Taching Petroleum Co Ltd v. Meyer Aluminium Ltd
Read the full judgment text of CTA 1/2018 on BabelCite. This CTA judgment was delivered on 29 May 2020.
1. By 2 respective High Court Actions, Taching and Shell sue Meyer for outstanding payments for industrial diesel delivered to Meyer. Meyer’s defence is that Taching and Shell have breached the First Conduct Rule under the Competition Ordinance, Cap 619 (“ the Ordinance ”) by colluding to (a) fix price; and/or (b) exchange price information (“ the Defence ”).
Cites 13 cases
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CTA 1/2018 & [2020] HKCT 2 IN THE COMPETITION TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COMPETITION TRIBUNAL ACTION NO 1 OF 2018 ________________________ BETWEEN
________________________ AND IN THE COMPETITION TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COMPETITION TRIBUNAL ACTION NO 2 OF 2018 ________________________ BETWEEN
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________________________ D E C I S I O N ________________________ A. INTRODUCTION A1. Background of the case 1.By 2 respective High Court Actions, Taching and Shell sue Meyer for outstanding payments for industrial diesel delivered to Meyer. Meyer’s defence is that Taching and Shell have breached the First Conduct Rule under the Competition Ordinance, Cap 619 (“the Ordinance”) by colluding to (a) fix price; and/or (b) exchange price information (“the Defence”). 2.The Defence has been transferred to this Tribunal for determination. It is Meyer’s case that the collusion was evidenced by and/or inferred from:
3.Whilst the issue of the 118 Pairs of Notices is not denied, Taching and Shell deny the allegation of collusion. They draw the classic distinction in competition law between collusion and conscious parallelism. Taching claims to have determined their Current List Prices by following those of its supplier, Sinopec; whereas Shell claims to have independently and separately determined its Current List Prices without reference to Taching. 4.Meyer admits that at the pleading stage, it had no basis to suspect that the scope of the collusion had extended beyond Taching and Shell. However, after discovery, Meyer found what to it was an “alarming” Agreement for Sale and Purchase of Sinopec products dated 5 September 2007 between Taching and its supplier, Sinopec (“Sinopec Taching Agreement”). 5.Meyer claims that there were 2 provisions in the Sinopec Taching Agreement which gave rise to reasonable grounds to suspect that the collusion involved more participants than just Taching and Shell. 6.Meyer therefore seeks to amend its Points of Defence (“Meyer’s PoD”) to include “other suppliers and/or other facilitating third parties” as alleged participants in the collusion (“the Disputed Amendment”). In line with that, Meyer seeks further and better particulars (“FBP”) of the Points of Response (“PoR”) of Taching and Shell. 7.In addition, Meyer seeks leave to adduce expert evidence because in denying the collusion, Taching and Shell pleaded that similarity in pricing behaviour can readily be explained by the fact that:
8.Further, Meyer seeks discovery of unredacted documents from Shell. A2. Summonses by Meyer against Taching 9.There are 4 Summonses taken out by Meyer against Taching on 6 December 2019, seeking: (1) Leave to amend Meyer’s PoD dated 19 October 2018 in both CTAs (“Amendment Summons”); (2) An order for Taching to provide answers to 2 sets of Requests for Further and Better Particulars (“Taching FBP Summons”); (3) Leave to adduce economic expert evidence (“Expert Evidence Summons”); and (4) An Order for Taching to file an affidavit stating whether it has, or has had at any time, in its possession, custody or power of certain document(s) (“Discovery Summons”). 10.In respect of the Discovery Summons, Taching denies having the documents sought. Meyer and Taching have agreed that no order would be made on that Summons, both in terms of the application and costs. I make an order accordingly. 11.Taching opposes the remaining 3 Summonses, broadly for the following reasons:
12.Taching points out that Meyer’s Summonses are premised on an erroneous understanding of the pleaded cases of both Taching and Shell. In particular, Meyer heavily but erroneously relies on the contention that both Taching and Shell rely on the structure and/or features of the industrial diesel market to explain their parallel pricing behaviour. In fact, the explanations provided by Taching and Shell for the pricing parallelism are much simpler:
A3. Summonses by Meyer against Shell 13.There are 4 Summonses taken out by Meyer against Shell:
14.Shell’s position is that:
15.Shell has issued a summons seeking leave to adduce an affirmation of Jessica She, Pricing Manager of Shell. It was not opposed and I have given leave at the hearing. 16.I will set out each party’s case on the alleged collusion in more detail and outline the relevant competition law principles before I deal with the Summonses one by one. B. PARTIES’ RESPECTIVE CASE B1. Meyer’s Pleaded Case 17.At all material times, Meyer only had 2 suppliers of industrial diesel, Taching and Shell. Each of them had a more or less equal proportion of business from Meyer. Indisputably, both had similar pricing mechanisms, which can be summarized as follows:
18.Although Shell had additional components (ie Shell’s Fixed Minor Adjustments), such difference from Taching had no real significance to Meyer because the Net Unit Prices payable by Meyer to Taching and Shell respectively at all material times were exactly identical. 19.Under the aforesaid pricing mechanisms:
20.Meyer did not know how the Current List Prices were actually determined by Taching or Shell. Meyer was however given to understand that the adjustments of Shell’s Current List Prices were to cater for the fluctuation of the import costs of industrial diesel or international oil prices. 21.In about May 2017, upon obtaining quotes from another supplier in Hong Kong, Meyer discovered that the then prices charged by Taching and Shell were about double that of the other supplier. 22.In its new quotations, Taching almost halved its Net Unit Price overnight from HK$6.15 per litre (6 June 2017) to HK$3.8 per litre (7 June 2017). Taching’s price further dropped in its next two quotes which were both at HK$3.6 per litre (12 June 2017 and on 15 June 2017). 23.Meyer carried out further investigations and discovered parallel pricing in (i) the Net Unit Prices charged by Taching and Shell; and (ii) the adjustments made to the Current List Prices of Taching and Shell between 2011 and June 2017. In those 6 years, out of the 118 Pairs of Notices, 111 were initiated by Shell and 1 by Taching and 6 were by both of them on the same day. Those Notices effected identical changes to their respective Current List Prices either on the same day or very shortly thereafter, after a corresponding change was made by either Taching or Shell. 24.According to Meyer, the changes specified in the respective written Notices by Taching and Shell were not public information and the striking uniformity in such changes could not be explained by mere coincidence. The only reasonable inference has been set out in 2 paragraphs in Meyer’s PoD to Taching’s claim:
25.I pause to note that although in the High Court Actions, the Defence is limited to the “object” defence, in the Tribunal, Meyer’s PoDs contain an “effect” defence in paragraph 16 without particulars. 26.It is not open to a party to allege an effect defence in passing without setting out the relevant conduct alleged to have the effect of restricting competition. To do so may result in striking out of that party’s claim: Humber Oil Terminals Trustee Ltd v Associated British Ports [2011] EWHC 352 (Ch) at §§45 and 48, Deutsche Bahn AG v Mastercard Incorporated [2018] EWHC 412 (Ch) at §46.[2] This is not a mere technicality or formality. Since competition claims are both notoriously burdensome and serious, a respondent is entitled to know what case he has to meet and the issues (if any) which experts can properly address only if the claim is clearly articulated: Sel-Imperial Ltd v The British Standards Institution [2010] EWHC 854 (Ch) at §§17-18. 27.This is particularly so since the Tribunal has, upon transfer of the Defence, directed that Meyer’s PoD should comply with CTPD1 §§88-89, which required it to “contain not only the material facts relied upon, but also a succinct presentation of the arguments of facts, economics (if applicable) or law supporting the findings and relief sought, so that from the outset the Tribunal and the respondent are apprised of the substance of the case advanced…”. See Reasons for Decision in CTA 1/2018 dated 12 September 2018, §25. 28.For lack of particulars, the effect defence shall be disregarded. B2. Taching’s Pleaded Case 29.Taching was and is a non-exclusive authorized seller of Sinopec. Taching sources industrial diesel from Sinopec and sells it to end customers like Meyer. 30.From time to time, Taching received unilateral notices from Sinopec adjusting list prices for Sinopec’s petroleum products. Upon receipt of such notice, Taching would in turn issue a written notice to Meyer. 31.Taching’s case is that it has never discussed, agreed or concerted with Shell on any matter relating to the prices at which each of them would supply industrial diesel to Meyer. At all material times, Taching did not have any information or knowledge about the pricing mechanism between Shell and Meyer or the prices charged by Shell to Meyer. 32.As to the manner in which its Net Unit Prices and the adjustments to its Current List Prices were determined, Taching’s explanations are that:
B3. Shell’s Pleaded Case 33.Shell is one of the 4 “oil majors” who supplies industrial diesel in Hong Kong.[3] Like Taching, Shell denies collusion with Taching to fix prices or share pricing information. 34.Shell’s Current List Prices were determined by reference to its internal policies, set out in the Confidential Annex to Shell’s RAPoR. Extracts from Shell’s price book evidencing its internal policies and all emails evidencing each adjustment to the List Price and the underlying rationale (“List Price Emails”) have been disclosed. 35.Shell’s Current List Price was primarily based on its costs of acquiring industrial diesel, and would be reviewed in accordance with established policies by reference to, amongst others, market factors, without reference to Taching. 36.It was commonplace for the oil majors (including Shell and Sinopec) to make similar or identical changes to their List Price in order to maintain the competitiveness of their product. This explained why the price adjustments to Taching’s List Price (which followed Sinopec’s price adjustments) almost always coincided with Shell on the same day or shortly thereafter. 37.As for the Discount,
38.The reviews of and adjustments to Shell’s List Price were undertaken by designated personnel within Shell who did not have any direct dealings or negotiations with the representatives of Shell’s end-users. 39.The negotiations on Discounts and changes thereto were undertaken by designated Account Managers (each assigned to and was responsible for specific end-users), who had no involvement in the fixing of the List Price. 40.Shell’s personnel were expressly prohibited from engaging in direct or indirect discussions with Shell’s competitors or their staff about pricing information. B4. Grounds for Meyers’ Summonses 41.In reliance on the Sinopec Taching Agreement, Meyer suggests that there might be other parties to the collusion. 42.In reliance on Taching and Shell’s pleadings, Mr Lee, counsel for Meyer, identified 3 issues: the Market Transparency Issue, Similar Costs Issue and Adaption Issue. 43.Firstly, Shell pleaded that there was transparency in the market with respect to prices:
44.Meyer does not agree that the market is “transparent”. Meyer’s case is that any transparency between Shell and Taching over sensitive pricing information was artificially generated as a result of collusion in order to reduce uncertainties in the market. 45.Meyer says that Taching and Shell are coy in disclosing:
46.Meyer calls this the “Market Transparency Issue”. In respect of the Shell FBP Summons, a number of requests for FBP are directed at this issue. 47.Secondly, Shell has pleaded that industrial diesel is a homogeneous product and the costs structures of competitors are similar. Thus:
48.While Meyer agrees that industrial diesel is a largely homogenous product, it does not agree that the costs structure of competitors are similar. As explained in Pang-2nd [4] of Dr Pang, Meyer’s expert economist, Shell and Taching were at different levels of the distribution chain. Shell was a vertically integrated supplier and Taching a distributor of Sinopec. Their respective costs were naturally likely to be different. 49.Meyer calls this the “Similar Costs Issue”. A number of requests for FBP are directed at this issue. 50.Thirdly, Shell pleads that:
51.As there were 118 Pairs of Notices, Meyer finds it important to know, in respect of those occasions, whether Shell had (and, if so, on which occasions) actually “adapted” to the pricing behaviour of Taching. 52.Meyer will call this the “Adaption Issue”. A number of requests were directed at this issue. 53.Fourthly, Taching pleads that:
54.In respect of the Taching FBP Summons, a number of requests are directed at the Market Transparency Issue and Similar Costs Issue. C. RELEVANT PRINCIPLES OF COMPETITION LAW 55.These principles are taken from the helpful summaries of counsel and largely follow the structure of the written submission of Ms Lam and Ms Xu, counsel for Taching. C1. Burden and standard of proof 56.To establish a contravention of the First Conduct Rule, the burden is on Meyer to prove that Taching and Shell made or gave effect to an agreement, or engaged in a concerted practice, the object of which was to prevent, restrict or distort competition in Hong Kong: s.6 of the Ordinance. 57.The First Conduct Rule is modelled on Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”). EU case law is, in this regard, of “obvious value” to the interpretation and application of the First Conduct Rule: Competition Commission v Nutanix Hong Kong Ltd & ors (“Nutanix”) [2019] 3 HKC 307 at §24, G Lam J, President of the Competition Tribunal. 58.Mr Lee submits that there is a higher standard of proof under EU law in that infringement of the First Conduct Rule requires proof beyond reasonable doubt. However, the present case is a civil case and the standard of proof is on balance of probabilities. 59.Ms Lam, however, draws to my attention that the EU does not distinguish between the civil and criminal standard known to Hong Kong. EU law applies to UK and UK uses the civil standard. The applicable standard was discussed in the case of Television Broadcasts Ltd v Communications Authority [2016] 2 HKLRD 41, §§283, 284 & 286, G Lam J:
60.In Hong Kong, for enforcement proceedings initiated by the Competition Commission, the standard of proof is beyond reasonable doubt: Nutanix, §72. For a defence run in the present case, the standard of proof is on balance of probabilities. The EU case law on breach of the First Conduct Rule will still be of obvious value to interpretation of Hong Kong competition law, as the standard of proof should not be conflated with what is necessary to establish a contravention of a conduct rule. C2. The market in question 61.There is no dispute that the industrial diesel market is an oligopoly, an industry dominated by a few entities which usually sell homogeneous products. As there are few sellers in the market, every seller influences the behaviour of the others and vice versa. 62.As explained in Whish & Bailey, 9th ed, at p 572:
C3. Agreement or concerted practice 63.An “agreement” is not required to be in any particular form and is not limited to a legally enforceable contract but is defined broadly in s.2(1) of the Ordinance to include “any agreement, arrangement, understanding, promise or undertaking, whether express or implied, written or oral, and whether or not enforceable or intended to be enforceable by legal proceedings”: Nutanix, at §25. 64.The central component in the concept of agreement is a meeting of minds or concurrence of wills between at least two parties, the form in which it is manifested being unimportant: Nutanix, at §26. 65.A “concerted practice” is not defined in the Ordinance. A consistent line of decisions in the EU has held that concerted practice is a form of cooperation, falling short of an agreement, where undertakings knowingly substitute practical cooperation for the risks of competition: Nutanix, at §28. 66.Whilst each economic operator must determine independently the policy which he intends to adopt on the market, this does not deprive undertakings of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors. However, it does preclude any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market: Nutanix, at §29. 67.Reciprocal contact between the undertakings in question is implied in the concept of concerted practice in the sense that there is an element of acting in concert “where one competitor discloses its future intentions or conduct on the market to another when the latter requests it or, at the very least, accepts it …”: Nutanix, at §30. 68.The definition of agreement and concerted practice are intended “to catch forms of collusion having the same nature which are distinguishable from each other only by their intensity and the forms in which they manifest themselves”. The two concepts are not synonymous and have partially different elements but are not mutually incompatible: Nutanix, at §34. C4. Information exchange 69.In order to establish a concerted practice in the context of information exchange, the applicable law in the EU requires:
70.Information exchange between competitors can constitute a concerted practice if it reduces strategic uncertainty in the market. This is because it reduces the independence of competitors’ conduct on the market and diminishes their incentives to compete: Horizontal Cooperation Guidelines of the EU Commission, §61. 71.The Commission in Hong Kong adopts a similar position in its Guideline on the First Conduct Rule (27 July 2015) (“FCR Guideline”), §§6.39-6.40. 72.Exchange of competitively sensitive information such as an undertaking’s planned prices or planned pricing strategy between competitors is likely to be concerted practice in circumstances where: (a) the information is given with the expectation or intention that the recipient will act on the information when determining its conduct in the market; and (b) the recipient does act or intends to act on the information. See FCR Guideline §2.28. 73.FCR Guideline §§2.29-2.30 explains to similar effect that:
74.Exchange of publicly available information that is equally accessible in terms of the cost of access to all competitors and customers is unlikely to contravene the First Conduct Rule. Information which is more costly to obtain for parties not affiliated with the information exchange because they would need to gather and collate the information is unlikely to be considered truly public. The fact that information could have been gathered from a customer does not mean that the information is publicly available: FCR Guideline §6.48; EU Horizontal Cooperation Guideline §§92-94. 75.Depending on the facts of the case, the possibility of finding a concerted practice cannot be excluded, for example in a situation where an announcement by an entity was followed by public announcements by other competitors. This is not least because strategic responses of competitors to each other’s public announcements could prove to be a strategy for reaching a common understanding about the terms of coordination. See EU Horizontal Cooperation Guidelines, §63. 76.As to subsequent conduct on the market, it was held in Nutanix, at §33 that:
77.As regards a relationship of cause and effect between the discussions and the subsequent conduct, the presumption must be that the undertakings taking part in the concerted action and remaining active on the market take account of the information exchanged with their competitors for the purposes of determining their conduct on that market, especially where the undertakings concert together on a regular basis over a long period: Case C-199/92P, Huls AG v Commission, EU:C:1999:358, §162. 78.It is for the undertaking to rebut the presumption and to prove that the concertation did not have any influence on its own conduct on the market: Huls AG, §§162 & 167. C5. Object restriction 79.The Ordinance provides:
80.Price fixing constitutes, by its very nature, a restriction on competition by object: Competition Commission v W. Hing Construction Co Ltd & Ors (“W. Hing”) [2019] 3 HKC 486 at §137, G Lam J. 81.So is exchange of information between competitors in private on their future individual intentions or plans with respect to price or other information of commercial or strategic significance FCR Guideline, §§2.28, 6.40; Joined Cases T-202/98, T-204/98, and T-207/98 Tate & Lyle [2001] ECR II-2035, §58; Case T-1/89 Rhone Poulenc v European Commission, EU:T:1991:56, §§122-124. 82.If an agreement is a restriction by object, it is not necessary to consider its effect on competition: Nutanix, §382; W. Hing, §§98-106; FCR Guideline, §3.3. Whilst in an “object” assessment the agreement has to be seen in its context, the requisite assessment for an object case is to be distinguished from an “effect” investigation. The latter is based on an extensive market analysis which is not required for an assessment of the existence of a restriction by object. Nor is it necessarily required in an object case to define the market: Nutanix, §§384 & 388. 83.As explained by G Lam J in W. Hing at §108:
C6. Parallel conduct 84.Parallel conduct in itself is not illegal. The prohibition of anti-competitive collusion does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors. It is well established that, in the absence of evidence on explicit concertation, parallel conduct could not be regarded as furnishing proof of concertation unless that collusion constituted the only plausible explanation for such conduct. See Joined Cases C-89/85, etc, Ahlstrom Osakeyhtio v Commission of the EU [1993] ECR I-1307 (“Wood Pulp II”), §71; FCR Guideline, §2.31. 85.Where an applicant relies solely on undertakings’ parallel behaviour as proof of concertation, it must address any alternative explanations advanced by the firms of that behaviour and demonstrate why they are implausible: Case T-442/08, CISAC v European Commission, EU:T:2013:188, §§101-102 & 132-133. 86.Mr Lee disputes this as akin to the criminal standard of proof. This being a civil case, the civil standard of balance of probabilities should apply. 87.I disagree. The standard of proof on balance of probabilities applies to the Defence, but it should not be conflated with the necessary elements to establish concertation or disapply the principles set out in paragraphs 84 and 85. 88.Wood Pulp II and Cases 48/69 etc ICI v Commission [1972] ECR 619 (“Dyestuffs”) are cases where the EU Commission attempted to prove the existence of a cartel largely on the basis of economic data. Since then the EU Commission has not relied solely on economic data or market conduct in proof of a cartel as, in the absence of other evidence, the economic activity can usually be given a different explanation. See: Faull & Nikpay, The EU Law of Competition (3rd ed), §§8.512-513, Bishop & Walker, The Economics of EC Competition Law (3rd ed), §§5-029 to 5-031. D. CORE ISSUES 89.The pleaded case of Meyer is that the collusion took the form of fixing Net Unit Prices and exchange of information in private between Taching and Shell who were competitors. Price fixing and exchange of information in private were, by their nature, a restriction on competition by object. The only pleaded collusive conduct was the parallel conduct of Taching and Shell in making identical adjustments to their respective Current List Prices, which resulted in identical Net Unit Prices they charged Meyer in 118 instances. This is confirmed with the benefit of Meyer’s witness statements. 90.Accordingly, as pleaded,
91.Taching and Shell have each denied collusion and given their respective explanations for the similarity in pricing. 92.Accordingly, at the trial, the core issues are:
These are matters of fact. 93.Meyer has framed 3 other issues for the Tribunal’s consideration - the Market Transparency Issue, Similar Costs Issue and Adaption Issue. As will be further demonstrated in Section G on the Expert Evidence Summonses, those 3 Issues are mis-characterization of the core issues and are not the true focus of this litigation. E. THE AMENDMENT SUMMONSES 94.Order 20, rule 5 of the Rules of the High Court (“RHC”) applies to the amendment of pleadings in competition proceedings: CTR, rule 57(3). 95.Amendments are allowed “for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings”: Hong Kong Civil Procedure 2020, Vol 1, §20/8/6. 96.Leave is readily granted to amend before the trial unless it can be demonstrated that the new claim based on the proposed amendment is bound to fail. While the Court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to require prolonged investigation: Natamon Protpakorn v Citibank [2009] 1 HKLRD 455, at §§25 & 26, CA. In that case, the original statement of claim had been struck out. The CA held that it was a drastic measure to drive the plaintiff from the judgment seat even before it had the chance to put forward its case at the trial. This could only be done in plain cases. Whilst this principle was usually stated in the context of striking out applications, it was held to be equally appropriate where leave to amend was objected to in that case. 97.A party seeking to amend its pleading has the obligation to put forth particularized amendments.
98.This requirement for properly particularized amendments is all the more important for the applicant where amendments to plead a new case are introduced at a late stage. That party has the obligation to put forward an amended text which itself satisfies to the full the requirements of proper pleading. It should not be acceptable for the applicant to say that deficiencies in the pleading can be made good from the evidence to be adduced in due course, or by way of further information if requested, or as volunteered without any request. The opponent must know from the moment that the amendment is made what the amended case that he has to meet is, and with as much clarity and detail as he is entitled to under the rules: Swain-Mason v Mills & Reeve LLP [2011] 1 WLR 2735, §73; followed in Highfit Development Co Ltd v Koo Siu Ying (unreported, HCA 494/2015, 9 August 2017), §30, A Chan J. 99.It is an abuse of process to bring a claim without a solid foundation in the hope that something will turn up in the course of the proceedings, eg at the stage of discovery or on cross-examination: New China Hong Kong Group Ltd v Ng Kwai Kai Kenneth, HCA 519/2010, 11 February 2011, at §70, Fok JA (sitting as additional judge of the CFI). 100.In the context of competition cases, the later an application for amendment is made since the 1st CMC, the less likely the Tribunal will grant it. This is because the Tribunal encourages active case management and having the parties put all cards on the table as early as possible. 101.The 2 Amendment Summonses can be considered together. Both Taching and Shell do not oppose the majority of the amendments, which are minor and/or clerical in nature. The Disputed Amendment is this proposed plea:
102.The Disputed Amendment is said to have arisen from the Sinopec Taching Agreement, which provided as follows:
103.Based on the 2 clauses, Meyer seeks to plead an alleged “wider collusion”. Mr Lee submits that, on the face of the Sinopec Taching Agreement, contrary to Taching’s assertion that it had a free will in determining the prices, Taching was contractually obliged to:
104.Taching, Sinopec and Sinopec’s resellers and dealers were clearly competitors in the relevant market. Mr Lee submits that the law is very skeptical about any contact (direct or indirect) between competitors relating to sensitive information. 105.A copy of the Sinopec Taching Agreement was provided to Meyer by Taching on 14 February 2019. Meyer has not explained why it has taken 10 months since discovery of that Agreement to file the Amendment Summonses. Even if it was because Meyer had wanted to see the witness statements of Taching first, the Amendment Summons was still taken out 3 months after witness statements were exchanged on 4 September 2019 and after the third CMC on 15 November 2019. 106.No milestone date would be disturbed but the case would have been ready for setting down for trial but for the present Summonses. Given the discovery and witness statements exchanged, Meyer’s delay was not excessive. If the Disputed Amendment is a meritorious plea arising from new facts known from discovery, I will give leave to amend. The trouble is that it is not. 107.Firstly, the Sinopec Taching Agreement is not even pleaded in the Disputed Amendment. 108.Secondly, the Disputed Amendment introduces a new case of a “wider collusion” not only between Taching and Shell but also among a number of unidentified “other suppliers” and “third parties”, and not only to fix prices but to develop the market. This contradicted Meyer’s own evidence in the witness statement of Chan Pui Wan that the collusion was between Taching and Shell only (§§6, 90-93). 109.Thirdly, the Disputed Amendment does not provide even basic particulars as to the form of the alleged agreement and/or concerted practice, and when that agreement was entered into. 110.As shown in Mr Lee’s written submission, a cartel can take different forms – a direct agreement between 2 or more parties, concerted practice between undertakings involving exchange of commercially sensitive information between competitors, implementation of decisions of associations of undertakings, single overall cartel agreement and hub-and-spoke agreement whereby information is exchanged indirectly via a common supplier/retailer, and acting through a third party facilitator, to name a few. Meyer should have given particulars as to whether the wider collusion took one of these forms. 111.Fourthly, it is unclear who the parties to the wider collusion were and their respective roles.
112.Fifthly, disclosures of actual or likely retail prices, profit margins and wholesale prices or terms of sale by a customer to its supplier is not necessarily unlawful. Something more is required to found anti-competitive behaviour:
113.In the present case, clauses 6 and 10 did not refer to price fixing or exchange of pricing information. Meyer has not explained how clauses 6 and/or 10 went beyond normal commercial dialogue or suggested a wider collusion. 114.Sixthly, the Disputed Amendment still rely on the 118 Pairs of Notices for an inference to be drawn in support of the Disputed Amendment. It is of course permissible for the Tribunal to draw inferences from a number of coincidences and indicia which, taken together, may, in the absence of another plausible explanation, constitute evidence of infringement of the competition rules: Aalborg Portland v Commission, Joined Cases C-204/00P, etc [2004] ECR I-123 at §§55-57 and Case T-348/08 Aragonesas Industrias y Energia, SAU, v European Commission ECR II-7583 at §97. However, one wonders how such inference could be drawn when it is not even pleaded (and the 118 Pairs of Notices do not show) that the other suppliers and/or third parties were parties to those Notices. 115.It can thus be seen that the Disputed Amendment fails to meet the requirements of pleading and does not, on its face, support a plea of wider collusion involving anti-competitive conduct. 116.Mr Lee accepts that Meyer only has a suspicion and is unable to say who were involved. He seeks to justify the Disputed Amendment by the fact that Meyer, being the victim, was not privy to the detailed composition, structure and internal working of the cartel. Such information would only be known among the cartelists. As a result of such disparity of knowledge, it is unrealistic to expect the victim to plead its case with full particulars at the outset. Instead, it is usually the case that the applicant will only be able to amend and supplement his pleading after discovery of facts and evidence from the alleged cartelists. Mr Lee even says that he could not give particulars. If Taching and Shell gave him names of the cartelist, he could give particulars. 117.This line of submission simply shows Meyer’s abuse of process in trying to fish for evidence to plead a new case: New China Hong Kong Group Ltd, above. A private litigant like Meyer does not have the wide powers of the Competition Commission to compel disclosure under Part 3 of the Ordinance. It must plead its case properly. The Tribunal has directed pleadings to be filed in the present cases. That a cartel is difficult to establish does not relax the pleading requirements as in any civil action. 118.Mr Lee submits that it is completely “normal” to plead alternative cases. He relies on Nokia Corporation v AU Optronics Corporation [2012] EWHC 731 for the proposition that when determining whether a cause of action has been sufficiently pleaded, the Court would generally allow “a measure of generosity in favour of a claimant” (at §67). 119.It is of course permissible to plead alternative cases. However, without disrespect, Mr Lee has misread Nokia. 120.In that case, both the US Attorney General and the EU Commission had investigated a cartel of manufacturers of LCDs who maintained the prices of mobile phone LCDs at an artificially high level. Civil legal proceedings had been commenced in the US by various claimants against those cartelists, including the defendants. 121.Nokia issued its claim form in 2009 against a wide range of alleged cartelists for losses in connection with purchases of LCDs incurred as a result of the defendants’ infringement of the predecessor of Article 101 of TFEU. The Particulars of Claim (P/C) referred to the EU Commission’s investigation, with the obvious intention of pleading any relevant finding of breach of Article 101 by the Commission, and making a follow-on action by Nokia. The P/C also pleaded stand-alone claims so that if there was no relevant finding by the Commission, Nokia would establish the breach of the Article itself (§20). The claim was stayed by consent pending the outcome of the EU Commission’s investigation. (§21) 122.The EU Commission released a decision publicly in 2011 but did not deal with possible infringement of Article 101 in respect of small LCDs for mobile phones. Accordingly, Nokia did not have a follow-on claim, but a stand-alone claim. The defendants sought to strike out the latter. (§22) Nokia sought leave to file an amended P/C (“APC”), which made reference to materials disclosed in the US proceedings. The case was refined so as not to maintain a case of entry by the defendants into a price fixing agreement but exchanges of information on prices with a view to charging higher prices to customers. 123.At issue was whether the amendments were the same causes of action as in the P/C; or were they a new claim which needs to be launched and served afresh on defendants out of the jurisdiction, in which case there may be a limitation issue. 124.Sales J dismissed the striking-out application and allowed the amendments, holding that the amendments did not introduce a new claim. Sales J noted an inevitable tension between ensuring that claims were fully pleaded to enable a defendant to know what case he had to meet, and ensuring that a claimant was not prevented by overly strict rules of pleading from introducing a viable claim but which would be shut out by the law of limitation if the claimant was forced to wait until he had full particulars before launching a claim. (§62) 125.It was in the context of working out that tension that Sales J made the remarks now relied on by Mr Lee:
126.That “measure of generosity” was given by Sales J in salvaging the claim and an unspecific P/C made at an early stage. The decision was made after considering the initial stay of proceedings by consent, the possible expiry of limitation period of the claim and the now fully pleaded APC. 127.Hence Nokia is not authority for the proposition that a victim to a cartel can enjoy relaxed principles on pleadings or cannot plead alternative cases. 128.The applications for striking out in Nokia appeared to be at the pleading stage, but with the benefit of discovery in US proceedings. The situation of Meyer is different in that there have been full discovery and exchange of witness statements. The Disputed Amendment still lacks particulars. 129.Even if Mr Lee is correct in submitting that the Tribunal would allow a measure of generosity in favour of the claimant, Taching and Shell have challenged the lack of particulars. In paragraph 21 of Meyer’s 2nd Reply Submissions, Mr Lee submits that if a request for particulars is indeed made (which Meyer submits is unnecessary), Meyer will give “voluntary particulars” about the Sinopec Taching Agreement as the basis of the possible wider collusion. 130.With respect, a litigant should not hold the particulars up his sleeve until pressed to provide them. This only further demonstrates the abuse of process in Meyer. It also contradicts Mr Lee’s oral submission that he is unable to give particulars (paragraph 116 above). 131.For the reasons given in this Section, I have no hesitation in dismissing the Disputed Amendment as abuse of process. The rest of the minor/clerical amendments are allowed as agreed. F. TACHING FBP SUMMONS F1. Legal principles on ordering further and better particulars 132.Principles in relation to the power to order particulars under O.18 r.12 of RHC are equally applicable to Tribunal proceedings in which the parties have been directed to file pleadings: CTPD1 §25(b). 133.The relevant principles are summarized in Million Decade Ltd v Tung Fai (unreported, HCA 1062 and 1660/2013, 20 April 2016), at §§24-27, DHCJ M Ng (as she then was).
134.O 18, r 12(3B) was a new rule introduced by the CJR to implement Recommendation 34 of the Final Report of the Chief Justice’s Working Party on CJR. The Working Party stated as follows, at §§268-269:
135.It is for the applicant for FBP to satisfy the court that the order is necessary either for disposing fairly of the cause or matter, or for saving costs. It is not enough for him to merely show that the particulars requested are relevant: Well Joint Trading Ltd v Chiu Chung Chiu & ors (unreported, HCA 1768/2011, 9 July 2012), §17, per DHCJ Au-Yeung (as she then was). F2. Analyses of First Requests of Taching's APoR 136.Taching’s position is that the FBP Summons should be dismissed because:
137.All of these requests can be considered together, as they are premised on the same grounds. 138.Requests 9-10 concern paragraph 7(4)(a) of Taching’s PoR:
139.Requests 11-12 concern paragraph 7(4)(b) of Taching’s PoR:
140.Requests 13-14 concern paragraph 11(4)(b) of Taching’s PoR:
141.Meyer asks whether, apart from those pleaded, there are any other alleged “commercial considerations” or other “factors” affecting the price of industrial diesel supplied to end customers and particulars of such other considerations or factors. 142.Mr Lee gives 2 grounds for these requests: (i) they are relevant to the Similar Costs Issue, ie whether the cost structures of competitors in the industrial diesel market were similar; and (ii) in view of clauses 6 and 10 of the Sinopec Taching Agreement, Meyer is entitled to know whether such commercial considerations include “liaison” and/or “coordination” with Sinopec and its resellers or dealers as well as “Sinopec’s reasonable opinion on sales”. 143.I do not consider these to be good grounds. 144.Taching’s pleas are to illustrate how it determined the Current List Prices by independently adapting to Sinopec’s adjustments to list prices (issued to Taching and published on Sinopec’s website) and negotiated the Fixed Discount with Meyer on arms-length basis. Whether Taching had taken into account one or a few other factors or commercial considerations is irrelevant to the core issues. It is also taxing and unreasonable for Meyer to ask Taching to give an exhaustive list of each and every of those factors and commercial considerations, however minor or unusual they were. 145.The Similar Costs Issue in ground (i) is irrelevant as “other players” were not parties to the alleged collusion and it is not Taching’s case that it had followed the pricing mechanism of those players. 146.Further, Lawrence Ma, witness for Taching, has explained in full the factors and commercial considerations in §56 of his witness statement and factors for the Fixed Discount when negotiating different agreements in §§79-81. Meyer has failed to explain why the pleas and Mr Ma’s evidence are not sufficient to explain Taching’s case. 147.If Meyer’s request is based on ground (ii), it could have simply made a direct request in those terms. It is difficult to expect a reader to guess Meyer’s intention from the requests as presently framed. Since the Amendment Summonses are dismissed, there is no basis to pursue such requests. 148.For the reasons given in Section F2, I decline to order FBP under the First Request. F3. Analyses of Second Request 149.Paragraph 5(3) of Taching’s APoR pleads that:
150.Meyer asks whether, apart from “Oil Majors, resellers (or dealers) and end users”, the list prices of Shell’s petroleum products are accessible to any other “other players in the market” and the full particulars of such alleged “other players in the market”. Meyer contends that these requests are relevant to the Market Transparency Issue. 151.I am unable to agree with Meyer. The issue as to whether or not Shell’s List Prices were transparent is irrelevant because Taching’s case is that it independently adapted to the changes in Sinopec’s list prices. 152.To the extent that the Market Transparency Issue is relevant, once it is shown that it was possible for Oil Majors, resellers (or dealers) and end users to have access to Shell’s list prices, it is not necessary to show that market players actually had access to such information. It also does not matter how many more “other players in the market” had access. The answers to these requests are simply not necessary for the fair disposal of the core issues or for saving costs. 153.In any event, Taching has given answers already. Taching says, amongst others, that it was possible for market players to make direct enquiries with Shell for quotations; or customers of Shell may inform other market players of the List Prices of Shell. 154.In summary, I do not find any of the FBPs sought by Meyer to be necessary for the fair disposal of the matters in dispute and Taching has provided answers already. I dismiss the Taching FBP Summons. G. EXPERT EVIDENCE SUMMONSES AGAINST TACHING AND SHELL 155.Meyer seeks leave to adduce economic expert evidence both as to liability and quantum. The issues identified for the expert are as follows:
G1. Legal Principles on Leave to Adduce Expert Evidence 156.The Tribunal may give leave, as in any civil case, to adduce expert economic evidence: Order 38, rule 6; CTPD 1, §25(i). The test for granting leave is whether the expert evidence is relevant to the issues in dispute as disclosed on the pleadings. Where the proposed expert evidence is plainly inadmissible or irrelevant, the court ought to exercise its discretion to refuse the admission of such evidence. But where the court cannot form a clear view on the relevance of the proposed expert evidence or where it considers that the proposed evidence is clearly relevant, then it should grant leave for the evidence to be adduced at the trial. See Wong Hoi Fung v American International Assurance Co (Bermuda) Ltd & another [2002] 3 HKLRD 507, §12, Chu J (as she then was). 157.Taching and Shell pose 3 questions for guidance:
Fung Chun Man v Hospital Authority (unreported, HCPI 1113/2006, 24 June 2011), §13, Bharwaney J; following Mann v Messrs Chetty & Patel (a firm) [2000] EWCA Civ 267. 158.To the extent test (a) requires the court to weigh the cogency of expert evidence, I consider it pre-mature at this stage. 159.Test (b) is another expression of the test of relevance, which is most important here. 160.With regard to test (c), the estimated costs of an expert report to Meyer appears to be high, at $300,000, compared to a claim for $4.43 million and $2.49 million of Taching and Shell respectively. However, such costs are of little weight in the present cases because:
161.Turning back to the test of relevance, for cartel cases, the focus is to prove that an agreement or concertation existed. There are 3 methods to prove it in the context of parallel conduct:
162.An example of the 2nd Method is described in Competition Primers for ASEAN Judges 2018 - Primer II - Circumstantial evidence in the context of competition law:
163.There are two types of economic evidence:
See Prosecuting Cartels without Direct Evidence of Agreement, Organisation for Economic Co-Operation and Development, June 2007 Policy Brief, at p.1. 164.There is dispute between Meyer on the one part and Taching and Shell on the other as to whether, short of evidence of communication evidence between the colluders, there is probative value at all in economic evidence. 165.Meyer relies on the US Court of Appeal case of In Re Brand Name Prescription Drugs Antitrust Litigation [1999] USCA7 434 for the proposition that:
Mr Lee seems to suggest that absence of evidence of explicit collusion is not fatal to this application in his initial submission, but later said in his 2nd Reply Submissions that EU law is no different from US law. 166.On the other hand, Taching and Shell submit that absent any direct or “smoking gun” evidence of explicit collusion (whether by discussions or reciprocal contacts), economic analysis as to whether parallel pricing behaviour was more consistent with collusion or independent conduct is not sufficient to establish the existence of concertation. 167.In my view, Taching and Shell’s submission is more in line with authorities, both under EU law and US law. 168.Under EU law, although the Tribunal should consider the circumstantial evidence holistically (where individually each piece of evidence is not sufficient to found liability) together with economic evidence, expert evidence alone is not sufficient to establish the existence of collusion, eg Wood Pulp II. 169.Even the OECD Policy Brief relied upon by Meyer confirms that economic evidence is of limited probative value because it “can be ambiguous, consistent with either concerted or independent action” (p.1). In fact, the OECD noted: “A review of cartel cases prosecuted in OECD countries in which circumstantial evidence was important showed that in almost all successful cases there was communication evidence” (p.5). 170.This is further supported by Shell’s expert, Mr Dennis Beling, who has cited extensive authorities to support the view that “it is practically impossible to prove the presence of agreements between competitors in cases of alleged collusion using only economic data without any evidence of communication between them”: Beling §§11, 13-14, 16. See also: Faull & Nikpay, §§8.51-55, 8.512-8.514; Bishop & Walker, §§5-029 to 5-031. 171.Insofar as US authorities are concerned, Meyer’s reliance on Re Brand Name does not assist it.
172.Therefore, even under US law, conscious parallelism in itself, without plus factors, is insufficient to give rise to an inference of anti-competitive conspiracy. Expert evidence alone would not advance a claimant’s case. G2. Application of the legal principles 173.In the present case, apart from the parallel pricing, Meyer has not pleaded any communications or “plus factors” to show collusion between Taching and Shell, not even in the Disputed Amendment. Economic evidence alone would not be of help in establishing any of the core issues identified in Section D above. 174.Whilst Meyer accepts that parallel conduct alone is insufficient to prove collusion, it contends that Taching and Shell’s reliance on EU authorities is misplaced because they fail to notice the different standards of proof in play. I have dealt with this point in paragraph 60 above and do not think that Taching and Shell have fallen into error. 175.Meyer next contends that there was something more than parallel conduct, having regard to the following factors:
176.Factor (3) is not relied on in the pleadings. In any case, it is not a matter which requires expert evidence to explain and Meyer has given an explanation. 177.Factor (4) is rendered irrelevant upon dismissal of the Amendment Summons. 178.It is not necessary at this interlocutory stage to examine whether factors (1) and (2) could be said to be circumstantial evidence other than parallel conduct or plus factors or to weigh its strength. Meyer is effectively saying that it relies on the 2nd Method, and maybe the 3rd, to prove collusion. 179.Provided Meyer can show relevance to specific issues, in principle, leave should be granted for expert evidence to be adduced, even if, at this interlocutory stage, the Tribunal cannot form a clear view on the relevance of the proposed expert evidence: Wong Hoi Fung. The expert evidence can be considered holistically with other evidence at the trial. G3. Issue 1: Market Definition Issue 180.Market definition is usually to show the boundaries within which competitors compete and is relevant only for the purpose of determining whether an agreement/concerted practice has the appreciable effect of restricting competition: see Whish & Bailey, Competition Law (9th ed), p.28. It is not necessarily required in object cases to define the market: Nutanix (a bid-rigging case), §388. Nor was it rigorously analysed in W. Hing, at §134 (a market sharing and price-fixing case). 181.Meyer’s pleaded case is an object case and not effect case. It is not necessary to define the relevant market. Collecting evidence of the communication between the alleged colluders is the focus in an object case. 182.Dr Pang’s explanation for the need to define the market pays no regard to the pleaded case. Her explanation in Pang-2nd [5] is as follows:
183.With respect, on the pleaded cases, there is no real dispute regarding the definition of the relevant market:
184.With respect, the alleged collusion involved only Taching and Shell and nobody else in the market. Meyer does not claim to have difficulty in access to other suppliers. The parts underlined in paragraphs 29 and 30 of Pang-2nd do not form part of Meyer’s case. 185.I am not satisfied that expert evidence is required to define the market. G4. Issue 2: Parallelism Issue 186.Mr Lee relies heavily on Dyestuffs & Wood Pulp II, both being cases where there were advance announcements of price increases in the relevant market and economic evidence was adduced. He also relies on Australian Competition & Consumer Commission v Colgate-Palmolive Pty Ltd, 353 ALR 460; and Jara Creek Central Packing Shed Pty Ltd v Amcor Ltd [2007]. 187.In Dyestuffs, three general and uniform increases in the prices of dyestuffs had taken place within the EU over a period of years. The Commission concluded that the increases had occurred as a result of a concerted practice operating between ten producers. The Court of Justice upheld the Commission’s decision. I pause to note that Dyestuffs was decided in the 1970s, before CISAC in 2013. The parallel conduct in Dyestuffs was in different national markets and price changes could not have been brought into effect within a period of two to three days without prior concertation (§110). 188.Wood Pulp II (§§66-67)and Colgate-Palmolive [2017] FCA 1590 (§§23-24) were cases where the Commission used the 2nd Method. There was evidence of communications and expert evidence was adduced as complementary circumstantial evidence. 189.Jara Creek was a case on discovery. The expert explained that in order to establish the likelihood of collusive behaviour, it was appropriate to consider a “clean period” prior to the date of commencement of the alleged behaviour to carry out a benchmark analyses. The purpose was to assess the measure of damages (§5). As will be explained below, the present cases do not involve assessment of damages. 190.Mr Lee relies on the following paragraphs in Taching’s APoR in support of his application:
191.He also relies on Shell RAPoR:
192.He cites various paragraphs from Taching’s witness Statement to support the Market Transparency Issue and Similar Costs Issue. 193.Pang-1st, §§26-27 sums up the issues in this way:
194.With respect, Dr Pang has mis-characterized the core issue, which is whether there was an agreement/concertation. Whilst there is joinder of issues, the “Taching’s response” and “Shell’s response” described by Dr Pang are not their main case but fallback arguments of Taching and Shell to explain the parallel pricing. Moreover, the degree of competition is not a matter which the Tribunal has to consider before deciding if there was a breach of the First Conduct Rule. 195.On the face of the pleas cited, economic evidence is required to show (i) the structure of the industrial diesel market; (ii) whether the underlying cost factors of the oil majors were similar; (iii) whether there was high degree of transparency in List Prices of the oil majors; and (iv) whether there was a high degree of uniformity in the changes to the List Prices of the oil majors; over the period of 2011 to June 2017. 196.But what does Dr Pang want to show by the economic evidence? Pang-1st, §34 states as follows:
197.Dr Pang gives examples of “facilitating practices” in Pang-2nd, §25 such as price signalling, price announcements. 198.Firstly, in my view, paragraph 34(b) of Pang 1st does not go towards establishing actual collusion. 199.Secondly, the words underlined in paragraphs 34(c) and (d) simply do not form part of any party’s case. They neither address market structure nor transparency in the purported Taching’s response or Shell’s response. It is not permissible use of expert evidence to fish for evidence in order to formulate a case. 200.Thirdly, Mr Lee says that Taching has exhibited two economic reports, namely “Study of the Auto-Fuel Retail Market” and “Report on Study into Hong Kong’s Auto-fuel Market”. In the circumstances, he submits that expert economic evidence is naturally required by Meyer to address the above issues. 201.With respect, Taching has not obtained leave to adduce expert evidence and relevance of those 2 reports is yet to be seen. Any attempt by a party to adduce expert evidence without leave does not justify another party’s application for leave to adduce expert evidence. 202.For the reasons given, I give leave to adduce expert evidence on the Parallelism Issue limited to matters stated in paragraph 195. G5. Issues 3 and 4: Economic Context Issue and Effect Issue 203.Meyer relies on the following paragraphs of Taching’s APoR:
204.Meyer claims to need expert economic evidence to address the above criticisms. 205.§§33-34 of Taching’s APoR addresses legal principles on how to establish an object case. The court does not require expert evidence on legal principles. 206.§§35-37 of Taching’s APoR criticizes the inadequacy of Meyer’s plea on an effect case. Meyer cannot ride on its own inadequacy to seek to adduce expert evidence on a non-issue. 207.For the reasons given, no leave would be granted to adduce expert evidence on the Economic Context and Effect Issue. G6. Issue 5: Damages Issue 208.I accept as a matter of principle that assessment of loss and damages may require expert economic evidence. As explained in Competition Litigation UK Practice and Procedure, 2nd ed, at §16.17:
209.Meyer is seeking to set off its damages against the claims of Taching and Shell. However, a defendant cannot rely on set-off if the sum sought to be set-off has not yet fallen due at the date of commencement of the action: Hong Kong Civil Procedure (2020), §§18/17/2, 18/17/3; Richards v James (1848) 2 Ex 471, Edmunds v Lloyds Italico I Ancora Compagnia di Assicurazione e Riassicurazione SpA [1986] 1 WLR 492 at 495E-F. 210.Here, Meyer’s claim is for loss and damage arising from Shell’s alleged contravention of the First Conduct Rule. The competition regime in Hong Kong is that it does not allow stand-alone private action. Meyer’s claim will not accrue until after the present proceedings (and any subsequent appeals) are finally resolved due to the effect of these sections:
See Reasons for Decision in CTA 1/2018 dated 12 September 2018, §§12-14. 211.In other words, before the Tribunal makes a determination of contravention of the First Conduct Rule in these proceedings, Meyer does not have an accrued right to damages to set off against Taching or Shell at the date of commencement of these actions. 212.In fact, Meyer has acknowledged this, as was recorded in this Tribunal’s decision dated 22 February 2019 in HCA 1929/2017 and HCA 1069/2018 at §§7-8:
213.Accordingly, assessment of damages could not be a justification to adduce expert evidence. 214.Meyer now resiles from its earlier position and contends that no provision in the Ordinance says that stand-alone action is barred; but that ss.94, 95 and 142 suggest that the Tribunal has full jurisdiction to hear all private actions brought in respect of infringement of the conduct rules.
215.Mr Lee relies on this annotation in Butterworth Hong Kong Competition Law Handbook (2015), §§108.03, 110(1) and 142.04:
216.The legislative history was that provisions on stand-alone private action were removed from the original Competition Bill but the Tribunal has jurisdiction to hear and determine contraventions of the conduct rules raised as a defence (s.113 of the Ordinance). 217.Mr Lee acknowledges that the legislature removed the right to bring stand-alone private actions. However, he submits that ss.94 and 95 allow Meyer to apply to the Tribunal for remedies and reliefs in the course of its defence to an action brought by others. Such remedies would include an order for damages under Schedule 3. He says that is not inconsistent with s.108 because:
218.Statutory provisions are construed having regard to its context and purpose. Words are given their natural and ordinary meaning unless the context or purpose points to a different meaning. Context should be taken in its widest sense and that includes other provisions of the statute and existing state of the law: Cheung Kwun Yin (2009) 12 HKCFAR 568, §§12 and 13. 219.When read in context with other provisions of the Ordinance, Mr Lee’s submission is untenable:
220.For the reasons given in section G, I only give leave to Meyer to adduce expert evidence as per paragraphs 195 & 202. The need for expert evidence arises due to joinder of issues in the PoR of Taching and Shell and Meyer has not stated its case. There should thus be sequential service of expert reports. Meyer should first serve its report, say, within [28] days. Taching and Shell shall serve theirs, if so advised, within [28] days thereafter. Within [28] days thereafter, the experts shall meet and prepare a joint report setting out matters that they agree and those that they do not agree and the reasons why. H. REDACTION SUMMONS AGAINST SHELL 221.Meyer seeks unredacted copies of the following:
222.Shell claims that the redacted information is irrelevant to the issues in dispute – such as Shell’s pricing strategy in relation to other types of fuel products, other industry sectors or other clients. H1. Legal principles 223.Rule 24(3) of the Competition Tribunal Rules (Cap 619D) provides that:
224.Mr Lee relies on Hollander, Documentary Evidence, 13th ed:
225.The above statements were cited with approval in WH Holding Limited & other v E20 Stadium LLP [2018] EWHC 2578 (Ch), at §31, Snowden J. 226.On the other hand, a party is entitled to cover up parts of a disclosed document on the ground of irrelevance unless the redactions destroy the sense of the document or make it misleading: Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at §50, following GE Capital Corporate Finance Group Ltd v Bankers Trust Co [1995] 1 WLR 172 at 174B-D. 227.In determining whether the redacted parts of the document are irrelevant, the oath of the party giving discovery is conclusive unless the Tribunal can be satisfied – not on a conflict of affidavits, but either from the documents produced or from anything in the affidavit made by the party giving discovery or by any admission in its pleadings or necessarily from the circumstances of the case – that the affidavit does not truly state that which it ought to state: Wong Kar Gee at §51, GE Capital at 174D-E. 228.A “heavy burden” lies on a party who seeks to challenge the veracity of the other party’s oath regarding redaction: Wong Kar Gee, at §51. 229.It is not sufficient for the party seeking discovery to show that the redacted information is potentially relevant or might provide material for cross-examination as to credit. The test is whether it is not unreasonable to suppose that the parts redacted do contain information which may, either directly or indirectly, enable the party seeking discovery to advance his own case or to damage the opponent’s case: Wong Kar Gee, at §51. 230.Mr Lee submits that Rule 24(3) is a self-contained code about specific factors to be considered. Shell’s reliance on Wong Kar Gee and GE Capital is misplaced. 231.I am unable to agree. As pointed out by Ms Sit, SC, counsel for Shell, Rule 24(4) applies Order 24 of the Rules of the High Court except rules 1, 2, 3, 4, 6 on general discovery. Wong Kar Gee and GE Capital concern inspection under Order 24, rule 11 and that rule is applicable to the Tribunal. H2. Meyer’s case 232.Rule 24(3)(b) is not in issue because Meyer’s application only relates to production of unredacted copies to members within Meyer’s confidentiality ring. 233.Meyer submits that sub-rules 24(3)(a), (c) and (d) are clearly satisfied because:
H3. Shells’ evidence 234.Shell’s Price Book and List Price emails plainly contain confidential and commercially sensitive information. Leakage to competitors and customers would harm Shell’s business interest. 235.Shell provided as exhibits: (i) a redacted copy of the Price Book; and (ii) redacted copies of 12 sample List Price Emails from different points of time within the relevant period (“the Exhibits”). They have annotations setting out the grounds for the redactions. 236.Ms Jessica She (Pricing Manager of Shell) has confirmed on oath that annotations to the Exhibits contain an accurate summary of the contents therein and the reasons for the redactions. In the Exhibits, redactions are made solely on the basis of irrelevance. The information which is confidential is indicated in text boxes outlined in blue. 237.Subsequent to discovery and exchange of witness statements, some of the previously redacted information on the ground of irrelevance has been uncovered. Shell has also removed redactions of blank areas and other irrelevant information so as to illustrate, with greater clarity, why the redacted contents in the List Price Emails are irrelevant. 238.Ms She confirms that the samples of List Price Emails are representative of the List Price Emails as a whole, as the emails all contain similar contents. She has gone on oath to explain what she meant by irrelevant in §22 of her affirmation. Ms Sit SC has taken me through some of the redacted documents to illustrate Ms She’s evidence. H4. Analyses 239.In relation to Shell’s Price Book:
240.In relation to the List Price Emails:
241.Without disrespect, the assertion of Dr Pang on relevance of the redacted documents is made without regard to the pleaded issues. There is simply no basis for Dr Pang to do a forensic analyses of Shell’s pricing policy on such a wide scale involving other fuel types, other customers or other industry sectors, not even for the purpose of “control” or “benchmarks”. 242.This not a case of Shell redacting documents unthinkingly as described in Hollander and WH Holding. Paragraphs 237 and 238 above show that Shell has actively reviewed the necessity for redaction as the case progresses. The redactions are with reasons and I accept that they are on the ground of irrelevance. The statement of irrelevance on affirmation is conclusive and Meyer has not begun to challenge the veracity of that statement. 243.For the reasons given in this Section, I dismiss the Redaction Summons. J. SHELL FBP SUMMONS 244.On 30 November 2018, 11 months after Shell filed its PoR, Meyer served 34 requests for FBP on Shell. In the meantime, Meyer had no difficulty in making discovery and preparing witness statements. 245.Shell provided answers to some requests but declined to answer others on the ground that the information sought (a) has already been adequately particularized; or (b) was unnecessary for the fair disposal of the issues in dispute. 246.The same legal principles governing Taching’s FBP Summons are applicable here. Requests 1 and 2 247.Shell pleads that:
248.Meyer wants to know whether, by the use of the words “insofar as”, the Plaintiff has actually made any commercial decision to adapt to the pricing behaviour of Taching. If so, provide full particulars of each and every such alleged commercial decision with regard to the 118 Pairs of Notices. 249.Conscious parallelism is an issue in the present case. Mr Lee submits that Meyer’s preparation of the case may be fundamentally different depending on Shell’s answer. For example, if Shell’s case is that it has actually never adapted to Taching’s pricing behaviour, then the defence of conscious parallelism will fall away (because irrespective of any transparency and similarity of costs, there was no adaption or matching). If, however, Shell’s case is that it had indeed made adaptions, it will then only be fair for Shell to disclose the relevant instances so that Meyer knows precisely what case it has to meet. 250.With respect, Meyer has omitted a reference to paragraph 39 of Shell's RAPoR, under the hearing of “no collusion between [Shell] and Taching”. It is expressly pleaded in §39.1 that Shell’s List Prices were fixed or revised in accordance with the system pleaded in §17.2 and the Confidential Annex “without reference to Taching”, except for 3 instances when Meyer disclosed Taching’s List Prices to Shell. Shell has also disclosed the List Price Emails. These requests are simply not necessary for the fair disposal of the core issues nor do they save costs. Requests 3 to 8 251.Shell pleads that:
252.Meyer’s requests seek full particulars of “other factors” taken into account by Shell when determining its List Price or underlying costs factors. They are said to be relevant to the Similar Costs Issue and Adaption Issue. 253.The FBPs are not necessary for the fair disposal of any core issue for the following reasons:
Requests 13-18 254.§18.3 of Shell’s RAPoR pleads that:
255.These requests seek an exhaustive list of the players in the market and the sources from which Shell could have learnt about the List Prices offered by the other “oil majors”. 256.Meyer says these are relevant to the Market Transparency Issue. The details and circumstances of access to relevant sensitive pricing information are at the heart of the matter. For example, it will certainly be collusive behaviour if information was deliberately dispersed through a third party (either through an association of undertaking, or as a hub or a third party facilitator). In such circumstances, any transparency created will not be treated as genuine. 257.Specifically, requests 17 and 18 seek to ascertain whether Shell had actually accessed the List Prices of other oil majors before it issued its relevant adjustment notices. Meyer says that they are relevant to the Adaption Issue. 258.The particulars are unnecessary for the fair disposal of the issues in dispute because:
259.I agree with Ms Sit SC that the purpose of such requests is to fish for information to support potential claims of collusion between Shell and other market players. This is not permissible and the Amendment Summons has been dismissed. Requests 19, 20, 23 and 24 260.§28.3 of Shell’s RAPoR pleads that:
261.Meyer asks whether, by the use of the words “including but not limited to”, Shell is alleging that there are other factors that have been taken into account by Shell; and if so, give full particulars of such other factors. Meyer says that these requests are relevant to the Similar Costs Issue and Adaption Issue. 262.§28.3(iii) of Shell’s RAPoR pleads that:
263.Meyer asks whether, by the use of the words “eg” Shell is alleging that there are other “leverage the end-user may have against Shell and, if so, particulars of such other leverage. These requests are said to be relevant to the Similar Costs Issue and Adaption Issue. 264.These requests seek an exhaustive list of factors taken into account by Shell when negotiating the Discount offered to end-users. The particulars are unnecessary for the fair disposal of the issue in dispute and fishing in nature:
Requests 21-22 265.§28.3(ii) of Shell’s RAPoR pleads that:
266.These requests seek further particulars as to how Shell obtained information on the net unit prices and/or discounts offered by other MULSD suppliers. They are said to be relevant to the Market Transparency Issue. 267.Such particulars are unnecessary for the fair disposal of any issue in dispute. It is not Meyer’s pleaded case that Taching and Shell colluded with other suppliers. In the circumstances, the means by which Shell obtained market intelligence about the discounts offered by other suppliers is of no relevance. 268.In any event, Shell’s case on this point is clearly set out and properly particularized in Shell’s RAPoR §29. 269.These requests are another attempt by Meyer to fish for information to support potential claims of collusion between Shell and other market players. They are not permissible as the Amendment Summons has been dismissed. Requests 27 and 28 270.§29.1 of Shell’s RAPoR pleads that:
271.Meyer asks, with reference to the 118 Pairs of Notices, whether Shell had actually obtained and/or estimated the level of Discounts offered by other players in the market before Shell issued its relevant Notices. If Shell had, provide particulars of such instances and state in respect of each instance, what public (sic) information or informal inquiries had been obtained and/or estimated by Shell. Meyer says these requests are relevant to the Adaption Issue. 272.Such particulars are not necessary for the fair disposal of any core issue:
Requests 29 and 30 273.§36.4 of Shell’s RAPoR pleads that:
274.These request seek an exhaustive list of instances where Meyer used offers from other suppliers in the market as leverage in contractual negotiations with Shell. 275.Such particulars are not necessary for the fair disposal of the issues in dispute or for saving costs, because there is no real issue between the parties in relation to the Discounts / Net Prices offered by Shell. 276.In any event, further details of the contractual negotiations between Shell and Meyer have been set out in Tam WS §§31-34. There were only 3 adjustments to the Discounts (in 2010, 2012 and 2013) based on what Meyer told Shell about Taching’s List Prices. 277.No useful purpose would be served by requiring Shell to set out all of those details in its pleading, which would only overcomplicate the pleadings: Million Decade at §§18-20. Requests 31 to 34 278.§42.1 of Shell’s RAPoR pleads that:
279.Meyer asks whether, by the use of the words “any information [Shell] might have had”, Shell has actually had information with regard to the List Prices, Net Prices or Discounts offered by Taching to [Meyer]; and if it had, identify in which of the 118 Pairs of Notices the Plaintiff had had such information; and state in respect of each instance the legitimate source and channels through which such information was obtained by Shell. 280.§42.2 of Shell’s RAPoR pleads that:
281.Meyer asks whether, by the use of the words “insofar as”, Shell has actually made any independent commercial decision to supply the Product at the same or similar price level to Taching; and if so, identify the relevant instance with regard to the 118 Pairs of Notices. 282.Meyer says that these requests are relevant to the Adaption Issue. 283.Such particulars are not necessary for the fair disposal of any core issue:
284.For the reasons given in Section J, I dismiss the Shell FBP Summons. K. CONCLUSION 285.In respect of Taching,
286.In respect of Shell,
287.All costs are made on a nisi basis, with certificates for 2 counsel. 288.I am most grateful to counsel for their thorough analyses and their enlightenment on the law of competition.
Ms Catrina Lam (on 10 January 2020 only) and Ms Cherry Xu, instructed by Herbert Tsoi & Partners, for Taching, the plaintiff in CTA 1/2018 Ms Eva Sit, SC and Mr Joshua Chan (on 10 January 2020 only), instructed by Clifford Chance, for Shell, the plaintiff in CTA 2/2018 Mr Kenneth K H Lee and Ms Nana Lui and Mr William Tse, instructed by Robertsons, for Meyer, the defendant in both cases [1] Defined as the “Net Delivery Price” in Taching APOR §7(4)(d) ie the actual price at which Taching supplied industrial diesel to Meyer. [2] Appeal against the decision was dismissed: see [2012] EWCA Civ 36. [3] The other oil majors are Sinopec, Caltex and ExxonMobil. [4] This denotes the name of the deponent and the rank of his/her affirmation. [5] This is to denote an affirmant and the rank of his/her affirmation. |
Cases cited in this judgment
Further hearings and rulings under CTA 1/2018