that empowers the Authority to require the licensee to abandon all existing contracts and policies simply because that would be neat or convenient.  Given, as the Authority accepts, TVB was free to decide what future contracts it might enter into, the Authority has offered no valid reason why TVB should not also be free to decide what should happen in future to its current contracts.

310.  Mr Hoskins QC submitted that §277(a) could be justified by s. 13(3) of the BO, which renders void any provision in an agreement that provides for or permits, directly or indirectly, conduct which contravenes s. 13(1).  There are however problems in relying on that provision in this context.  First, s. 13(3) was not mentioned in the Decision or in the evidence filed by the Authority, but only briefly during the oral addresses in court. It does not seem to have been a matter relied upon by the Authority during its decision-making process.  Secondly, and as a result, there has been no proper argument before this court on whether the clauses in question “provided for or permitted” the infringing conduct within the meaning of that subsection.  Thirdly and in any event, s. 13(3) applies, if at all, only to provisions in an agreement; it does not apply to policies that operate independently of contract such as the no Cantonese policy, to which §277(a) extends.

311.  For these reasons I am persuaded that in making the order in §277 of the Decision requiring TVB to abandon all contractual clauses and policies in question and in imposing other ancillary orders pursuant to s. 16 of the BO in §277, the Authority has erred in law.  The appropriate response seems to me to be an order quashing the requirements and directions contained in §277 of the Decision.

XIII. CONCLUSIONS AND ORDERS

312.  For the foregoing reasons, I have come to the conclusions that:

(1) Ground 2 of the application succeeds. The Decision should be quashed for infringement of Article 10.  There will therefore be an order of certiorari bringing up the Decision to this court and quashing it.

(2) If, contrary to that conclusion, the Decision was not to be quashed for infringement of Article 10, then there should be an order that §277 of the Decision be quashed on the basis of Ground 7.

(3) Ground 1 (which was not pursued), Grounds 3, 4, 5 and 6 and Ground 7 (save in relation to §277 of the Decision) should be rejected.

313.  I give the parties liberty to apply within 28 days with respect to the precise form of relief.

314.  I direct the parties to exchange written submissions on costs within 28 days.

315.  I thank counsel for their very considerable assistance.