Bid-rigging in renovation projects to be criminalised under law against triads

The Hong Kong government is set to criminalise bid-rigging in building maintenance projects under laws covering triad and corruption offences and allow authorities to take criminal or civil action against such conduct, following the release of an independent committee’s report on the fatal Tai Po blaze.

The regulatory overhaul on bid-rigging was announced on Thursday, as the government released the long-anticipated report of the independent committee investigating the causes of the devastating fire at Wang Fuk Court, which was undergoing large-scale renovations when the blaze ignited last November.

The change will introduce a criminal offence with penalties of up to 10 years’ imprisonment and fines.

“The committee also finds that such bid-rigging and associated misconduct may involve different parties spanning from building contractors, building consultants, property management companies, middlemen, members of building management committees, to even homeowners themselves,” the report said.

“Some of them have triad affiliations. Such a corrupt ecosystem can no longer be tolerated, and the government and the public should make use of this opportunity to rebuild a healthy environment for the large-scale building maintenance and renovation industry in the future.”

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While stressing that it was not within its scope to determine whether there had been bid-rigging in the Wang Fuk Court case, the committee said there were “numerous features of that project which bore the hallmarks of bid-rigging and anticompetitive conduct”.

It cited examples of an aggressively low consultancy bid, an expansive scope of works, a contractor winning the inflated downstream contract, a “dummy” inspector at the estate, a “grossly misleading” tender analysis report and concentrated proxy votes over critical appointments at the project.

Secretary for Justice Paul Lam Ting-kwok highlighted that the government would amend the Competition Ordinance by criminalising bid-rigging in major building maintenance and renovation projects.

“The criminal offences will include preliminary works and consultancy services, and will encompass serious anticompetitive conduct defined under the ordinance beyond bid-rigging, such as price-fixing and market sharing,” he said.

He proposed a maximum penalty of 10 years’ imprisonment and fines to be capped at HK$10 million (US$1.3 million), or three times the commercial gains derived from the offence, or 50 per cent of the annual local turnover for infringement.

Another initiative was to include the new criminal offences on anticompetitive conduct related to major building renovation works under the Organised and Serious Crimes Ordinance so law enforcement agencies could compel suspects to answer questions, provide information and even freeze assets, and the court could impose heavier penalties.

The government also proposed including the new offences under the Independent Commission Against Corruption Ordinance so the city’s anti-corruption watchdog could exercise its powers over the cases, he added.

Lam also said the new offences would be covered by the Interception of Communications and Surveillance Ordinance, allowing enforcement agencies to collect evidence of highly covert criminal activities.

The revamp also suggested enhancing the current civil liability framework on bid-rigging conduct, such as raising the maximum penalty to an HK$8 million fine, twice the commercial gains obtained from the contravention or 30 per cent of the local turnover for up to three years during the period of contravention.

According to Lam, the government also proposed adopting a dual-track approach involving both criminal and civil enforcement to combat bid-rigging in building maintenance and renovation projects flexibly.

“The Independent Commission Against Corruption (ICAC), the Hong Kong Police Force and the Competition Commission will collaborate closely. The Commerce and Economic Development Bureau plans to submit the proposal to the Legislative Council’s relevant panel for discussion and consult stakeholders,” Lam said.

“We strive to table the bill to the Legislative Council as soon as possible to establish and refine a legal and enforcement mechanism that can target and deter bid-rigging effectively in major building maintenance and renovation works.”

A separate initiative included setting up a cross-departmental task force to combat crimes related to bid-rigging in maintenance projects, involving the police, the anti-corruption watchdog and the Competition Commission.

The task force would launch joint investigations or provide mutual support to strengthen deterrence and enhance intelligence gathering and information exchange.