It took Parliament over four years to enact legislation that enables the Commerce Commission (the Commission) to better share information with, and provide assistance to, overseas regulators. However, once the enabling legislation was passed, it took the Commission only four months to enter into its first co-operation agreement under that legislation with the Australian Competition and Consumer Commission (ACCC).
There is now a broad power for these two agencies to share compulsorily acquired documents and information and affected parties may not even be told that such sharing has occurred.
In October 2012 the Commerce (International Co-operation, and Fees) Act (the Act) was passed amending the Commerce Act 1986. Mirror legislation was passed at the same time also amending the Fair Trading, Credit Contracts and Consumer Finance and the Telecommunications Acts. The Act has a long history. Its origins date back to 2003 / 2004 when proposals were first made to improve co-operation between the Commission and the ACCC. A Bill was first introduced to Parliament in 2008. Australia made equivalent legislative amendments in 2007.
In short, if requested by an overseas regulator, the Act enables the Commission to provide "compulsorily acquired information" and/or "investigative assistance". As the term suggests, compulsorily acquired information is information not in the public domain and which the Commission has obtained through its statutory powers, including through a compulsory interview, in a search and seizure or from a statutory notice to produce documents. Investigative assistance includes the Commission exercising these powers for the benefit of the overseas regulator.
The Commission cannot do this for just any overseas regulator. There must first be in place a "co-operation agreement". Precursors to the entry into such agreements include consideration of:
- whether the overseas regulator has competition or fair trading law functions corresponding to ours;
- the legal framework relating to the use of compulsory acquired information in the overseas country;
- any potential consequences for New Zealand consumers and businesses of the Commission providing information or assistance; and
- privacy issues.
Given the similarities between the New Zealand and Australian legal systems generally, and the similarities in the functions of the two competition regulators specifically, a co-operation agreement with the ACCC was an obvious first. However, similar agreements with other overseas regulators are likely to follow soon.
The co-operation agreement with the ACCC
The co-operation agreement with the ACCC was entered into on 27 February 2013. The agreement is supplemental and additional to existing co-operation arrangements that the Commission has with the ACCC. As the ACCC Chairman Rod Sims said at the time of signing this co-operation agreement, the New Zealand and Australian regulators now have "probably the most complete set of cooperation arrangements in place globally – outside countries who have established cross border enforcers, such as the EU".
Prior to agreeing to assist in any particular case, the Commission must satisfy itself about certain matters. These include whether the information will assist the ACCC in performing its functions, why the information could not be more conveniently obtained from another source and any prejudice to New Zealand's international trade interests.
Having agreed to assist, and consistent with the empowering statute, in providing the ACCC with information or assistance, the Commission:
- may impose conditions including as to how the information is handled (e.g. as to storage, use, subsequent disposal etc) and as to the protection of its confidentiality;
- can not provide information which was given on a 'without prejudice' basis in an attempt to settle a dispute between parties. Any other privileged material that is passed on to the ACCC will remain privileged and will be treated by the ACCC as subject to an analogous privilege under Australian law;
- should not provide copies of statements made by a person to the Commission that would tend to incriminate that person unless the ACCC gives certain written undertakings as to how that information will be used; and
- may seek payment for costs it incurs.
What does this mean in practice?
These changes have the potential to be significant.
- The power applies not only to investigations under the Commerce Act but, as noted, under all legislation where the Commission has coercive powers.
- Documents can be required to be produced to the Commission simply to assist an ACCC investigation i.e. there may not even be an equivalent investigation being conducted in New Zealand.
- The Commission may be more likely to use its formal powers as this gives it the option of providing material to the ACCC without seeking consent (material provided voluntarily, including anything provided under an application for leniency, can still be provided but would require consent).
- The person from whom the information or documents were obtained, or to whom they relate, does not need to be told that the Commission is providing the material to the ACCC until after it has been provided. Even then, the Commission need not advise the affected party if doing so might compromise an investigation by either regulator, would prejudice the maintenance of the law in New Zealand (or elsewhere) or if it is not practicable to give notice. This means affected parties have no opportunity in advance to ensure the Commission follows the appropriate processes and/or imposes necessary conditions. Affected parties may not know the information was provided for quite some time (or at all).
- Documents and information provided to the ACCC by our Commission will become subject to the rules and processes relevant to the holding of such material in Australia. While the Commission can (and should be expected to) assert confidentiality where necessary, and require other protections, other considerations may over-ride this e.g. the rules of production relevant to requests from third parties to access a regulator's file may differ to our regime, as may the rules of production in Court proceedings. The risk of access by potential third party claimants could, therefore, increase.
- Under New Zealand law there is a potential issue as to whether statutory compulsion extends to requiring a company located here to produce documents that are held offshore. This new power provides a potential way around that issue for the regulator.
- There is a greater prospect of regulatory action being taken in both jurisdictions.
What can one do to limit the risks?
Parties need to factor this extension of powers into their approach to Commission investigations. Parties often see merit in being co-operative and to assist a Commission investigation, including by not challenging the use of Commission powers (even when the scope or terms are questionable). However, the additional risks associated with compliance means parties should critically review any Commission request for documents and information. Further, if a party becomes aware that the Commission has provided material to the ACCC they should insist on being provided with a full explanation of what conditions have been imposed. Given that Australia already has provision for jail time for competition law breaches, close scrutiny of the terms on which information gained in a compulsory interview has been provided to the ACCC would be particularly warranted.