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Hong Kong construction dawn raids should prompt tender process reviews

Recent dawn raids by the Competition Commission in Hong Kong show how important it is for consultants and contractors to thoroughly review their tendering operations to ensure that they are compliant with the law, an expert has said.

The Competition Commission (CC) and Independent Commission Against Corruption (ICAC) conducted their first joint operation on 16 and 17 April. The investigation was prompted by a corruption complaint made by members of the public to the ICAC about building maintenance. 

Mohammed Talib, construction and competition law expert at Pinsent Masons, said: “The joint operation shows that the infrastructure sector continues to be a high priority target for the Commission given the impact it has on the public. Businesses in the sector need to urgently review their procurement operations and bidding practices to ensure they are fully compliant with the law.”

The companies investigated were all alleged to have been involved in corruption and anti-competitive activities, breaching section 9 of the Prevention of Bribery Ordinance and the first conduct rules of the Competition Ordinance.

Around 40 premises were searched, including offices of project contractors, consultancies and property management companies and people's homes. Authorities seized mobile phones, computers, and documents, some relating to building maintenance projects.

The Commission asked relevant parties of the investigation to produce documents and information, with refusal to hand over the information a criminal offence under the Competition Ordinance.

The operation led to the arrest of 20 people, including project contractors, project consultants, middlemen within the businesses, and members of the property management companies involved.

The CC said that the joint operation “demonstrates the determination of the two agencies in cracking down on corruption and potential anti-competition activities in building maintenance.”

Hinson Cheung, a construction law and regulatory compliance expert at Pinsent Masons, said: “Consistent with other law enforcement and investigatory agencies, the Competition Commission is now increasingly ready to carry out investigatory raids across the board, often unannounced. In this new climate, consultants and contractors will need a developed action plan to react and be prepared for such raids. This will encompass a corresponding increase in resources to identify and establish a response team, ramp up training for staff, step up compliance processes, and develop existing or new action plans.”

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