Based on the report of the Independent Committee in relation to the fire at Wang Fuk Court in Tai Po, the Security Bureau and the Commerce and Economic Development Bureau, joined by the Hong Kong Police Force, the Independent Commission Against Corruption (ICAC) and the Competition Commission, announced today (October 30) the proposal to criminalise bid-rigging in building maintenance and renovation projects, as well as enhanced measures to combat relevant bid-rigging.
The report of the Independent Committee pointed out that bid-rigging in major building maintenance and renovation projects is a serious problem in Hong Kong. Persons with suspicious backgrounds, including triad groups, have manipulated tender results and colluded with consultants, professionals, contractors etc to engage in corruption and other fraudulent practices. The Government attaches great importance to the report. Following a comprehensive review of the existing legislation, enforcement mechanisms and division of responsibilities among departments, the Government has decided to pursue a series of reform measures through a three-pronged approach, namely legislative amendments, law enforcement co-ordination and frontline prevention, with a view to fully and rigorously combating bid-rigging in building maintenance and renovation projects and other criminal activities carried out by bid-rigging syndicates.
Criminalising bid-rigging in building maintenance and renovation, and enhancing the civil regime under the Competition Ordinance
Under the existing legislation, bid-rigging is primarily addressed through the civil regime under the Competition Ordinance (Cap. 619), while criminal enforcement can only target other offences arising in the course of bid-rigging. To further combat bid-rigging, the Government will introduce a series of legislative measures, including amending the Competition Ordinance to criminalise serious anti-competitive conduct, such as bid-rigging in relation to building maintenance and renovation projects; enhancing the Ordinance's existing civil regime; and bringing the new criminal offence within the scope of the Organized and Serious Crimes Ordinance (Cap. 455) and the Independent Commission Against Corruption Ordinance (Cap. 204).
The key element of the proposed amendments to the Competition Ordinance is the targeted criminalisation of four types of serious anti-competitive conduct involving tenders for building maintenance and renovation projects, namely bid-rigging, price-fixing, market sharing and output restrictions, and to hold the individuals and undertakings concerned criminally liable. The proposed scope of regulation will cover not only tendering for works contractors, but also related preparatory arrangements, such as the engagement of consultants at the preliminary stage, with a view to tackling collusion comprehensively across all stages of building maintenance and renovation.
To enhance deterrence, the Government proposes that the new criminal offence carries a maximum penalty of 10 years' imprisonment and a fine. The maximum fine will be the highest of the following – $10 million; three times the total value of the commercial gains derived from the contravention; or an amount calculated at 50 per cent of the local turnover of the undertaking concerned for each year in which the contravention occurred.
The Government also proposes to enhance the overall civil regime under the Competition Ordinance in parallel, with a view to strengthening penalties and improving enforcement effectiveness. These reforms will not be confined to building maintenance and renovation projects. The specific proposals include:
(1) to the highest of the following – $8 million; twice the total value of the commercial gains derived from the contravention; or an amount calculated at 30 per cent of the local turnover of the undertaking concerned for each year in which the contravention occurred, up to a maximum of three years;
(2) extending the maximum duration of director disqualification orders from five years to 15 years;
(3) extending the relevant statutory time limits for applications for pecuniary penalties and other orders of the Competition Tribunal from five years to 10 years; and
(4) expressly stipulating that the "balance of probabilities" standard of proof applies to the relevant civil proceedings for pecuniary penalties, and introducing a statutory presumption concerning the relationship between concerted practices among undertakings and their subsequent market conduct, to enhance enforcement effectiveness.
The proposed criminalisation of serious anti-competitive conduct in relation to building maintenance and renovation and the reforms to the civil regime will complement each other, thereby strengthening the overall deterrent effect and regulatory effectiveness of the Competition Ordinance.
To take forward the above reforms, the Police, the ICAC and the Competition Commission will draw on their respective expertise and statutory functions to collaboratively handle cases involving the new criminal offence and conduct joint operations where necessary. The Competition Commission will also continue to pursue legal liability for the relevant anti-competitive conduct through the civil regime. The Government proposes to bring the new criminal offence as a specified offence within the scope of the Organized and Serious Crimes Ordinance (Cap. 455) and the Independent Commission Against Corruption Ordinance (Cap. 204), thereby strengthening the investigative powers of the law enforcement agencies and enabling the three agencies to work together more effectively to combat bid-rigging in building maintenance and renovation projects.
Bringing the new offence within the scope of the Organized and Serious Crimes Ordinance to enhance deterrence
The Government's plans to bring the offence of bid-rigging in building maintenance and renovation, which is to be newly created upon the criminalisation exercise, within the scope of the Organized and Serious Crimes Ordinance as a specified offence, will enable the organised nature and seriousness of bid-rigging activities to be addressed more effectively, with law enforcement agencies being able to leverage the four distinctive powers available under the Ordinance to combat bid-rigging syndicates in a targeted manner. Details are as follows:
(1) Requirement to furnish information or produce material (commonly known as a "Witness Order"): In the course of investigation of organised crimes, the Secretary for Justice may make an application to the Court of First Instance for an order requiring a relevant person to answer questions in relation to the investigation or furnish information. Any person who fails to comply with the order without reasonable excuse commits an offence. Any person who, in compliance with the order, knowingly or recklessly makes a statement that is false or misleading in a material particular also commits an offence. Offenders are liable on conviction upon indictment to a maximum penalty of imprisonment for three years and a fine of $500,000. Any attempt to conceal, delay or impede the investigation may result in serious legal consequences. The law enforcement agencies will conduct a thorough investigation and take resolute enforcement action against offenders. Such acts will absolutely not be tolerated;
(2) Order to make material available (commonly known as a "Production Order"): The Secretary for Justice or an authorised officer may make an application to the Court of First Instance for an order requiring a specified individual, entity or public officer to furnish information, or to permit access to such material, within a specified period. Any person who fails to comply with an order without reasonable excuse commits an offence and is liable upon conviction to a maximum penalty of imprisonment for one year and a fine of $100,000;
(3) Enhanced sentence: upon application by the prosecution, the court may impose a substantially heavier sentence having regard to the seriousness of the case, the nature and the extent of harm inflicted on the community, or the prevalence of the offence, thereby mandating criminals to pay a heavier price. At present, applications by the prosecution for sentence enhancement are commonly seen in money laundering and fraud-related offences, and the enhanced sentence may be up to the maximum penalty permitted by law for the offence concerned. In other words, persons participating in bid-rigging activities will face heavier sentences; and
(4) Confiscation order: the court may issue a confiscation order to recover money or property of criminals convicted of serious illegal activities. The scope of enforcement of a confiscation order is not limited to money. It also covers all realisable property belonging to the defendant, including real property, stocks and vehicles. It ensures that offenders are unable to retain any crime proceeds derived from bid-rigging activities.
Moreover, under the Organized and Serious Crimes Ordinance, any person who knows or suspects that any property represents proceeds of crime has a statutory obligation to disclose such information to an authorised officer as soon as it is reasonable. Upon the enactment of the legislation on bid-rigging in building maintenance and renovation, proceeds related to bid-rigging activities will also be subject to the disclosure of suspected proceeds of a crime mechanism under the Ordinance. It will help intercept all capital flows suspected of linkage to illegal activities, thereby ensuring that criminals will be unable to transfer or conceal any crime proceeds through the financial system.
Establishing an interdepartmental task force to step up co-ordination of law enforcement actions
While taking forward the aforesaid legislative initiatives, the Government will also step up the co-ordination of law enforcement actions to combat bid-rigging syndicates on all fronts. The Chief Executive has tasked the Secretary for Security to take the lead in establishing a joint task force to combat bid-rigging in building maintenance and renovation projects. The task force will set up a dedicated operational mechanism targeting bid-rigging syndicates to enhance intelligence gathering and exchanges, joint enforcement operations and risk alerts, with a view to safeguarding fair competition in the market and protecting the public interests.
Led by the Secretary for Security, the task force will comprise representatives from the Police, the ICAC and the Competition Commission, including the Deputy Commissioner of Police (Operations), the Head of Operations of the ICAC, the Chief Executive Officer of the Competition Commission and the Chief Superintendent of the Organized Crime and Triad Bureau of the Hong Kong Police Force. The task force will leverage the respective enforcement powers of various departments and take proactive actions. Dedicated teams will be formed to target specific syndicates or cases to conduct risk assessments, plan operations and oversee enforcement actions, thereby enhancing operational efficiency and enforcement effectiveness to combat bid-rigging in building maintenance works rigorously.
The task force will combat bid-rigging syndicates in three main directions, namely intelligence sharing, joint operations and prevention.
In respect of intelligence sharing, the task force will strengthen the intelligence exchange mechanism among the three member agencies, particularly in relation to targeted syndicates and cases, thereby enhancing intelligence gathering and analytical capabilities for early identification of suspicious cases and appropriate follow-up actions.
In respect of joint operations, the task force will co-ordinate joint enforcement operations involving the three agencies to leverage the respective statutory powers and law enforcement tools to create synergy to combat bid-rigging syndicates on all fronts and in all directions, thereby enhancing enforcement effectiveness and deterrent effect. Upon the criminalisation of bid-rigging in building maintenance and renovation, a dual-track enforcement model will be adopted, allowing flexible actions having regard to the circumstances of individual cases.
On the prevention front, in addition to law enforcement efforts, the three member agencies will also attend meetings of owners' corporations in various districts along a risk-based approach under the co-ordination of the Home Affairs Department. Through early monitoring of suspicious activities and frontline intelligence gathering, the law enforcement agencies will be able to achieve the objectives of early identification and early intervention, thereby maximising enforcement effectiveness and deterrence.
The Government will spare no effort in combating bid-rigging through measures including legislative amendments and interdepartmental joint enforcement operations. Members of the public are seriously warned not to defy the law: offenders will face serious legal consequences, including arrest, prosecution and imprisonment.