Case Commentary

Hong Kong Competition Tribunal decides landmark first case

The Hong Kong Competition Tribunal has given judgment in Competition Commission v Nutanix & Ors [2019] HKCT 2 (CTEA 1/2017), the first case brought by the Hong Kong Competition Commission under the Competition Ordinance (Cap. 619). The Ordinance came into force in December 2015.

The case concerned bid-rigging in the IT sector.

The judgment, given by the Hon Mr Justice Godfrey Lam, President of the Competition Tribunal, establishes that the standard of proof in competition proceedings in Hong Kong is beyond reasonable doubt.

The Commission commenced the proceedings under s. 92 of the Competition Ordinance, seeking financial penalties and other orders against five undertakings: Nutanix Hong Kong Ltd, BT Hong Kong Ltd, SiS International Ltd, Innovix Distribution Ltd, and Tech-21 Systems Ltd.

The Tribunal heard that YWCA Hong Kong, the victim of the scheme, had placed a call for tenders seeking the provision and installation of a hyperconverged computer server system. Nutanix, the head supplier of the server technology, was alleged to have drummed up dummy bids from its downstream distributors and resellers in order to ensure that BT would win the bid.

It was alleged that SiS, Innovix and Tech-21 had submitted deliberately overpriced, non-competitive bids to ensure that the minimum number of tenders required by YWCA’s procurement rules would be received, paving the way for BT to secure the tender.

In its judgment, the Tribunal found that Nutanix, BT, Innovix and Tech-21 had each violated s. 6 of the Competition Ordinance, which prohibits cartel conduct.

The case against SiS was dismissed.

In respect of SiS, the Tribunal held that the conduct and knowledge of SiS’s junior employee, in preparing and submitting the dummy bid bearing SiS’s name and chop, was not attributable to the company. SiS did not compete in the market for end users such as the YWCA. The employee, in purporting to submit a formal tender in a market in which the company did not compete, was acting under the sway of his Nutanix liaison; he was not acting primarily with SiS’s interests in mind; he had concealed his actions from SiS; and was not acting in the course of his employment. He had “gone rogue”.

Tim Parker acted for SiS.

The judgment can be found here.