The Development: The Australian Competition and Consumer Commission ("ACCC") recently issued new guidelines regarding compulsory information requests. The guidelines clarify application of the "reasonable search defense" against ACCC charges that a company's response to ACCC requests are inadequate.
The Background: Under Section 155 of the Competition and Consumer Act 2010 ("CCA"), the ACCC may issue compulsory requests for information regarding suspected CCA violations. Intentionally failing to comply with a Section 155 notice is a criminal offense.
Looking Ahead: By explaining the ACCC's expectations for compliance with Section 155 notices, the new guidelines, which clarify the scope of the recently enacted reasonable search defense, can help companies avoid liability from an inadequate response.
Background: Section 155 Notices
Section 155 notices are a powerful information gathering tool for the ACCC. The ACCC may use the notices not only to require that a party produce documents, information or other evidence, but also to require that a party submit to an ACCC examination to testify under oath or affirmation. The ACCC may issue Section 155 notices to parties under investigation, as well as third parties, such as competitors, customers, suppliers or other industry participants.
Refusing or failing to comply with a Section 155 notice by the due date is a criminal offense, absent an ACCC variance. The ACCC may fine companies up to A$105,000 or individuals up to A$21,000 for noncompliance. In the alternative, for individuals, the ACCC may seek a prison sentence of up to two years.
In practice, the ACCC has authority to vary a notice to reduce the burden of compliance or that extend the time for compliance. However, as noted in our September 2014 and November 2015 Alerts, the ACCC does readily enforce compliance and commence criminal proceedings, resulting in fines and imprisonment. The ACCC's Section 155 authority is subject to Federal Court review.
Reasonable Search Defense
As detailed in our February 2018 Update, Australia introduced a "reasonable search" defense that permits a company to defend its compliance with a Section 155 notice against an ACCC allegation of deficiencies. The ACCC's new guidance clarifies the circumstances in which the reasonable search defense applies. A party will not be in breach for failure to comply with a notice if:
- It can prove that, after a reasonable search, it was not aware of documents that it should have provided to the ACCC; and
- It provides a written response to the ACCC describing the reasonableness of the search, its scope and any limitations, including, for example, limits of a party's search capabilities, document retention practices, the extent to which documents are stored in the right place, the location of computer servers, etc. The ACCC has clarified that, although it prefers a signed written declaration, it does not have the power to enforce this and will accept any form of written response.
The ACCC guidance includes a nonexhaustive list of factors that it may consider to determine whether a search was reasonable, including the nature and complexity of the matter, the number of documents involved and the ease and cost of conducting the search.
Suggested Form of Compliance
Although the ACCC provides guidance on the production of electronic documents, it does not have the power to enforce the form of compliance (i.e., the production method and document format). Although a company may produce documents in whatever form it prefers, in certain circumstances, it may be prudent for a company to comply with the ACCC's guidance. For example, adhering to the ACCC's production guidance is most important when a company is cooperating with the ACCC (e.g., third party investigations or merger reviews).
The guidelines also clarify that parties are not required to produce documents that are subject to legal professional privilege.
Guidance on the Use of Information and Documents
The ACCC's guidance details permitted uses of the information obtained in response to a notice. As detailed above, the ACCC's predominant use of Section 155 notices is to investigate potential competition law violations or to analyse the competitive effects of a transaction. The ACCC may use documents that a corporation produces in either civil or criminal proceedings against that corporation or individuals in the corporation. The ACCC also may use the information in other ACCC decisions or investigations. For example, information identified through the course of a merger review, where relevant, may be used to inform cartel proceedings against either the merger parties or a third party.
Importantly, individuals are not excused from furnishing information on the grounds that the information may incriminate them or expose them to a penalty. Likewise, a corporation cannot place conditions on the ACCC's use of its information. However, the ACCC will treat the information as confidential and only disclose it as required under with Section 155AAA (i.e., an ACCC official is performing duties or functions as an ACCC official, or an ACCC official or the ACCC is required or permitted by the CCA or any other law of the Commonwealth, State or Territory of Australia).
The ACCC's position on use of these documents in court proceedings is less clear. Generally, information and documents obtained by the ACCC are only admissible in criminal proceedings for noncompliance with a Section 155 notice. However, the ACCC's guidance clarified that this protection applies only to information furnished by an individual in writing or provided during an oral examination. Therefore, documents already in existence at the time of the notice are admissible against an individual in criminal proceedings.
Two Key Takeaways
- New ACCC guidelines explain its expectations for compliance with Section 155 information requests, including a defense for noncompliance. This guidance is significant because the ACCC may sanction noncompliance criminally with fines or imprisonment.
- The ACCC guidelines provide companies with clear instructions about how to comply with a Section 155 notice, including guidance on the required scope of searches, to ensure that the ACCC considers a company's response to be reasonable.