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Hong Kong Competition Exchange 2018 - Summary of Discussions

Panel 1: International Perspectives on Adjudicating Competition Cases

Moderator:

Mr Justice Godfrey LAM Wan-Ho, President, Hong Kong Competition Tribunal

Panellists:

Judge Denise COTE, United States District Court for the Southern District of New York
Mr Norman MANOIM, Chairperson, Competition Tribunal of South Africa
Mr Justice Peter ROTH, President, United Kingdom Competition Appeal Tribunal
Judge Christopher VAJDA, Court of Justice of the European Union
Judge ZHU Li, Senior Judge, IP Division of Supreme People’s Court, People’s Republic of China

Summary of discussions:

This panel began with each panellist introducing the judicial structure of their respective jurisdictions in relation to competition law cases, followed by sharing of experience on adjudicating competition cases in particular when it comes to admission of evidence and expert testimonies. The panel also discussed the advantages and disadvantages of specialist Courts and generalist Courts, challenges in dealing with economic evidence, level of scrutiny to be applied by courts and sentencing.

Adjudication of competition law matters across jurisdictions

Judge Denise Cote introduced the US antitrust laws and agencies and explained that, in the US, antitrust cases may be brought by the Federal Trade Commission (FTC), Department of Justice (DOJ), individual States and private parties. Almost all courts that hear antitrust cases in the US are courts of general jurisdiction, whether the trial courts, the intermediate appellate courts or the US Supreme Court. The one exception is the FTC which issues administrative decisions, but such decisions may also be appealed to the courts.

Mr. Norman Manoim shared his experience with the South African system. He explained that the Competition Commission of South Africa was the ‘prosecutor and policeman’ in the South African system, but was not an adjudicator of competition cases. The Competition Tribunal of South Africa hears first instance competition cases before a panel of three lay members, with tribunal members consisting of both lawyers and economists. The Competition Appeal Court consists of High Court judges, and adjudicates cases appealed from the Competition Tribunal. If any constitutional issues arise, such matters are heard by South Africa’s Constitutional Court.

As for the UK, Justice Peter Roth explained that the Competition and Markets Authority (CMA), the UK’s competition authority, investigates infringements of competition law and issues decisions which may impose significant financial penalties. In terms of the judicial framework, the Competition Appeal Tribunal (CAT) hears appeals of decisions made by the CMA, whereas private actions can be heard at both the CAT and the High Court. On the other hand, collective action cases relating to competition law can be filed at the CAT but not the High Court. Decisions of the CAT (and the High Court) can be appealed to the Court of Appeal, and further to the Supreme Court.

Judge Christopher Vajda explained that at the EU level, the European Commission (EC) is the public law enforcer of competition law. The EU also adopts a decentralized model where competition law proceedings can be initiated at the member state level by each member state’s national competition agency, on the basis of both national and EU competition laws. The decisions of the EC can be appealed to the General Court of the EU, and the General Court’s decisions can be further appealed to the Court of Justice of the EU on a point of law. Courts of any of the EU’s member states can also refer questions to the Court of Justice for a preliminary ruling.

Judge Zhu Li introduced the Chinese Anti-Monopoly Law, which he noted included both public and private enforcement mechanisms. In respect of the court system of Mainland China, there are both general courts and specialized courts which deal with competition cases. Judge Zhu explained that there are four levels to the Mainland China court system – the Basic People’s Courts, Intermediate People’s Courts, High People’s Courts and finally the Supreme People’s Courts. Certain courts at the Intermediate level, as well as specialized courts such as the Intellectual Property Courts, can handle competition law cases. Their decisions can be appealed to the High Courts, and then to the Supreme Court. Recently, there has been a reform to allow cases to go directly to the Supreme Court without going to the High Courts.

Challenges in adjudicating competition cases

The moderator asked whether there were any special challenges in adjudicating competition cases, and whether it was appropriate or desirable for judges to take notice of how cases are dealt with in other jurisdictions. Justice Roth highlighted two challenges, namely the difficulty of assessing economic evidence and also the management of discovery in particular in private actions given the complexity of competition cases. Justice Roth considered judges in the UK would often look at jurisprudence in other EU member states, and may also look at judgments from US and Canada. However, judges should be cautious about considering foreign judgments given their local contexts. Mr. Manoim discussed the situation in South Africa, where their statute actually requires the Competition Tribunal to look at jurisprudence in other jurisdictions.

Justice Roth highlighted two challenges, namely the difficulty of assessing economic evidence and also the management of discovery in particular in private actions given the complexity of competition cases. Justice Roth considered judges in the UK would often look at jurisprudence in other EU member states, and may also look at judgments from US and Canada. However, judges should be cautious about considering foreign judgments given their local contexts.

Mr. Manoim discussed the situation in South Africa, where their statute actually requires the Competition Tribunal to look at jurisprudence in other jurisdictions. Mr Manoim noted however that judges should be cautious about borrowing from other jurisdictions, and gave the example that a US decision on monopolization may be more conservative than would be appropriate for a small jurisdiction like South Africa where business may face higher barriers to entry.

Judge Vajda discussed the difficulty of determining how to draw the line between conduct that has the ‘object’ or ‘effect’ of harming competition and the approach of the EU courts in this regard. He also noted that judges should be cautious in taking notice of other jurisdictions, especially in the context of the Court of Justice being an appellate court, the EU courts rarely referred to judgments from other jurisdictions.

Judge Zhu noted the challenges in assessing economic evidence, in particular where there is conflicting economic evidence. Judge Zhu also discussed the tools developed by Chinese courts for adjudicating cases involving the ‘new economy’.

Finally, Judge Cote discussed the adjudication of antitrust cases in the US, noting that such cases make up a small portion of cases heard by generalist courts, as well as the difficulty of arguing antitrust cases before a jury.

Specialist vs Generalists Courts

Judge Cote considered that there are benefits to generalist courts hearing antitrust cases, as a generalist judge would be constantly engaged with new cases and ideas. Specialist courts may offer greater predictability in their judgments which is critical for businesses, but Judge Cote considered that where there is a strong rule of law the fact that there are generalist courts deciding antitrust cases is not necessarily a problem. Judge Cote also noted the concern that specialist judges may become ‘captive’ to a particular viewpoint.

Judge Zhu considered the advantages of specialist courts is that they may enhance the quality of judgments, predictability, and consistency. He added that specialist courts may be more willing to implement measures appropriate for specialist cases, and referred to the ‘technical investigator’ system in the specialist IP courts. He however noted that specialist judges may develop a narrower viewpoint, and emphasized the need for such judges to remain open-minded.

Mr. Manoim was in favour of a court of first instance being a specialist court, and noted the benefit of having an economist sit on the first instance court to provide input on economic matters, as is the case in the South African system. He however considered that there was no reason for the appellate court to also be a specialist court, given the limited number of appellate competition law cases heard in most jurisdictions.

Justice Roth noted that specialist courts are common in contexts outside of competition law, such as in labour and IP matters. He stated he was in favour of specialist tribunals in competition law cases, given the specialised nature of competition law, and also the opportunity to have nonlawyers (such as economists and business persons) sit on such specialist tribunals.

How to handle economic evidence when adjudicating competition cases

Mr. Manoim considered that economic evidence prepared by experts is often too technical and verbose. One mechanism used by the Competition Tribunal of South Africa to address this is the ‘hot tub’. In this system, judges first encourage experts to identify the issues that are agreed between them. At trial, the economic experts give presentations on and debate amongst themselves, without the intervention of lawyers, on the issues that are not agreed. Using this method, they have found that the economic evidence has been reduced by about 50%.

As for the PRC, Judge Zhu explained that cross-examination was important in allowing judges to understand economic evidence. Such cross-examination was not only performed by lawyers, but also encouraged to be performed by the economic experts themselves. Judge Zhu noted the importance for economic experts to explain their economic analysis in a clear and simple way, and they were encouraged to use visual means such as slides and photos. Judge Cote explained that the ‘hot tub’ mechanism is not possible in the US given the requirement for cross-examination of witnesses, but in a non-jury situation she has tried mechanisms that would line-up expert-against-expert from the two sides.

Judge Cote also noted that courts serve a ‘gatekeeping’ function, and if economic experts lacked credentials or might mislead the Court, such experts can be kept out of the trial.

Justice Roth described the requirement in the UK for experts to include in their reports a declaration of their duty to the courts which supersedes that to their clients. If the court considers the expert not to be impartial, it is open for the judge to include statements to this effect in their judgment. In respect of understanding the evidence, the courts require experts to meet without lawyers to produce a statement of the points on which they agree and disagree, and may also employ a ‘teach-in’ to allow experts to explain certain concepts. Justice Roth also noted that UK courts have used the ‘hot tub’ mechanism, but considered that it is demanding on the courts which must lead the questioning.

Level of scrutiny to be applied by courts

Mr. Justice Godfrey Lam noted that in administrative systems, courts and tribunals are involving in reviewing the decisions made by administrative agencies, and queried the level of intensity that should be applied by courts in reviewing decisions of competition authorities.

Judge Vajda noted that setting up a specialist court, as is the case of the EU General Court, would encourage more intense scrutiny given that judges were expected to spend more time on each case. Judge Vajda also noted that the criminal nature of competition law fines means that the relevant treaty safeguards apply to competition law trials. Judge Vajda wondered whether a prosecutorial model would have been more appropriate, but given the administrative model in the EU, the role of the court has become more important. Speaking to the margin of appreciation, Judge Vajda drew a distinction between procedural rules and basic facts on the one hand and economic issues on the other.

Fining and sentencing

Judge Cote explained that in the US there are sentencing guidelines which judges must refer to when deciding what sentence to impose, although judges are not strictly bound by them. In the antitrust context, these guidelines set out the indicative terms of imprisonment for an individual, and levels of fines for individuals and companies. The level of sentence or penalty might be driven by the size of the economic impact of the conduct. Judge Cote estimated that 97% of cases in the US had been resolved by some consent procedure.

Turning to the UK, Justice Roth explained that it is the CMA that imposes the financial penalty in the first instance. The CMA has published guidelines setting out the method in which they determine the level of the financial penalty, taking into account the gravity and duration of the infringement various aggravating or mitigating factors. Justice Roth noted that the fine imposed by the CMA may be subject to an appeal to the CAT, although the CAT would tend to take a relatively light touch in this regard notwithstanding that appeals to the CAT would typically be subject to a full review on the merits.