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Hong Kong Competition Tribunal Clarifies Competition Commission’s Discovery ObligationsJune 19, 2018
The Hong Kong Competition Tribunal, which hears all cases regarding violations of Hong Kong’s competition law, recently issued a decision addressing the discovery obligations of the Competition Commission in proceedings before the Tribunal. The decision, Competition Commission v. Nutanix Hong Kong Limited and others CTEA 1/2017  HKCT 1, is the first of its kind. It provides increased clarity on a number of discovery issues relevant to respondents in enforcement proceedings. Key holdings include:
- Leniency Communications. Communications between the Competition Commission—Hong Kong’s competition enforcement agency—and parties who unsuccessfully seek leniency are privileged and need not be disclosed in later proceedings.
- Complaints to the Regulator. Complaint forms filed by members of the public—which can result in Commission investigations and Tribunal proceedings—are ordinarily protected from disclosure.
- Internal Commission Documents: The Commission’s internal documents are not exempt from disclosure simply because they are internal. Any withholding must be justified based on the content of the individual document. Public interest immunity may, however, extend to (1) internal communications which reveal the Commission’s sources or plans, methods, procedures, and tactics, and (2) reports made by staff and case handlers to Commission members for decision and minutes of Commission meetings.
- Scope of Discovery: Discovery in Tribunal proceedings “should approach the standard applicable to the prosecution in criminal proceedings,” including the disclosure of relevant material which may undermine the Commission’s case or advance a respondent’s case.
Notably, the Nutanix decision did not address discovery obligations placed on respondents. Still, the decision’s guidance regarding Commission obligations and respondent discovery rights should aid respondents in future enforcement actions.
This alert discusses in detail the decision in the Nutanix case highlighting key takeaways and comparative considerations relative to other jurisdictions. Should you have any questions on the content of this alert, please feel free to contact any of the key contacts listed below.
Hong Kong’s Competition Ordinance (Cap 619) (“CO”) took effect in December 2015. In March 2017, the Commission filed its first enforcement action, alleging that Nutanix and other information-technology companies engaged in bid rigging. Specifically, the Commission alleged that Nutanix orchestrated the submission of fake “cover” bids in order to ensure another respondent secured a contract to supply and install an IT server system for the Hong Kong Young Women’s Christian Association.
SiS International Limited—one of the respondents accused of submitting a dummy bid—sought discovery from the Commission. On May 26, 2017, the Tribunal issued an order requiring the Commission to disclose “a list of documents . . . separating (a) those sought to be relied upon and used by the [the Commission] in these proceedings and (b) unused materials, with the origination of each of the documents identified.” (Decision, ¶ 9). SiS argued that the Commission’s subsequent disclosure was deficient and sought redress before the Tribunal.
III. THE DECISION
On March 14, 2018, Mr. Justice Godfrey Lam partially ruled in favour of SiS. He made a number of points at the outset, holding that:
- While the Rules of the High Court (O 24 r 2 of the Rules of the High Court) apply to Tribunal proceedings, there is no automatic general discovery in enforcement actions before the Tribunal;
- Discovery is at the discretion of the Tribunal;
- While discovery in Tribunal proceedings should approach the standard applicable in criminal proceedings, the law does not require automatic disclosure of all unused materials, only those materials meeting the “test of relevance.” (Decision, ¶¶ 23-26); and
- Even if competition cases involve the determination of a criminal charge, this “does not necessarily mean that criminal jurisprudence and procedures apply or apply in the same way in all respects to these proceedings.” (Decision, ¶ 27).
Justice Lam then examined each class of documents subject to the discovery application lodged by SiS.
A. Leniency Communications
SiS sought all without prejudice correspondence and records of without prejudice communications between the Commission and respondents in relation to the Commission’s leniency policy. The Commission was willing to produce (1) any pre-existing documents provided during the course of the leniency process, and (2) communications related to successful leniency applications (an academic concession in the circumstances as there were none). It objected to the production of communications between the Commission and unsuccessful leniency applicants or records of these, invoking the without prejudice privilege and public interest immunity. Justice Lam sided with the Commission.
1. Public Interest Considerations
The Commission’s Leniency Policy emphasises that leniency is “a key investigative tool,” (Leniency Policy, ¶1.1), and that it is “in the public interest that leniency should be accorded to an undertaking which is willing to terminate its participation in cartel conduct.” (Leniency Policy, ¶1.2).
The Commission argued that disclosure of communications related to unsuccessful leniency applicants would “severely undermine” the leniency program, as individuals and companies would be hesitant to come forward without the assurance of confidentiality.
Justice Lam balanced the public interest considerations of encouraging leniency applicants against the desire to determine Tribunal proceedings based on all available information. He held that the public interest in non-disclosure of unsuccessful leniency communications outweighs any contrary interest in disclosure. (Decision, ¶54).
Justice Lam recognised the “strong public interest in encouraging eligible parties to apply for leniency and in facilitating free and frank communication in the process.” (Decision, ¶ 49). Disclosure of unsuccessful leniency communications would mean that leniency applicants would be in a “worse position than those who have not applied for leniency at all.” (Decision, ¶ 50). For the same reason, Justice Lam suggested that public interest weighs in favour of an informer privilege for any person who has given information to the Commission, (Decision, ¶ 36), although that privilege would still be subject to a balancing exercise (Decision, ¶ 38).
Justice Lam acknowledged, however—and the Commission did not contest—that the Commission should disclose (i) any pre-existing documents provided during the course of the leniency process or (ii) any “successful” leniency communications (i.e. where leniency has been granted—there were, however, no successful leniency applications in the case).
2. Without prejudice privilege
Justice Lam also held that communications regarding unsuccessful leniency applications benefited from the without prejudice privilege or “a privilege akin to it.” (Decision, ¶ 65). As a general rule, this means that leniency communications and any information contained therein cannot be disclosed or used against the unsuccessful applicant in enforcement proceedings.
Justice Lam explained that without prejudice privilege facilitates the kinds of cooperation and settlement envisioned by the Leniency Policy. (Decision, ¶ 58). As in civil litigation, parties must be able “to put their cards on the table” and negotiate openly without fear that what they disclose will be used against them. (Decision, ¶ 55). Accordingly, without prejudice privilege applies to “negotiations between the Commission and persons subject to investigation and proceedings even though the context lies outside litigation of private rights.” (Decision, ¶ 59).
Finally, Justice Lam concluded that without prejudice privilege would also apply to settlement negotiations (separate and apart from leniency communications) between the Commission and potential enforcement targets, at least when those communications have not resulted in a successful settlement. (Decision, ¶¶ 63, 74). Although not expressly discussed, the holding implies that successful settlement negotiations may be disclosed.
B. Complainant’s Original Complaint
The Commission objected to the disclosure of the original complaint form alerting it to the potential bid rigging. The Commission claimed that public interest immunity was warranted in order to encourage reporting without fear of disclosure.
Justice Lam recognised that “normally the complaint form,” along with the complainant’s name and contact details, is confidential and covered by informer privilege. (Decision, ¶ 67). In the Nutanix case, however, the Commission had already revealed the identity of the complainant, likely with the complainant’s consent. That fact undermined any further interest in protecting the complaint form, and the Tribunal ordered the Commission to disclose the document.
C. Internal Commission Documents
The Commission objected to the production of any internal reports, minutes, or correspondence regarding its investigation and ongoing Tribunal proceeding against the Nutanix respondents.
Justice Lam rejected the Commission’s claims that (1) the documents were irrelevant as a matter of law, (Decision, ¶ 83), and (2) that the public interest privilege uniformly prohibited the disclosure of internal documents, (Decision, ¶ 86). He acknowledged, however, that legal professional privilege would apply to the extent the dominant purpose of any communication was for obtaining legal advice. (Decision, ¶ 85).
Justice Lam concluded that discovery obligations must be assessed by reviewing the contents of the documents. The Nutanix decision indicates that the first step in assessing disclosure is relevance. It is only when documents are relevant that a question of public interest privilege can arise. (Decision, ¶ 87).
The decision is clear that a document is not “necessarily irrelevant simply because it is an internal communication within the Commission.” (Decision, ¶ 81). For example, an internal document may be relevant and discoverable when it records information gathered during an investigation and that information has not otherwise been disclosed. (Decision, ¶ 81). Conversely, an internal document would likely be irrelevant if the Commission has already disclosed the primary material on which the internal document is based. (Decision, ¶ 80).
2. Public interest immunity
Justice Lam refused a “sweeping proposition that every internal communication is privileged” pursuant to public interest privilege. (Decision, ¶ 86). And while the Commission attempted to divide its internal documents into five sub-categories, Justice Lam concluded that many of the categories were too broad to assess whether disclosure was required. Key conclusions regarding internal documents include:
Internal Document Type
Public Interest Privilege
Records of internal communications between Commission staff during the execution of search warrants issued under s 48 CO
Preliminary and preparatory working drafts of witness statements of informants, complainants and/or persons under investigation generated internally by staff of the Commission
Internal preparatory and briefing notes prepared by Commission staff for the purpose of conducting interviews or executing warrants under s 48 CO
Records of internal communications, recommendations, approvals, meetings, and the relay of information generally, as between Commission staff and Commission Members, for the purpose of the performance of the Commission’s investigative and enforcement functions
Records of general internal communications between Commission staff responsible for investigations or litigation-related tasks, including internal reports and electronic correspondence
D. Witness Documents
The Nutanix decision also addressed the disclosure of documents related to a witness statement by “Mr. D,” an employee of SiS who purportedly participated in the bid rigging and who received immunity. SiS requested a “warts and all” account of the witness. Justice Lam ruled that the Commission must disclose two intermediate drafts of the witness statement not previously shared, but refused to require disclosure of internal notes made prior to meetings with Mr. D. Justice Lam explained that warts-and-all does not mean “everything under the sun.” (Decision, ¶ 119).
IV. COMPARATIVE CONSIDERATIONS
The Nutanix decision is notable for an additional reason: The Commission’s positions on disclosure and privilege mirror those taken by antitrust enforcers in other jurisdictions, notably the United States Department of Justice (“DOJ”).
In the US, the DOJ “holds the identity of leniency applicants and the information they provide in strict confidence, much like the treatment afforded to confidential informants.” On that basis, the DOJ has successfully argued that communications and information received from leniency applicants—both successful and unsuccessful—can properly be withheld. In particular, Courts have accepted that the disclosure of confidential sources (including their very existence) “would lead members of the cartel to identify and intimidate the leniency applicant and to more carefully hide information,” placing at risk ongoing and future investigations.
The DOJ has also successfully challenged the disclosure of internal documents on privilege grounds, including the attorney-work-product privilege, deliberative-process privilege (sometimes called “executive privilege”), and attorney-client privilege. The attorney-work-product privilege “extends to documents and tangible things that are prepared in anticipation of litigation or for trial by an attorney,” which is broad but not without limits.
V. KEY TAKEAWAYS
- Respondents in proceedings before the Tribunal have extensive discovery rights and are able to make significant claims for disclosure.
- The Commission cannot simply make blanket claims of public interest privilege without justifying those claims based on the content of the documents and the information contained in them.
- The Commission does not have to list every document for which it claims privilege, except when it claims public interest privilege. (Decision, ¶ 128.6).
- The Tribunal endorses without prejudice privilege for unsuccessful leniency and settlement communications with the Commission, which preserves the rights of applicants to pursue leniency without fear of undue prejudice.
 The full decision is available here.
 Available here.
 “Without prejudice privilege does not only mean the information cannot be used as evidence against a party but generally permits privileged documents to be withheld from third parties in litigation connected with the same subject matter.” (Decision, ¶ 60).
 The Commission Enforcement Policy (¶4.2) provides that “Approaches to the Commission to discuss settlement may be made on a ‘without prejudice’ basis.”
 As a general rule, if a settlement is reached pursuant to Rule 39 of the Tribunal’s Rules, an agreed statement of facts made by the settling party will become public.
 SiS requested to know “everything about him, the terms of immunity and any matters surrounding it which could affect the credibility of his evidence.” (Decision, ¶ 105).
 Click here.
 Lieff, Cabraser, Heimann & Bernstein, LLP v. U.S. Dep’t of Justice, 697 F. Supp. 2d 79, 85, 87-88 (D.D.C. 2010).
 Ellis v. U.S. Dep’t of Justice, 110 F. Supp. 3d 99, 107-08 (D.D.C. 2015).
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