This client alert is the first of a two-part series on the Hong Kong leniency program.
Updated 30 April 2020.
On April 16, the Chief Executive Officer of the Hong Kong Competition Commission (the Commission), Brent Snyder, announced sweeping changes to the agency’s leniency program.1 This is the second round of changes in less than one year – the first occurring in May 2019 when the concept of “leniency plus”2 was adopted.3 Not surprisingly, given Mr. Snyder’s prior tenure as Deputy Assistant Attorney General for criminal enforcement at the U.S. Department of Justice, Antitrust Division (the Division), the reforms more closely – though not entirely – align the Hong Kong leniency program with the U.S. program. In an interesting twist, the Hong Kong program is in some ways more progressive and offers greater protection to both companies and individuals that obtain leniency.
Type A and Type B leniency. Two pillars of the U.S. leniency program are Type A and Type B leniency. The Division grants the former when a leniency applicant is the first to self-report its role in cartel misconduct before the Division has opened an investigation. In contrast, Type B leniency is available before or after the inception of an investigation, when the Division does not yet have sufficient evidence against the applicant to result in a sustainable conviction. The Hong Kong leniency program now parallels the U.S., with the same benchmarks characterized as “Type 1” and “Type 2” leniency options.
Protections for current and former employees. Type A leniency in the U.S. provides immunity to current directors, officers and employees who sufficiently cooperate with the investigation. With Type B leniency agreements, however, the Division in its discretion may exclude “current directors, officers, and employees who are determined to be highly culpable.”4 The Commission, however, does not make such a distinction in its leniency policy. Moreover, the Hong Kong program provides an additional incentive to cooperate because, pursuant to the leniency agreement, the Commission will not seek a disqualification order that would prevent an individual from serving as a director, which is defined as “any person occupying the position of director or involved in the management of a company.”5 As a result, the Hong Kong leniency program now offers more clarity and incentives for employees than its U.S. equivalent.
With both Type A and Type B leniency, the Division has always had discretion to exclude former employees from a leniency agreement but, in 2017, appeared to harden its stance, when it announced that former directors, officers and employees “are presumptively excluded from any grant of corporate leniency.”6 Although the Commission also retains discretion as to its treatment of former agents, officers, employees and partners, there is no presumption to exclude them from the leniency agreement in the Hong Kong program—a more tenable proposition for a former employee deciding whether to cooperate.
Leniency policy for individuals. Hong Kong’s revised leniency program includes, for the first time, a leniency policy for individuals.7 This policy parallels that of the U.S., including that leniency is not available to the “ringleader” of a cartel and will only be granted to the first individual to report the cartel where a leniency marker has not already been granted to a company. Now that Hong Kong has individual leniency, companies will not only compete with co-conspirators, they may be competing with their own employees for first-in position to qualify for leniency.
Treatment of the cartel ring leader. Another way in which the Hong Kong leniency program mirrors the U.S. counterpart is its insistence that the cartel ring leader – i.e., the leader or the originator of the activity or one that coerced other conspirators to engage in cartel activity – cannot qualify for leniency.8 However, some members of the U.S. antitrust defense bar maintain that, in practice, the Division has largely ignored this criterion when necessary to further investigations – particularly, if “leniency plus” is in play. Indeed, in its 2017 FAQs, the Division explained that “[e]xclusion under the condition is rare and wherever possible, the Division has construed or interpreted its program in favor of accepting an applicant into the Leniency Program in order to provide the maximum amount of incentives and opportunities for companies to come forward and report their illegal activity.”9 Similarly, the Hong Kong leniency policy notes that “[w]herever possible, the Commission will construe or interpret the ringleader ground of this Policy in favour of accepting a leniency applicant in order to maximise incentives and opportunities for companies to come forward and report their cartel conduct.”10 As the Hong Kong leniency program gains traction, it will be interesting to see if the provision is more strictly adhered to in Hong Kong than in the U.S. or if the Commission will likewise construe the definition of “ringleader” very narrowly.
Mandatory compliance program. The Hong Kong Competition Commission was the first leniency regime to require a compliance program as a condition of leniency. The Commission specifically mandates that applicants be “prepared to continue with, or adopt and implement”11 a compliance program that meets the standards of the agency. This added requirement reflects a measure that Mr. Snyder consistently championed while at the Division.12