In November 2017, amendments to Australia's competition laws changed the ACCC's power to obtain information and documents in relation to its investigations under section 155. The reforms have introduced a defence for recipients of these ACCC-issued notices to produce evidence and documents. Where notice recipients can demonstrate that a "reasonable" search has been undertaken and that documents or information have not been deliberately withheld, they are unlikely to be found to have contravened the often-burdensome notice requirements. The ACCC's power has also been extended to investigations of alleged breaches of s87B undertakings. Finally, the penalty for failing to comply with a notice have risen considerably to a maximum of $21,000.
ACCC's Power to Obtain Information
The Australian Competition and Consumer Commission ("ACCC") has a powerful investigative tool conferred upon it by section 155 of the of Competition and Consumer Act 2010 (Cth) ("CCA"). Under this section, the ACCC can issue a notice requiring any person or company capable of giving information in relation to a possible breach of the CCA to provide that particular material. The ACCC needs only to have a "reason to believe" that the person is capable of furnishing the material. It does not matter whether the person has engaged in the contravening conduct or not. In fact, significant numbers of these notices are issued to third parties.
Policy Review Proposals
In March 2014, the Australian government tasked a panel, led by Professor Ian Harper ("Harper Review"), to conduct a "root and branch" assessment of Australia's competition laws and policy. The primary aim was to identify whether such laws were still "fit for purpose" in light of the changes to both the world's and Australia's economies since the 1990s.
The Harper Review's findings were produced in the Competition Policy Review in 2015, and included three recommendations to amend section 155 of the CCA:
First, to expand the ACCC's power to obtain information to cover alleged contraventions of court-enforceable undertakings (s 87B) and merger authorisation determinations.
Secondly, to acknowledge the heavy burden placed on the recipients of notices issued by the ACCC and proposed a defence for persons not aware of the requested documents after a "reasonable" search has been undertaken.
Finally, to increase the penalty imposed for failing to comply with a section 155 notice.
The rationale for these recommendations was to strengthen the ACCC's enforcement of Australia's competition laws. The Harper Review also sought to address the heavy burden placed on recipients of section 155 notices, especially as a result of the increased use of technology leading to increasing numbers of electronic documents that often need to be searched in order to respond to the notice.
Amendments to Section 155
The Australian government accepted the three proposals to amend section 155, and in November 2017 the reforms were implemented into law via the Competition and Consumer Amendment (Competition Policy Review) Act 2017 ("Amendments").
Under the Amendments, the penalty for failing to comply with a section 155 notice was increased significantly from a maximum fine of $4,200 to $21,000, and from a maximum imprisonment of 12 months to two years. This penalty is now in line with the similar notice-based evidence gathering powers in the Australian Securities and Investments Commission Act 2001 (Cth). The ACCC's powers to retrieve information have also been expanded to include the investigations of alleged contraventions of court-enforceable undertakings accepted pursuant to section 87B of the CCA.
Significantly, a defence for failing to produce a response that the recipient is unaware of has also been added. Under this provision, so long as the recipient of a notice is able to prove that a "reasonable" search for the requested documents has been carried out and provide a written response explaining the scope and limitations of the search, they will not be held to have contravened the notice. The CCA provides a broad scope to what will likely constitute a "reasonable" search, taking into account the complexity of the matter to which the notice relates, the number of documents involved, the costs of retrieving the documents, and any other relevant matters. Arguably, the time allowed under the notice for compliance may also be a relevant factor to the assessment of whether a "reasonable" search has been undertaken.
Impact of the Amendments
Until November 2017, there had not previously been a reasonable search defence available for recipients of notices under section 155. The introduction of the defence is intended to recognise the regulatory burden associated with such notices, especially in light of the large volume of electronic materials being retained by businesses and individuals which may need to be searched in order to comply with the notices.
At first glance, the defence may appear to represent a softening of the law, despite the actual penalties of noncompliance with the provision increasing. However, for companies and individuals in receipt of a section 155 notice, the amendments can actually be more onerous, because of this newly added step of demonstrating that a "reasonable" search has been undertaken. It is not possible to withhold material or to decline answering during an examination, except on the grounds of legal professional privilege. For those who receive section 155 notices, it is recommended that they seek external legal advice, particularly in light of the significant increase in the potential maximum fines and imprisonment and the ACCC's interest in ensuring compliance by all recipients. The ACCC continues to communicate its expectations of full compliance, which must serve as a warning to all recipients, includes third parties.