Poon aircon firm in $2b cartel probe

Two providers of air-conditioning works, including one founded by Otto Poon Lok-to, husband of Secretary for Justice Teresa Cheng Yeuk-wah, are being sued for alleged price-fixing, market-sharing and bid-rigging over work potentially worth about HK$2 billion over four years.

The Competition Commission accused ATAL Building Services Engineering and its parent company, Analogue Holdings, owned by Poon, and Shun Hing Engineering Contracting Company and Shun Hing Holdings of engaging in serious anti-competitive conduct.

Analogue senior engineers Eric Ser Ka-wai and Cheng Kit-shun, and Shun Hing's senior manager Ken Kwan Siu-kin, face the same investigation.

They were alleged to have fixed prices, shared markets and rigged bids over the supply of air-conditioning work in Hong Kong from December 14, 2015, to December 4, 2019.

During the period of alleged collusion, the companies potentially recorded HK$2 billion sales from air-con work. The commission sought a declaration from the Competition Tribunal that the respondents contravened the First Conduct Rule as well as an order to fine them and recover the commission's investigation costs.

The 44-page writ says Analogue and Shun Hing were competitors as they both provided services for air conditioning work in maintenance, installation, repair or replacement work.

When customers needed servicing, they issued a request for tender or quotation. Analogue, Shun Hing and other competitors would then submit bids.

But the three employees from the two companies had e-mail communications on tenders, where they shared commercially sensitive information such as their intentions to bid and intended bidding price.

They also requested one another to raise their prices so the other could contracts through a lower price - a cover bid or "Pig Quote."

In the e-mails, the employees called the cover bids "pig tender."

In January 2016 and March 2016, Shun Hing allegedly helped ATAL to secure contracts with ISS EastPoint Property Management for the building at 1063 King's Road, and Hong Kong and China Gas Company (Towngas) for the building at 363 Java Road, by submitting cover bids at ATAL's request in which Shun Hing quoted a price higher than ATAL.

In November 2016, ATAL allegedly submitted a cover bid at Shun Hing's request so Shun Hing could offer a lower price to Savills Property Management's request for a quotation for Queen's Garden at 9 Old Peak Road. But Savills did not award a contract as it obtained the quotations for estimation only.

In January 2017, ATAL allegedly helped Shun Hing to get the contract from Kanic Property Management for a house at No 23 La Salle Road in Kowloon Tong by a cover bid, as Cheng at ATAL sent an e-mail "PIG PIG" to Shun Hing.

The e-mail also contained Kanic's request for a quotation. Kanic awarded the contract to Shun Hing. Analogue and Shun Hing continued to communicate frequently between September 2018 and December 2019, by helping each other to get more contracts in cover bids involving Hip Shing Hong Centre, Club Lusitano, Surson Commercial Building, Tuen Mun Wu Hong Clinic and Tin Shui Wai Health Centre.

Competition Commission chief executive Rasul Butt said the two firms engaged in "a multi-year cartel."

"With air conditioning being a modern necessity, the cartel affected many members of the public residing and working in residential and commercial buildings," Butt said.

"The enforcement action today further demonstrates that disrupting hardcore cartels that affect people's livelihood, especially when the companies involved are major players in the relevant market, will continue to be one of the commission's top priorities," he said.

The watchdog said it received a complaint and reviewed almost one million documents, one of the biggest cartel investigations it has handled.

The stock price of Analogue Holdings fell 10 percent to HK$1.62 yesterday.

After the company's annual meeting yesterday, Poon said he could not comment on the case as it was in legal proceedings, but said Analogue was not related to Shun Hing. "Facts speak louder than words," he said.

Poon also said his staff were working hard and his company was operating as usual.

Companies that violate the Competition Ordinance could face a pecuniary penalty of up to 10 percent of annual Hong Kong turnover per contravention for a maximum period of three years.

Its director could be disqualified from the director role for up to five years, while individuals related to the case might also be ordered to pay a pecuniary penalty.

The tribunal may also order the parties who contravened the law to pay damages to any person who suffered loss or damage.