Notices, Enforcement and the Making of the Hong Kong Competition Ordinance

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1 The final publication is available at link.springer.com Journal: China-EU Law Journal ISSN DOI: /s z China-EU School of Law 2015 Notices, Enforcement and the Making of the Hong Kong Competition Ordinance Félix E. Mezzanotte Abstract Created by the Hong Kong Competition Ordinance 2012 (Ordinance), the infringement notice and the warning notice are novel tools of competition law enforcement. Their use, however, involves serious tradeoffs. On the one hand, the notices promote a speedier, more flexible and cheaper resolution of investigations in competition law cases. On the other hand, they may curtail deterrent effects while injecting greater discretion and uncertainty into the enforcement process. This article investigates the extent to which such tradeoffs were identified and weighed by the designers of the notices in the lawmaking process. Written records of the legislative debates on the Ordinance were collected and their content analysed systematically. The findings suggest that although the participating actors largely agreed upon and fluently articulated the benefits of the notices, they either ignored or neglected their potential risks. The development of competitive markets in Hong Kong requires that those risks be well understood and managed. Key words: infringement notice, warning notice, HK Competition Ordinance; lawmaking; deterrence; enforcement Assistant Professor, School of Accounting and Finance, Hong Kong Polytechnic University. affemezz@polyu.edu.hk; Telephone I would like to thank Mr Qilin Zhang for his useful research assistance. I am also grateful to Professor Mark Williams, Dr. Sudeep Gosh, and the two anonymous reviewers for the valuable comments that they have provided to improve this article. Financial support granted by the Hong Kong Polytechnic University (Competitive Research Grants) is gratefully acknowledged. Claims and errors are the sole responsibility of the author. 1

2 1. Introduction The Hong Kong Competition Ordinance 2012 (Ordinance) has granted enforcement powers to two different entities, namely the Hong Kong Competition Tribunal (Tribunal) and the Hong Kong Competition Commission (Commission). 1 The process of enforcement can in turn follow two distinct models. In the first model the Commission investigates competition cases and, eventually, brings legal proceedings in the Tribunal to have the cases resolved and violators punished. In the second model the Commission not only investigates but also terminates competition cases on its own, without the Tribunal s intervention. Two novel tools of competition law enforcement created by the Ordinance allow the Commission to conclude cases on its own, notably the infringement notice (IN) and the warning notice (WN). Compared with legal proceedings in the Tribunal, it is expected that the enforcement through the IN and WN will prove speedier, more flexible and less costly. 2 However beneficial, the Commission s use of the IN and WN may also prove harmful. It can in practice limit the role played by the Tribunal in the enforcement process while injecting, into this very process, undesirable levels of discretion and uncertainty. 3 Moreover, the fact that the notices carry no monetary penalties curtails deterrent effects. 4 Weaker deterrence renders the Ordinance less effective, with costly consequences for consumers and society. In the United States, for example, the operation of hard-core cartels (since records have been kept) has imposed on the US consumers price overcharges of 23.3 percent on average. 5 In Asia price overcharges from cartels are estimated to have reached up to US$500 billion between 1990 and With the enforcement through the IN and WN bearing potentially costly risks, the need for those risks to be understood and managed in the context of Hong Kong should not be underestimated. The goal of this article is to learn more about those risks or concerns by looking at how they were identified and weighed by the actors that 1 Competition Ordinance (Cap. 619) (hereinafter Ordinance ). The Ordinance has now entered the process of implementation. It is expected that it will become effective in the second part of Polinsky and Shavell 2007, p ; Wils 2008, p ; Polinsky and Rubinfeld 1988, p Enforcement notices and warrant letters have also been examined in the context of regulatory non-compliance in the United Kingdom, see Macrory Yves and Agapi 2013, p ; Cook 2006, p ; Papp 2012, p Although this argument has been put forward in the context of commitment decisions under EU Competition Law it can still apply reasonably well to the case of the WN and IN in the context of the Ordinance, see section 3 of this article. 4 Buccirossi et al. 2011, p In addition, Buccirossi et al. Deterrence in Competition Law (Discussion Paper SP II 2009) Accessed 15 December Connor and Lande 2012, p Also, Connor and Lande 2006, p Connor 2008, p

3 participated in the legislative process that created the IN and WN. In order to examine this question section 2 of this article provides the necessary context by outlining the legal rules governing the IN and WN as set out in the Ordinance. Relying on the author s interpretation of these rules and on other relevant literature, section 3 identifies a set of concerns that may arise from the use of the notices in the enforcement of the Ordinance. Section 4 delves into the lawmaking process that created the Ordinance in order to determine the extent to which those concerns were examined in the debates. To this end, the section offers a systematic analysis of the content of the legislative debates on the IN and WN. It was precisely in this context that the participating actors lawmakers, associations, firms and political groups, among others shaped the key features of the notices and, one would expect, identified and weighed the various benefits, risks and implications. Although the legislative debates are a valuable source, little is currently known about their content. The analysis set forth in this article covers the content of more than five hundred written records of the debates, and was conducted following a four-stage approach outlined in section 4.1 of this article. The findings, presented in section 4.2, show that the actors in the debate focused overwhelmingly on the advantages of the notices but scarcely on their risks. More particularly, the WN was endorsed on the premise that it would add clarity to a set of otherwise vague rules on anticompetitive agreements and thereby protect suspected firms from being punished unfairly. Cost-savings was the most popular reason in support of the IN. The potential costs of the Ordinance yielding negligible deterrent effects was largely overlooked, as was the risk posed by a potentially minor role of the Tribunal in the enforcement process. The content of the debates suggests either a lack of awareness of the risks posed by the notices or an evasive attitude by the actors towards examining those risks. 2. Infringement and Warning Notices As Tools of Enforcement The Commission and the Tribunal are the two core institutions guiding the enforcement of the Ordinance. In its most basic form, the role of the Commission is to investigate the existence of violations and, eventually, bring the competition case to the Tribunal, which will decide whether or not a violation has taken place. 7 The Tribunal acts as a superior court of record composed of judges of the Court of First Instance. It has adjudicatory powers and thus hears and decides on the applications made by the Commission on, among other issues, suspected violations of the Ordinance. 8 Yet, a model by which the Commission investigates 7 Ordinance, note 1 above, s142. The Commission has been granted a wide range of powers, among others, to draft guidelines, advocate compliance with the Ordinance, advise the government in relation to the Ordinance, conduct market studies, and promote research on competition law in Hong Kong, Ordinance s Ordinance s134(2) and s135. 3

4 cases and the Tribunal resolves them is not the only model of competition law enforcement contemplated in the Ordinance. The Commission has been granted powers not only to investigate but also, under a number of circumstances, to terminate competition cases on its own, without the need for the Tribunal to participate in this process. Exercising its enforcement powers regulated in Part 4 of the Ordinance the Commission may accept commitments from the alleged infringers, 9 grant leniency 10 and issue an infringement notice (IN) or warning notice (WN). 11 These notices are the topic of this article and, for this reason, this section will elaborate on them. In particular, this section seeks to understand how the notices work and explores their key features. The IN and the WN will be used by the Commission when investigating an alleged violation of the Ordinance. The Ordinance introduces two core prohibitions in the form of conduct rules. The first conduct rule bars agreements between undertakings, concerted practices and decisions of associations of undertakings which have the object or effect of restricting competition in Hong Kong. 12 A subset of those anticompetitive agreements, concerted practices or decisions may fall into the category of serious anti-competitive conduct. This category includes any one or a combination of the following: 13 (a) fixing, maintaining, increasing or controlling the price for the supply of goods or services; (b) allocating sales, territories, customers or markets for the production or supply of goods or services; (c) fixing, maintaining, controlling, preventing, limiting or eliminating the production or supply of goods and services; (d) bid-rigging. The second conduct rule prohibits undertakings with substantial market power from engaging in abusive conduct, that is, conduct that by object or effect restricts competition in Hong Kong such as predatory behaviour towards competitors or conduct that limits production to 9 Ordinance ss60-65 and sch Ordinance ss Ordinance ss66-78 and 80, respectively. 12 Ordinance s6. 13 Ordinance s2(1); Hong Kong Competition Commission, Draft Guidelines on The First Conduct Rule 2014, p

5 the prejudice of consumers. 14 In this context, the IN functions as follows: Where the Commission has reasonable grounds to believe that a person has infringed either (1) the first conduct rule and the breach involves serious anticompetitive conduct or (2) the second conduct rule, the Commission can, before starting legal proceedings in the Tribunal, choose to issue an IN. 15 The powers of the Commission to issue an IN are stated in the Ordinance as follows: 16 The Commission may, instead of bringing proceedings in to the Tribunal in the first instance, issue a notice (an infringement notice ) to the person against whom it proposes to bring proceedings, offering not to bring those proceedings on condition that the person makes a commitment to comply with requirements of the notice. The content of the IN will, among other things, identify the alleged violator, the conduct rule alleged to have been contravened and the evidence that the Commission relies on to support its allegations. 17 The IN will also specify the requirements that the alleged violator will have to comply with, which may include, among others, to refrain from any specified conduct, or to take any specified action, that the Commission considers appropriate; and to admit to a contravention of the relevant conduct rule. 18 In turn, the undertaking against whom the IN has been issued may commit to comply with the IN s requirements within a specified time period. 19 If the person complies with the commitment made within the compliance period, the Commission may not bring proceedings in the Tribunal against that person in respect of the alleged contraventions specified in the notice Ordinance s21. To the extent that this article focuses on the IN and WN this section does not offer an extensive examination into the different rules of the Ordinance such as, among others, the conduct rules, the merger rule and rules on exclusions and exemptions. For further details about the Ordinance and competition policy in Hong Kong beyond the content of this section see Kwok 2014, ; Cheng 2014, 88-94; and more generally Williams 2005; draft guidelines under the Competition Ordinance issued by the Hong Kong Competition Commission Accessed 11 March Ordinance s67(1) and s 2(1). However, the Commission cannot issue an IN if it has already started proceedings in the Tribunal in respect to the alleged violations, Ordinance s67(1)(b). 16 Ordinance s67(2). 17 Ordinance s Ordinance s67(3). 19 Ordinance s Ordinance s75. 5

6 Conversely, if the person does not make a commitment (opt-out option) or fails to comply with a commitment made, the Commission may decide to bring legal proceedings against that person in the Tribunal in relation to the alleged violation. 21 The legislator has also empowered the Commission to withdraw unilaterally an IN that has already been issued: The Commission may at any time before the expiry of the compliance period, by notice in writing given to a person to whom an infringement notice has been issued, withdraw the infringement notice with effect from a date specified in the notice. 22 In relation to the WN, where the Commission has reasonable cause to believe that an undertaking has violated the first conduct rule through actions that do not constitute serious anti-competitive conduct (e.g. anticompetitive agreements subject to the effects assessment) it must issue a WN before bringing proceedings in the Competition Tribunal. 23 The content of the WN must identify the suspected anticompetitive conduct and the alleged violators, and show evidence that substantiates the Commission s allegations. The WN will also require that the undertaking cease the alleged misconduct within a specified time period (the warning period) without repeating it in the future, and indicate the manner in which the undertaking will have to satisfy such request. The notice will also state that failure to comply with the requirements of the notice will allow the Commission to bring proceedings in the Tribunal against the undertaking and in respect of the alleged misconduct. 24 It can be added that, if successfully conducted, the use of the IN and WN will allow the Commission to remedy the competition problem and terminate the case without the need for the Tribunal to intervene in that very case. Neither the WN nor the IN are included in the category of reviewable determinations, meaning that the decisions by the Commission to issue either notice are initially ineligible for judicial review by the Tribunal. 25 Although there might be other avenues to control the Commission s WN and IN decisions, it seems to be the case that such control is beyond the reach of the specialized Tribunal. It is important to note that the Ordinance does not empower the Commission to include, as a requirement in a notice, monetary sanctions on the alleged violators. It is understood by the author that no such powers are stated in Part 4 of the Ordinance (divisions no. 2 and no Ordinance s68 and s76(2). 22 Ordinance s Ordinance s82(1). 24 Ordinance s82(2). Such proceedings may be brought only in respect to the alleged misconduct that followed, but not that preceded, the expiration of the warning period, Ordinance s82(5). 25 Ordinance s83. 6

7 dealing with the IN and WN, respectively). Nor are such powers granted in Schedule 5 of the Ordinance, which is dedicated to the setting up and organization of the Commission. As explained in the following sections of this article the Commission had initially been given the power to impose a sanction of up to HK$10 million on undertakings when issuing an IN, yet this power was later taken away from the Commission. As stated in the final text of the Ordinance, the IN may include a behavioural remedy to do or undo specific conduct and, perhaps, other types of remedies, yet without the imposition of a fine. 26 The Ordinance permits the Commission to apply to the Tribunal for pecuniary penalties, yet it is the Tribunal in legal proceedings that will ultimately decide whether or not to impose this penalty. 27 More particularly, and unlike the Commission, the Tribunal possesses powers to impose pecuniary, civil penalties on any person whom it has reasonable cause to believe has contravened, or has been involved in the contravention of, a competition rule. 28 The Tribunal may also order infringers to restitute the illicit gain 29 and pay the enforcement costs to the government. 30 More specifically, the Tribunal can order the disqualification of individuals and the violation of such order gives rise to criminal sanctions including imprisonment. 31 When looking at recovery from the perspective of private enforcement, the Ordinance does not allow stand-alone private actions for damages. 32 Follow-on actions for damages are permitted if a violation is found by a decision of the Tribunal, 33 yet these actions are far more restricted if the case is resolved by the Commission through the notices. As a general rule, a follow-on action would not proceed where the case is resolved through a notice, except for the case of the IN where the alleged violator admits having infringed the Ordinance and the 26 Ordinance s67(3)(a) and s67(4). 27 Ordinance ss Ordinance ss91-92 and s93(1). Although the Tribunal may set the penalty to any amount it considers appropriate this penalty cannot exceed in total a 10 per cent of the turnover of the undertaking concerned for each year of contravention and up to a maximum of three years; the turnover is calculated by looking at the total gross revenues of an undertaking obtained in Hong Kong, Ordinance s93(3) and s93 (4). 29 Ordinance ss Ordinance s96(1). 31 Ordinance sch3(1)(p) and s Ordinance ss Ordinance s110. 7

8 Commission accepts this admission. 34 How frequently the Commission will seek an admission of infringement when issuing an IN is unclear. 35 With the IN and WN having the features described above, the use of the notices by the Commission for the purpose of enforcing the Ordinance s two core prohibitions may deliver benefits but also create a number of concerns. These concerns will be identified in the next section by reference largely to doctrine. 3. Identifying Potential Concerns that the Use of the Notices May Raise Potentially, the IN and WN may deliver benefits including a faster resolution of cases and cost-savings for both the enforcers and the alleged infringers. 36 The notices, however, may also generate a number of concerns. They emerge from the impact that the notices may, and will likely, have on the enforcement role of the Commission and of the Tribunal. To start with, note that the Hong Kong government (Government) repeatedly stated in various reports during the lawmaking process that, as a general principle, the enforcement of the Ordinance would follow a judicial enforcement model; to this end, the Tribunal was created and given powers to adjudicate. 37 Explaining the major components of the Ordinance during the lawmaking process, the Government referred to the judicial enforcement model as follows: 38 Our policy objective is to establish a credible and impartial institutional framework which allows for effective and efficient enforcement of the competition law. The judicial enforcement model which we have adopted in the Bill through the creation of the Commission and the Tribunal has the advantages of separating the powers of investigation, prosecution and adjudication of alleged breaches of competition rules among different authorities, thereby enhancing fairness and addressing concerns over 34 Ordinance s110(3)(e). 35 Ordinance s67(3)(b). 36 Relevant readings in connection with this issue are listed in note 2 above. 37 Legislative Council Brief, Competition Bill, Submitted by the Commerce and Economic Development Bureau, 2 July 2010, File Ref.: CITB CR 05/62/56, paragraph 7; Legal Service Division on the Competition Bill, Paper for the House Committee Meeting on 8 October 2010 LC Paper No. LS93/09-10, 1-9, paragraph 11; and the Report of the Bills Committee on Competition Bill, Paper for the House Committee meeting on 18 May 2012 LC Paper No. CB(1)1882/11-12, 1-53, paragraph Bills Committee on Competition Bill, Overview of Major Components of the Competition Bill CB(1)320/10-11(02), 1-17, paragraph 4. 8

9 concentration of too much power in one body. Moreover, to ensure that there is effective deterrence of anti-competitive conduct, we consider that the Tribunal should be able to apply a full range of remedies, including pecuniary under the Bill. Given the significant power which will be provided to the adjudicative body, a judicial model is considered to be more appropriate. In stating the above, the Government showed a clear preference for building upon the excellent reputation that Hong Kong has gained for its independent judicial system and compliance with the rule of law. Yet the extent to which the use of the WN and IN as enforcement tools will in practice diminish the actual benefits of a judicial enforcement model in place remains to be seen. The point is that when a competition case is resolved at the level of the Commission, that case will not reach the Tribunal. By using the notices, therefore, the Commission gains a more active role in enforcement whereas the Tribunal becomes more passive. This dynamic however is not harmless. It has meaningful implications as it may, among other things, weaken legal certainty, reduce the control of the Commission s discretion, create prosecutorial bias and curtail the deterrence of anticompetitive conduct. This article will now elaborate on each one of these concerns separately. Issues related to legal certainty may emerge because the notice decisions lack the precedential value of the Tribunal s judgments. Assuming that only a few competition cases are ultimately resolved by the Tribunal, the enforcement process will fail to produce a sound body of judicial decisions on the basis of which undertakings can evaluate their legal risks. 39 As stated in the draft Guidelines, the decisional practice of the Commission does not bind the court, which can interpret the law differently. 40 Moreover, if the same agency is in charge, on the one hand, of conducting the investigation and, on the other hand, of making final decisions, that agency s actions may generate a prosecutorial bias. Once the prosecutor has made the decision to initiate a formal investigation he/she becomes more inclined to convict the suspected violators. 41 Specifically in the case of Hong Kong, such a bias may be present in the Commission s enforcement actions when the notices are used. One must note, however, that except for the event of an undertaking s admission of anticompetitive conduct it seems to be the case that when 39 note 3 above. 40 HK Competition Commission, Draft Guideline on The First Conduct Rule 2014, 1 and Draft Guideline on The Second Conduct Rule 2014, p Wils 2004, p

10 terminating cases using a notice, the Commission will not state in the notice whether or not an infringement has occurred because such a finding can only be reached by the Tribunal in legal proceedings. 42 Moreover, since the Commission s WN or IN decisions are non-reviewable determinations they cannot be reviewed by the specialized Tribunal, a fact that weakens the role of the Tribunal further while allowing for greater discretion in the enforcement of the Ordinance. The lack of judicial review by the specialized Tribunal may also expose the Commission to greater pressure from the Government or industrial interested groups, threatening the Commission s de facto or functional independence. 43 The Commission s functional independence is especially important in the context of Hong Kong because, among other issues, the structure of its local economy has long been characterized by the presence of diversified family-dominated conglomerates which exert strong political power and influence on the government. 44 Another important concern is the deterrence of anticompetitive conduct. The notion of general deterrence consists of precluding agents from breaching the law by threatening violators with sufficiently heavy and prompt sanctions. 45 It influences the business conduct of agents ex-ante as they anticipate the unbearable costs of unlawful conduct. The ability of the Ordinance to deter is a critical factor because it ultimately tells us about the Ordinance s effectiveness. 46 It is therefore not surprising that the Government has explicitly deemed deterrence a key objective of the Ordinance from the very start of the lawmaking process: The objective of the Bill is to prohibit and deter undertakings in all sectors from adopting abusive or other anti-competitive conduct which has the object or effect of preventing, 42 The basis for this statement is the author s interpretation of recent public speech delivered by Mr. Justice Gofrey Lam, President of the Hong Kong Competition Tribunal, at the 10 th Annual Conference of the Asian Competition Forum, 8-9 December 2014, Hong Kong. A similar interpretation is presented in Kwok 2014, p (section 2.3) and p (section 3.8). 43 Ma 2010, p.231. (the author finds that de facto but not de iure independence is a relevant factor in explaining the effectiveness of antitrust enforcement); also Feld and Voigt 2003, p ; Voigt 2009, p Williams 2009, p The pernicious influence of cartels is also illustrated by a number of cases investigated by the Hong Kong Independent Commission Against Corruption in the past, cases which seem to have involved the participation of not only private actors but also government officials, HKSAR v Cheung Kwok Chung, Court of Appeal [2004] HKEC 38; HKSAR v Wong Hung Ki, Court of Appeal, [2010] HKEC 706; Sit Kam Tai v Gammon iron gate Co Ltd, Court of First Instance, [2010] HKEC Buccirossi et al. 2011, p.168. For more extensive readings on sanctions and deterrence see Polinsky and Shavell 2007 ; Becker Buccirossi et al. 2011, p

11 restricting and distorting competition in Hong Kong. 47 Yet the ability of the Ordinance to deter will likely suffer when enforcement is conducted by the Commission through the notices, and not by the Tribunal through court decisions, because the former mode of enforcement is institutionally weaker. 48 The Commission, unlike the Tribunal, has not been empowered to impose monetary sanctions or otherwise punish anticompetitive conduct when issuing notices. The enforcement of the Ordinance through the notices will therefore prove more lenient; and it will often be the case that detected, unlawful conduct will be left unpunished. The lack of sanctions reduces deterrent effects, as does the absence of participation by the Tribunal. 49 Strong deterrent effects (as well as advocacy) are especially meaningful for Hong Kong insofar as judging from the cartel activity prior to the enactment of the Ordinance the city has for some time been exposed to the operation of local cartels. As Professor Williams points out: 50 In the commercial sectors that operate on a scale smaller than that in capital intense sectors, outright cartel agreements are widespread. In recent times, the school text book sector, the motor vehicle instruction market, the building services market and noodle manufacturing have all been subject to naked cartel activity. ( ) property development and property services are also widely acknowledged to suffer severe problems. Restrictive government land-supply policies, as well as land action rules, have encouraged the consolidation of the major real estate developers. Construction and building services are subject to even more explicit cartel arrangements, and cartelization in those sectors is endemic. 47 Legislative Council Brief, Competition Bill, Submitted by the Commerce and Economic Development Bureau, 2 July 2010, File Ref.: CITB CR 05/62/56, paragraph 4 (indented letters added). The objective is reiterated in similar terms in other reports including the Report of the Legal Service Division on the Competition Bill, Paper for the House Committee Meeting on 8 October 2010 LC Paper No. LS93/09-10, 1-9, paragraph 7; the Report of the Bills Committee on Competition Bill, Paper for the House Committee meeting on 18 May 2012 LC Paper No. CB(1)1882/11-12, 1-53, paragraph Buccirossi et al. 2011, p Buccirossi et al. 2011, p Drawing from the Competition Policy Indexes (Institutional CPI) in Buccirossi et al we measured the ability of the Ordinance to deter anticompetitive conduct under two distinct, extreme scenarios. In scenario A the Commission investigates the competition cases and the Tribunal resolves all those cases and imposes pecuniary and other sanctions on infringers. In scenario B the investigation and resolution of cases is conducted solely by the Commission through the notices. The results show that the ability of the Ordinance to deter in scenario B is about 45 percent lower than in scenario A. This drop in deterrent effects in scenario B is largely due to (1) the absence (at least in functional terms) of the specialised Tribunal, (2) a single entity, namely the Commission, investigating and resolving the cases, and (3) the lack of monetary sanctions on infringers and of disqualification orders. These are factors that deteriorate the deterrent properties of the Ordinance and make it less effective. 50 Williams 2009, p (citing diverse sources). 11

12 In this section, risks that may arise from the use of the notices as tools of enforcement have been identified. The risks stem from a scenario in which the Commission resolves cases instead of the Tribunal, and the Commission, unlike the Tribunal, has no powers to impose sanctions on the undertakings. They yield implications that are not trivial and, for this reason, one would expect that at least some of the said risks were detected and weighed by the actors who created the notices. The risks herein identified will thus be used as a baseline or normative reference with which the content of the debates on the IN and WN will be contrasted. Such an exercise will help to evaluate the quality of the reasoning stated in the legislative debate in relation to the risks posed by the notices. It is important to note, however, that the risks or concerns identified above can be mitigated in the practice of enforcement if either the alleged violators or the Commission decide to opt out of the notice proceedings, for such event will activate the decisional role and powers of the Tribunal in relation to the competition case. It should be noted that the IN is an optional tool and, as such, the Commission does not need to use it in all cases; the Commission may, alternatively, choose to bring litigation directly. Conversely, the rules on the WN do not allow for such a choice. The Commission must issue a WN when the case involves allegations of a breach of the first conduct rule (except for allegations of serious anticompetitive conduct ) and try first to remedy the competition problem adopting this approach prior to attempting to bring the case to the Tribunal. Furthermore, both the alleged violators (in the case of the WN and IN) and the Commission (in the case of the IN) are able to opt out of the notice proceedings even after the start of such proceedings. The availability of the aforementioned options is an important factor in determining whether a competition case will be ultimately resolved by the Commission or by the Tribunal and, for this reason, one would expect to see that such options were also the subject of debate in the lawmaking process. 4. The Debates on the Notices in the Lawmaking Process The previous sections have explained the key features of the IN and WN and identified a number of concerns arising from these notices. In this section the focus of the enquiry will turn to the legislative debates. In particular, the section will identify the reasons why the notices have been created and realize to what extent the debates have addressed the benefits and, especially, the risks posed by the notices. In order to add context, the data describing the characteristics of the debates and the level of support/opposition achieved by the notices are also presented in this section. 12

13 4.1. Method In order to shed light on the legislative debates on the WN and IN, the written records of those debates were identified and collected, and their content analyzed. Four steps were followed: Step 1: Identification and Collection of the Documents of the Lawmaking Process Written records were retrieved electronically from the archives of the Bills Committee 51 and from the Database on Legislative History of Bills. 52 The retrieved records cover the period between June 2010, when the Competition Bill was formally introduced, and June 2012, when the Competition Ordinance was enacted. Step 2: Search for Relevant Content Using Search Terms and Phrases The phrases infringement notice and warning notice were adopted in order to identify each and all references to the said notices in the retrieved records. For comparative purposes other search terms or phrases were also used including statutory body(ies) and SMEs or small and medium enterprises or small size firms. 53 The searches were conducted manually using the functions of pdf or doc files or, if the formats were unavailable, by reading the whole document. Step 3: Extraction of Data on the Basic Characteristics of the Debates The total number of times that the search phrases warning notice and infringement notice were cited in the text was counted in order to realize, relative to other selected topics, the size of the debates on the notices. Also, for each phrase identified the actor stating the phrase and the date of the statement was recorded. Categories of actors were formed using diverse sources including records from the Hong Kong Trade and Industry Organisation, 54 the Hong Kong Companies Registry 55 and the list of Statutory Bodies prepared by the Hong Kong 51 See Accessed December See Accessed April The English versions of such terms are used in this article. For the Chinese-only records we used the corresponding Chinese search terms: infringement notice 違章通知書, Warning notice 告誡通知, Statutory Body 法定團體, SMEs 中小企. The relevant Chinese content has been translated into English by the author with the assistance of a Chinese native speaker Accessed January 2013; and other relevant sites on the internet Accessed in different periods until July

14 Legislative Council. 56 Step 4: Extraction of Data on the Actors Viewpoints and Stated Reasons The paragraphs in which an actor made at least one explicit reference to either notice (relevant paragraphs) were identified, and their content read, interpreted, and categorized. The relevant paragraphs that showed a sentiment (a viewpoint in favour or against either notice) were separated from other paragraphs with merely technical or descriptive content. The actors viewpoints were used to measure the level of support or opposition drawn by the notices, and to identify systematically the reasons stated by the actors for or against the notices. Those stated reasons will be contrasted against the concerns identified earlier in section 3 in order to evaluate the quality of the legislative debate on the notices Findings Collection of Documentation of the Legislative Process A total of 530 documents were collected for analysis, as shown in Table no.1 below. [Add Table no.1] Basic Characteristics of the Debate on the Notices in terms of Actors, Participation Levels, Size and Time A total of 395 actors participated in the lawmaking process. Among these actors, 60 members of the Hong Kong Legislative Council (LegCo) debated and voted on the Competition Bill to pass it into law. Forty of those members were also part of the Bills Committee of the Legislative Council, a committee created specifically to draft the Competition Bill. The Hong Kong government (Government), which was counted as a single actor, participated in the lawmaking process primarily through officials attending the meetings of the Bills Committee and of the Legislative Council and through the Commerce and Economic Development Bureau (a government agency), which prepared all types of documents. Other categories of actors included 98 Hong Kong associations in trade, industry or professions, 179 interested companies, 22 individuals such as members of the academic community, 57 7 Statutory Bodies, 56 Home Affairs Bureau, Review of Advisory and Statutory Bodies (2005) LC Paper No. CB(2)2176/04-05(04). 57 The documents include a letter signed by 22 faculty members. This letter was counted as if written by a single, 14

15 19 political groups and Non-Governmental Organizations (NGOs), and 9 other actors. Less than 10 percent of the actors participated in the debate on the IN (33/395) and WN (35/395). If compared with the debates on a couple of highly controversial issues, notably whether and how the law would apply to the Small and Medium Enterprises (SMEs) and to the Statutory Bodies, 58 the participation level in the debates on the IN and WN was relatively low. Almost 68 percent (268/395) of the actors participated in the debate on SMEs. The participation dropped to 34 percent (133/395) with regard to the debate on the issue of Statutory Bodies. The actors made reference to the IN a total of 325 times and to the WN a total of 283 times. The terms SMEs and statutory body were cited, respectively, about 9.5 (3096/325) and 6 (1993/325) times more than the IN. This gap widened in relation to the WN. The Government proved the most active actor in this debate. It was responsible for roughly 70 percent (227/325) and 60 percent (170/283) of the references to the IN and the WN, respectively. A total of 136 paragraphs contained at least one reference to the IN, and 127 paragraphs did so in relation to the WN. As shown in graphics no.1 and no.2 below, the debate on the notices took place largely in the second year (last three quarters) of the lawmaking process. 59 The debate was triggered by a formal submission by the Government to the Bills Committee on the 25 October 2011, in which the Government proposed substantial changes to the rules governing the notices. It proposed, first, to create the WN and, second, to reshape the IN. 60 Among other changes to the IN, the document proposed that the Commission s powers to impose a fine of up to HK$10 million when issuing an IN be removed, and that the IN be used for competition cases covering serious anticompetitive conduct and abuses of substantial market power. individual actor. 58 Issues involving the SMEs and Statutory Bodies proved highly controversial in the making of the Competition Ordinance as reported by the local media: T Chong, Two-tier plan for competition law SCMP (Hong Kong, 11 February 2012); T Chong, Broader exemption sought for SMEs SCMP (Hong Kong, 11 February 2012); B Chan, How much bite will HK s competition law really have? SCMP (Hong Kong, 27 January 2012, A11); Editorial, Competition bill needs more work SCMP (Hong Kong, 27 October 2011); T Chong, Competition bill is weakening, watchdog says SCMP (Hong Kong, 25 October 2011); T Chong, Revolt looms over competition law SCMP (Hong Kong, 19 October 2011). 59 Graphs no.1 and no.2 contain a total of 131 and 124 paragraphs, respectively. A reference date could not be found in five of the IN paragraphs and three of the WN paragraphs. 60 Bills Committee on Competition Bill, Responses to Concerns on the Competition Bill (25 October 2011) LC Paper No. CB(1)91/11-12(01)

16 [Add graph no.1 and graph no. 2] Overall, the descriptions stated above suggest that the debate on the notices was conducted by a relatively small group of actors who engaged in a debate of modest size. The Government proved the most active actor. It started the debate by proposing important changes to the IN and the creation of the WN in October The Government also moved the debate forward thereafter and substantially shaped it Level of Support and Opposition to the Notices Nearly one half of the IN paragraphs (53/107) contained an actor s viewpoint or sentiment; this number was slightly higher for the WN, about 54 percent (68/127). 61 The sentiment shown as support, opposition or objection was also categorized. An actor supported a notice when the actor explicitly said so or referred to the notice in positive, approving terms; support was observed in 72 percent of the IN paragraphs (38/53) and in roughly 75 percent of the WN paragraphs (51/68). If an actor disapproved of the inclusion of a notice in the Ordinance it showed opposition. Little opposition to the notices was found. Nevertheless, the WN (12 percent of paragraphs [8/68]) was opposed three times as much as the IN (4 percent of paragraphs [2/53]). An objection took place when an actor generally agreed with the adoption of the notice yet showed some discomfort with a specific feature of it and the objected feature remained unchanged in the final version of the Ordinance. For example, it is observed that although a number of members of the Bills Committee supported the inclusion of the IN in the Competition Bill, they also disagreed explicitly with the IN carrying no monetary penalty against the alleged infringers. The number of objections against the IN (24 percent of the IN paragraphs [13/53]) was higher than against the WN (13 percent of the WN paragraphs [9/68]). 61 The amount of paragraphs containing a viewpoint or sentiment on the IN is originally 62 out of a total of 136 paragraphs. But since the IN was a very different instrument at an early stage before the proposal submitted by the Government on 25 October 2011 (see note 60 above and text) the content analysis of those paragraphs stated before that date was excluded (among the excluded paragraphs, 9 paragraphs showed a sentiment [5 support; 1 opposition; 3 objections]; 20 paragraphs showed technical or other content). The reason for excluding those paragraphs is to ensure that for the remaining paragraphs (paragraphs on or after 25 October 2011) the actors sentiment was stated over largely the same IN tool. Such problem was not found in the context of the WN. 16

17 [Add graph no.3 and graph no.4] Overall, as depicted in graphs no.3 and no.4 above, over time, the actors gathered strong support for and opposed on few occasions with regard to the creation of the notices. Although support emerged from actors across the board, the Government played a leading role in promoting the notices. The Government accounted for more than one half of the support for the IN (20/38) and for the WN (29/51). Key actors largely accompanied the Government s efforts. Combined together, the members of the Bills Committee, the members of the Legislative Council and the associations were responsible for roughly the other half of the support for the IN (16/38) and a third of the support for the WN (17/51). The WN generated opposition among members of the Bills Committee and the Legislative Council The Arguments For and Against the Notices In this subsection the reasons stated by the actors for and against the notices are identified, quantified, and briefly explained. In order to understand the quality of those reasons they are also contrasted with the concerns identified earlier in section 3 of this article. In total, 100 instances were identified in which a reason for and against the notices were stated in the text. As Table no.2 below shows, 66 percent of those citations contained a reason in favour of the notices (66/100), whereas objections to and reasons against the notices were found in 34 percent of the citations (34/100). The majority of the identified reasons were stated on more than one occasion. Two reasons in support of the IN and WN were cited the most frequently: the cost-saving merits of the notices (33/100) and their potential to add clarity to the law (33/100). These two reasons, consequently, largely dominated the debate. [Add Table no. 2] According to the cost-saving view, both the enforcers and companies would save costs from the avoidance of formal litigation. On the one hand, the notices will reduce the costs of enforcement because the Commission could take enforcement action alone without the need to bring costly litigation to the Tribunal. On the other hand, the compliance costs would also fall as the alleged infringers would be able to rectify the suspected misconduct in a more expedient and less expensive manner than they would through formal litigation. 17

18 In relation to compliance costs, for example, the Government stated: The Administration made the following clarification: the proposals, in particular the warning notice mechanism, could address SMEs' concerns about inadvertent contravention of the law and compliance costs. 62 The savings in cost was the most cited reason in support of the creation of the IN. The Government explained that The compliance cost for individual undertakings might not necessarily be high because the Commission had different enforcement options to address competition concerns. For example, instead of bringing proceedings in the Tribunal, the Commission might issue an infringement notice to the undertaking in return for a commitment of the undertaking concerned to take or refrain from taking certain action. 63 The Government summarized the concerns of the members of the Bills Committee on this issue as follows: The main concerns raised by these members include (c) the payment requirement of infringement notice may place a significant burden on SMEs. 64 In the final stages in the lawmaking process the Government reiterated: With respect to clause 66 on the infringement notice, in response to the view of the Bills Committee and the concern of the SMEs that the maximum payment requirement of HK$10 million may constitute a grave burden to SMEs, we proposed in last October that the power of the Commission to impose a payment requirement under an infringement notice should be taken out. 65 Both notices were also seen as relevant tools to clarify the law and its application. A number of actors argued that it would be very difficult for them to identify, on their own, the anticompetitive effects of their actions. The SME representatives, in particular, voiced their preoccupation with the absence of bright line rules in the determination of less serious anticompetitive conduct. Since the SME representatives felt that it would be likely that SMEs would not be able to understand the proposed rules sufficiently, they argued therefore that they would be likely to breach the law inadvertently and be unfairly punished. The WN would resolve this problem by adding clarity to the law and its enforcement. Addressing this point the Government stated: As to the concerns about inadvertent contravention of the first conduct rule, the warning notice should help address such concerns as the notice would 62 Bills Committee on Competition Bill, Minutes of the 24th Meeting held on 15 November 2011 LC Paper No. CB(1)1427/11-12, Appendix, p Bills Committee on Competition Bill, Minutes of the twenty-first meeting held on Tuesday 11 October 2011 LC Paper No. CB(1)516/11-12, 1-17, Appendix p Report of the Bills Committee on Competition Bill, Paper for the House Committee meeting on 18 May 2012 LC Paper No.CB(1)1882/11-12, -120, p.4, paragraph 10(c). 65 Legislative Council, Official Record of Proceedings on 6 June , p

19 specify the contravening act and the remedial actions to be taken to address such concerns. 66 The Government thus promoted the WN as a tool capable of enhancing compliance by SMEs while averting unfair sanctions. This stance was echoed by other actors as the following extract from a statement made by a member of the Legislative Council illustrates: The recently proposed new instrument of warning notice would enable the Commission to take swift action to halt non-hardcore activities while at the same time address the concern that businesses, particularly SMEs, might unknowingly engage in non-hardcore activities. 67 A Statutory Body also pointed out that it welcomes the addition to the Competition Bill of a warnings procedure, which will assist undertakings (especially SMEs and especially in the early days of the regime) to understand their obligations under competition law. 68 The opposition to the IN was almost nonexistent. One association merely sought a higher dose of the same medicine by proposing the WN, instead of the IN, to apply to the entire first and second conduct rules. 69 A member of the Bills Committee challenged the IN (and the WN) as tools which are at odds with the practice of the EU: There is only a commitment system in the EU. Does Hong Kong need three different systems [in reference to the warning notice, infringement notice and commitments] to settle a case in lieu of bringing proceedings before the court? 70 The Government responded as follows: 71 The proposed infringement notice and warning notice have been put forward mainly in response to the concerns expressed by the local business community that more lenient enforcement options are required for certain circumstances. We note that the warning notice is not adopted in other major jurisdictions and will review the arrangements after we gain experience in enforcing the law. 66 Bills Committee on Competition Bill, Minutes of the 29th Meeting held on 16 January 2012 LC Paper No. CB(1)2131/11-12, Appendix, p Bills Committee on Competition Bill, Minutes of the 23rd Meeting held on 8 November 2011 LC Paper No. CB(1)920/11-12, Appendix, p Submission to the Bills Committee on Competition Bill, 28 March 2012, LC Paper No. CB(1)1577/11-12(01), 1-8, p Submissions to the Bills Committee on Competition Bill, 8 November 2012, LC Paper No. CB(1)372/11-12(03), 1-4, p Bills Committee on the Competition Bill, Responses to Follow-up Questions Arising From Previous Meetings, 22 November 2011 LC Paper No. CB(1)389/11-12(02), Appendix D, p.5 (straight brackets added). 71 Bills Committee on the Competition Bill, Responses to Follow-up Questions Arising From Previous Meetings, 22 November 2011 LC Paper No. CB(1)389/11-12(02), Appendix D, p.5. 19

20 In relation to the concerns that the notices may give rise to (namely the concerns examined in section 3 of this article) the risk that the widespread use of the notices weaken the role played by the Tribunal was not a material issue in the debate. 72 Only one member of the Bills Committee argued that the WN is incompatible with a judicial enforcement model: Why the Commission is given the power to issue warning notice, bypassing the Tribunal? Why the Commission is so empowered under the judicial model? 73 The non-reviewable property of the WN decisions was objected to three times. A Committee member considered it undesirable that a person wrongfully issued a warning notice would not be able to challenge the notice at the Competition Tribunal 74 But another Committee member disagreed: 75 It is undesirable to make the warning notice a reviewable determination because the purpose of introducing the warning notice was to provide an informal option to obviate legal actions and simplify matters. If, however, the notice was made a reviewable determination, judicial review might then be instituted against the relevant decision where necessary. Such a development might give rise to unnecessary legal actions and defeat the above purpose of introducing the notice. The non-reviewable property of the IN, however, drew little attention from the actors. No further enquiry was observed into any other avenues for example, tools of public or administrative law to control the Commission s WN and IN decisions. 76 A number of stated reasons did however recognize the problem of deterrence posed by the notices. 77 The Government s proposal to remove the powers of the Commission to impose 72 note 39 and note 3 above. 73 Bills Committee on Competition Bill, Follow-up Questions on Amendments on the Competition Bill on 25 October 2011 LC Paper No. CB(1)389/11-12(01), 1-4, p Bills Committee on Competition Bill, Minutes of the twenty-eighth meeting held on Tuesday, 3 March 2012 LC Paper No. CB(1)1976/11-12; 1-11, Appendix, p Bills Committee on Competition Bill, Minutes of the twenty-eighth meeting held on Tuesday, 3 March 2012 LC Paper No. CB(1)1976/11-12; 1-11, Appendix, p note 43 above. 77 note 41 above. 20

21 a fine of up to HK$10 million when issuing an IN received five objections. Three of those objections claimed that issuing an IN without a monetary sanction would not be a sufficient deterrent. Another objection proposed that the fine be suspended instead of removed. If the violator infringed the law again it would need to pay for the first suspended fine as well as for the second fine. Such a mechanism, it was argued, would more than compensate for the cuts in deterrent effects produced by the removal of the fine. 78 One member of the Legislative Council opposed the WN on the ground that the WN carries no penalty and will therefore fail to serve as a deterrent for misconduct thereby undermining compliance: However, under the new clause 80A, the warning notice will bear no penalty and hence no deterrent effect. I personally cannot see what purpose such a warning notice can serve. 79 The fact remains, however, that only a few actors identified explicitly the tradeoffs generated by the lack of monetary sanctions in the notices. On the one side, the alleged infringers save costs. On the other hand, deterrence is compromised. Those actors that defended the deterrence argument did so in an unconvincing and very often unclear manner. The cost-saving argument largely prevailed. As it was stated by one association, removing the HK$10 million fine from the IN lessens the risk of unduly onerous enforcement action during the initial enforcement phase. 80 All in all, the findings suggest that concerns of insufficient deterrence played a minor role in the debates on the notices. The Commission s ability to opt out of existing IN proceedings was objected to three times during the debates on the grounds that such powers would be a source of uncertainty. 81 Only a few actors (at least indirectly) regarded an undertaking s opt-out strategy in the context of the WN to be an advantage to those who would prefer to be subject to court enforcement. Here, the WN was three times referred to as being a costly and ineffective tool; as a result, the argument continued, undertakings would prefer to opt out of the WN proceedings and instead defend themselves directly in court should the Commission decide to bring a legal action: [a Committee Member] questioned the use of the warning notice, pointing out that to secure recovery of the costs incurred, an undertaking issued with the 78 Submission to the Bills Committee on Competition Bill, 29 December 2012, LC Paper No. CB(1)905/11-12(01), 1-5, p Legislative Council, Official Record of Proceedings on 6 June 2012,14339, p Submission to the Bills Committee on Competition Bill, 10 November 2011, LC Paper No. CB(1)372/11-12(04), 1-3, p Bills Committee on Competition Bill, Minutes of the twenty-seventh meeting held on Tuesday, 20 December 2011 LC Paper No. CB(1)1726/11-12, 1-13, Appendix, p.6; Bills Committee on Competition Bill, List of follow-up actions arising from the discussion at the meeting on 20 December 2011 CB(1)725/11-12(01), 1-3, p.2. 21

22 notice might simply ignore it and defend itself in the Tribunal instead. 82 In a similar tone, the argument that the Commission s investigations leading to the issuance of a WN will in and of itself harm the reputation of undertakings and therefore those undertakings would be better off in a model of judicial enforcement was stated twice. 83 No discussion was identified on the risk of prosecutorial bias due to the Commission s role in both investigating and resolving cases. 84 The advantage attributed to the WN and IN of increased clarity in benefit of those undertakings against which the notices are issued was not measured against the risk arising from the more general problem of insufficient court precedents. 85 The research did not reveal traces of a debate in relation to the basic questions of when and how the Commission would exercise its discretion of issuing an IN instead of starting legal proceedings directly. In short, a set of important concerns were not the subject of a substantive debate by the actors during the legislative process. Based on the above, one could argue that the quality of the debates fell far short of a detailed and complete examination into the potential risks associated with the use of the notices in the enforcement of the Ordinance. Although some of the objections and reasons stated by the actors did highlight relevant risks, the frequency of occurrence of such statements during the debate was clearly too low to influence meaningfully the course of the debate. The reasons why the notices received only little and weak resistance remain unclear. The actors disinterest in or unawareness of those risks and implications of the notices may be a factor. An enquiry into the risks may have been thwarted by the actors perception that such risks are insignificant. The actors participation and views may have also been influenced by prior talks or negotiations that suppressed levels of dissent before the formal debates took place. The design of this research is limited, however, and does not allow for such conjectures to be explored. 5. Conclusions It is clear that the Ordinance has empowered the Commission to resolve competition cases using, among other tools, the IN and the WN. In this article such notices have been investigated and, in particular, paying regard to what extent the actors that participated in the 82 Bills Committee on Competition Bill, Minutes of the 28th Meeting held on 3 January 2012 LC Paper No. CB(1)1976/11-12, Appendix, p.7-10 (straight brackets added). 83 Legislative Council, Official Record of Proceedings on 6 June 2012, 14339, p note 41 above. 85 note 39 and note 3 above. 22

23 lawmaking process conducted a comprehensive evaluation of the benefits and risks of utilizing the notices in the enforcement of the Ordinance. By analyzing the content of the written records of the legislative debates on the Ordinance it is apparent that the support for the IN and WN among actors was strong. This support was based on the premise that the notices would reduce the costs of enforcement and compliance. In addition, the notices, particularly the WN, would serve to help the suspected undertakings realize in a flexible, easy manner the anticompetitive implications of their business conduct, and take action to correct them. These are good reasons for the creation of the notices. They drew largely from the prevailing concerns of the business community in Hong Kong, especially from the large group of SMEs that had advocated a more lenient enforcement of the Ordinance. In this light, the role of the Commission as enforcer gathered ample consensus. It was also clear from the debates that a number of actors had emerged opposing infrequently to the Commission s broad discretionary powers to administer the notices. The risks of resolving competition cases using the notices were not fully contemplated during the legislative debates. The risk of the Ordinance yielding negligible deterrent effects was almost ignored. The circumstances under which the Commission may require an infringer s admission of anticompetitive conduct when issuing an IN are unclear, as are the diverse mechanisms that will serve to limit the Commission s discretionary actions. Key questions have been insufficiently addressed including whether or not the Commission should rely on specific criteria in order to choose to issue an IN for a particular competition case. The question whether or not, and under what circumstances, the alleged infringers or the Commission will effectively opt out of the notice proceedings is largely empirical and must be revisited once again when the enforcement of the Ordinance is tried and tested. 23

24 References Becker G S (1968) Crime and Punishment: An Economic Approach, 76 J. Pol. Econ Buccirossi P, Ciari L, Duso T, Spagnolo G and Vitale C (2011) Measuring the Deterrence Properties of Competition Policy: The Competition Policy Indexes. Journal of Competitive Law & Economics 7(1): Buccirossi P, Ciari L, Duso T, Spagnolo G and Vitale C (2009) Deterrence in Competition Law (Discussion Paper SP II 2009) Accessed 15 December Cheng T K (2014) Ready for Action: Looking Ahead to the Implementation of Hong Kong s Competition Ordinance. Journal of European Competition Law & Practice 5(2): Connor J M and Lande R H (2006) The size of Cartel Overcharges: Implications for US and EU Fining Policies. Antitrust Bull 51: 983. Connor J M (2008) Global Antitrust Prosecutions of International Cartels: Focus on Asia. World Competition 31: Connor J M and Lande R H (2012) Cartels as Rational Business Strategy: Crime Pays. Cardozo Law Review 34: Cook C J (2006) Commitment Decisions: The Law and Practice under Article 9. World Competition 29(2): Feld L and Voigt S (2003) Economic growth and judicial independence: cross-country evidence using a new set of indicators. European Journal of Political Economy 19(3): Kwok K H F (2014) The New Hong Kong Competition Law: Anomalies and Challenges. World Competition 37(4): Ma T C (2010) Competition authority independence, antitrust effectiveness, and institutions. International Review of Law and Economics 30: Macrory R B Regulatory Justice: Making Sanctions Effective (Final Report, November 2006) 24

25 Accessed 15 December Papp F W V (2012) Best and Even Better Practices in Commitment procedures after ALROSA: The Dangers of Abandoning the Struggle for Competition Law. CML Rev 49: Polinsky A M and Rubinfeld D (1988) The Deterrent Effects of Settlements and Trials. International Review of Law and Economic 8: Polinsky A M and Shavell S (2007) The Theory of Public Enforcement of Law. In: Polinsky A M and Shavell S (ed) Handbook of Law and Economics 1: Voigt S (2009) Effects of Competition Policy on Development Cross-Country Evidence Using Four New Indicators. Journal of Development Studies 45(8): Williams M (2005) Competition Policy and Law in China, Hong Kong and Taiwan. Cambridge University Press. Williams M (2009) The Lion City and the Fragrant Harbor: The political economy of competition policy in Singapore and Hong Kong compared. The Antitrust Bulletin: vol 54(3) Fall: Wils P J (2004) The combination of the investigative and prosecutorial function and the adjudicative function in EC antitrust enforcement: a legal and economic analysis. World Competition 27(2): Wils P J (2008) The Use of Settlements in Public Antitrust Enforcement: Objectives and Principles. World Competition 31(3): Yves B and Agapi P (2013) Towards a more sustainable use of commitment decisions in article 102 TFEU cases. Journals of Antitrust Enforcement 1(2):

26 Table no.1 - Type and Number of Files Downloaded, Recorded and Analysed Type of Files Official minutes of the meetings of the Bills Committee 38 Official minutes of the meetings of the House Committee 2 Official minutes of the proceedings of the HK Legislative Council 7 Number Position papers submitted to the Bills Committee by associations, firms and other actors 366 Letters from members of the Bills Committee, guidelines to the Competition Bill issued by the administration and other documents prepared by the administration Reports on the Competition Bill 4 Total files retrieved and analyzed Table no.2 - Reasons For and Against the Infringement Notice (IN) and Warning Notice (WN) Stated Reasons IN on/after WN Support The notice saves costs The notice adds legal certainty 6 27 Objections The notice has to allow for the HK$10 million fine 5 - The Commission's discretion to withdraw an IN has to be restricted 3 - More clarity to the rules and procedures governing the notices is needed 1 1 Alterations to the procedure for the issuance of an IN are needed 1 - A firm's non-compliance with the IN's requirements has to be sanctioned 2 - The follow-on private actions have to be restricted 1 - The Competition Tribunal has to be given powers to review the notices - 3 The content of the notice must be kept confidential - 3 The notices have to be adopted for a limited period of time - 2 Opposition The WN should be used in place of the IN 1 - The notice is at odds with the practice of the EU 1 1 The notice undermines the role of the Competition Tribunal - 1 The issuance of the notice is costly and ineffective - 3 The process of issuing a notice will harm the reputation of firms - 2 The notice will curtail the deterrence of misconduct

27 Graph no. 1: IN - total debate over time (no. paragraphs) Graph no. 2: WN - total debate over time (no. paragraphs) Graph no.3: IN - sentiment over time (no. paragraphs) Opposition Objections Support 27

28 Graph no.4: WN - sentiment over time (no. paragraphs) Opposition Objections Support 28