The Commerce Commission has broad powers under the Commerce Act to aid its investigation of potential breaches. These powers include the power to interview people, and the power to impose confidentiality orders over information it receives. The relationship between these two powers has recently been the subject of a Court of Appeal decision, which focused on the scope and duration of confidentiality orders in a case where those orders had been placed over the content of compulsory interviews.

This decision will impact on the way the Commission will conduct its investigations and is therefore of interest to any business that is or may be investigated by the Commission. The decision overturned an earlier decision of the High Court which had limited the scope of confidentiality orders issued by the Commission.

The Commerce Commission's powers

Under section 100 of the Commerce Act, the Commission can place a confidentiality order over any documents or information given to it in the course of its investigation.

Under section 98 of the Commerce Act, the Commission has the power to compel individuals to attend interviews for the purpose of the Commission's investigation.

Commerce Commission's approach to interviewing executives or employees

The section 98 interview is a tool that the Commission often employs to gather information. There has been concern however as to the way in which the Commission has exercised these powers in regard to the relationship between a company and its employees.

The Commission has taken the view that a director or employee of a company is being interviewed as an individual, not as a representative of the company they work for. Therefore the company's lawyers or a representative from the company are not able to be present at the individual's interview and the transcript of the interview is not made available to the company.

Whether this approach is correct has not been tested yet, but it is a concern to a large number of organisations that are the subject of Commission investigations. In our view this approach is inconsistent with the ability to attribute actions of an individual to the company under the Commerce Act, and it can hinder an organisation's ability to assess its risk and defend itself.

The Air New Zealand case

The Commerce Commission took this approach one step further when investigating alleged anti-competitive conduct in the air cargo industry by placing confidentiality orders (under section 100 of the Commerce Act) over interviews with Air New Zealand employees. The confidentiality orders were extensive and prevented disclosure of not just information provided by the interviewee, but also information provided by the Commission to the interviewee, including their questions and any transcript of the interview, and any documents shown or discussed at the interview.

As a result of its investigation, the Commission commenced proceedings against Air New Zealand and 5 of its executives for breaches of sections 27 and 30 of the Commerce Act. Air New Zealand then challenged the scope and duration of those confidentiality orders.

The High Court in Commerce Commission v Air New Zealand (HC, Auckland, Andrews J, CIV 2008-404-1554, 21 October 2009) found in favour of Air New Zealand. It held that section 100 does not empower the Commission to maintain confidentiality orders after the date of commencement of proceedings. The Court also held that the power to prohibit disclosure did not extend to information given by the Commission (for example the questions asked by the Commission). However it held that section 100 does not just apply to commercially sensitive information.

Both parties appealed this decision. The Court of Appeal recently released its decision in the case of Commerce Commission v Air New Zealand [2011] NZCA 64.

Key issues

The Court considered that the three key issues in the appeal were:

  1. Whether section 100 covers only confidential information provided to the Commission;
  2. If so, whether section 100 orders can cover questions posed, and other material put, to a witness by the Commission; and
  3. Whether section 100 orders can survive the issuing of proceedings.

Does section 100 cover only confidential information?

In relation to the first issue, Air New Zealand argued that the purpose of section 100 orders is to protect the confidentiality of information for the benefit of the holders of the information and they cannot be used to impose blanket 'gagging' orders. The Court of Appeal rejected this. It accepted the Commission's submission that section 100 did not contain any limitations. The Court of Appeal sought to qualify this by saying:

There is, however, a difference between having wide powers and exercising them. Making a section 100 order is a serious step and before the Commission does so it should satisfy itself that such an order is necessary in the context of the particular investigation being undertaken. Any orders made, and their scope and duration, should be kept under review.

The Court of Appeal considered that section 100 gives the Commission the power to frame orders that prohibit discussion with anybody about the "information, documents or evidence" covered by the section. Therefore, the Commission was entitled to prohibit discussion of the facts by the employees with their employer.

Can the section 100 orders cover questions posed by the Commission?

The Court held that section 100 does not explicitly protect information provided by the Commission (except to the extent that the information provided has in turn been provided to the Commission and is thus potentially subject to section 100). However the Court of Appeal went on to say that orders can be made to suppress evidence given to the Commission, which could include both questions and answers. The Court of Appeal noted that the specific orders in this case covered the whole of the interviews, and much of this was trivial. It stated that "the Commission should consider when making an order whether the section 100 order can and should be made on a more limited basis".

Can section 100 orders survive the issuing of proceedings?

The final issue was whether the section 100 orders could remain in effect once the Commission had issued the proceedings. Under section 100, the orders remain in effect until the investigation is concluded, but not thereafter. The Court considered whether the investigation was "concluded" when proceedings were issued for the purpose of section 100(2)(b).

The Court held that an investigation may be continuing once proceedings were issued, and that this was a question of fact. They considered that there is nothing in section 100 to limit the scope of an investigation to that part of an investigation that precedes the filing of proceedings. However again, the Court of Appeal qualified this by saying:

As we noted earlier, however, there is a difference between having a power and exercising it. The fact that litigation has commenced or is about to commence is a major change of circumstances. Any existing section 100 orders should be reconsidered if proceedings are issued. The section 100 orders are also, after litigation has commenced, subject to the supervisory jurisdiction of the Court.

Concluding thoughts

The decision will have a significant impact on the investigation process. This issue is of very real significance to any company being investigated by the Commerce Commission under the Commerce Act. The ability of the Commission to impose such wide-reaching confidentiality orders on employees limits the ability of a company to fully defend itself when facing Commission action.