A complaint has been made to the Commerce Commission regarding a particular aspect of your trading conduct. You receive a request from the Commerce Commission to provide certain information by a specified date relating to the Fair Trading Act - how should you respond?

Background

The Commerce Commission (“the Commission”) is an independent crown entity and is responsible for the regulation of competition, as part of which it has enforcement powers.

The Commerce Commission has the authority to make requests for information under a number of statutes which it administers. This legislation includes (but to name a few) the Commerce Act 1986, the Fair Trading Act 1986 and the Credit Contracts and Consumer Finance Act 2003.

Must you supply the information requested by the specified date?

The first issue to determine is the basis on which the request is made and whether or not you are required to provide the information sought by the Commission. The first indicator is to consider the language used in the request. For example the request may use the following phrases:

“it would be appreciated if you would supply the following information:” and

“It is only fair to inform you that you are under no obligation, at this stage, to answer the questions or supply the documentation requested.”

The alternative is that the request is made pursuant to section 47G of the Fair Trading Act (“the FTA”) which states:

S 47G Commission may require person to supply information or documents

• (1) If the Commission considers it necessary or desirable for the purposes of carrying out its functions and exercising its powers under this Act, the Commission may, by notice in writing served on any person, require that person—
• (a) to supply to the Commission, by writing signed by that person or, in the case of a body corporate, by a director or competent employee or agent of the body corporate, within the time and in the manner specified in the notice, any information or class of information specified in the notice; or
• (b) to supply to the Commission, or to a person specified in the notice acting on its behalf in accordance with the notice, any document or class of documents specified in the notice.
• (2) Every person who is required to supply information or documents to the Commission has the same privileges in relation to the supply of the information or documents as witnesses have in any court.

The significance of the distinction lies in section 47J of the FTA which provides that no person may, without a reasonable excuse, refuse or fail to comply with a request made under section 47G. The section states:

S 47J Offence to contravene section 47G

(1) No person may,—

• (a) without reasonable excuse, refuse or fail to comply with a notice under section 47G; or
• (b) in purported compliance with the notice, supply information, or supply a document, knowing it to be false or misleading.

(2) Every person who contravenes subsection (1) commits an offence and is liable on summary conviction to a fine not exceeding $10,000 in the case of an individual, or $30,000 in the case of a body corporate.

If the Commission does not refer to section 47G in its request but makes it clear that there is no obligation to respond (using the phrases noted above) we would initially advise that there is no requirement to supply the information requested in terms of the FTA. However, please see our comments below.

We also note that in addition to the Commission's powers under section 47G, pursuant to section 47 of the FTA the Commission also has the power to search, pursuant to a warrant, any place named in the warrant for the purposes of investigating, gathering, obtaining or recovering evidence of conduct or the nature of conduct which constitutes or may constitute a breach of the FTA. In addition the Commission may (section 47E) inspect and take copies of documents or extracts from documents pursuant to a warrant. Likewise in such circumstances there is a corresponding duty to provide all reasonable facilities and assistance to the person authorised by the warrant (section 47D).

What is the Scope of the Commission’s request?

The Commission’s authority to request information is contained in section 47G of the FTA, and is drafted in broad terms. However, the Courts have recognised that this is not an unfettered power to require persons to furnish information and (in relation to its statutory power to request information) that the powers of the Commission are defined by the purposes for which those powers may be exercised. The High Court, in relation to section 98 of the Commerce Act (which is stated in substantially similar terms to section 47G of the FTA) in Telecom Corp of NZ Ltd v CC [1991] NZAR 155; (1991) 3 NZBLC 101,962 stated the following:

It follows that … the primary right to decide as to relevance under s 98 of the Commerce Act … reposes in the investigative body or officer but it is encumbent upon the investigative body or officer to show a degree of relevance bearing in mind that in an investigative situation and in the context of the section, the onus must be a very easy one to discharge. Nevertheless it will still be open to the person from whom the information is sought, to seek to establish that the information or the document is not relevant and in the appropriate case the issue may have to be determined by the Court.

This position was followed in the later case of AstraZeneca Ltd v CC (2008) 12 TCLR 116 in which the Court stated:

I add one further point, namely that although the power is couched in terms of what the Commission considers is necessary or desirable, that formulation does not render its exercise immune from review. In the end the subjective consideration of the Commission must also be capable of withstanding objective scrutiny.

The issue is therefore one of relevance, and whether the information requested by the Commission is related to the purposes which allow the information to be sought.

Although the Courts comments above are in relation to the Commerce Act, they may still be useful when considering a request in relation to the FTA. Where the Commission has given a fairly broad ranging request for information this may provide the opportunity to limit the response to more specific information to address the immediate concern of the Commission.

Of particular relevance is where the request includes information of a commercial nature relating to a business and or its operation. This information is by its very nature sensitive and disclosure of which may be disadvantageous against competitors. However, the FTA makes no distinction between information of a commercial and non-commercial nature. There are no grounds for refusing the request on this basis. Any sensitive and or commercial information should be marked as such. There may be some comfort from the exclusions under the Official Information Act which the Commission is subject to, being an ‘organisation’ in terms of that Act. In particular the release such information (being commercially sensitive) would unreasonably prejudice the commercial position of the respondent. The Commission also relies on respondents supplying their commercially sensitive information to facilitate its investigations and it is in the Commissions best interests to foster co-operative relationships.

Should you co-operate with the Commission’s request?

When addressing this issue we must take note of the Commissions ‘co-operation policy’ whereby the Commission will consider more favourably co-operative persons than those who delay or are otherwise unhelpful. We would advise that the Commission would be likely to take the level of co-operation into account when deciding what level of enforcement action to take if the Commission considers that there may have been a breach of the FTA. This would also be a factor that the Court would take into account when determining an appropriate penalty if it is held there had been a breach the FTA.

There is of course the risk that in providing the Commission with the information requested, the respondent might incriminate itself (or an associated party). However, if the opportunity to show good faith and co-operate at this stage is not taken, the opportunity to reap the benefit of such actions may be lost. If the information was not provided at this stage, the Commission could then issue a section 47G Notice requiring the information and there would then be an obligation to comply.

It is clear that in view of the statutory provisions noted above the Commission has the authority to request information and if requested pursuant to section 47G, that the respondent would be under a duty to provide the information requested. In terms of when to supply the information the better approach, taking account of the Commission’s ‘co-operation’ policy, is to provide the information under a preliminary request rather than wait for a section 47G Notice.

If the request is subject to a deadline this should be complied with but if further time is required make a request, in good time, for a reasonable extension as a gesture of good faith.

If commercially sensitive information is supplied to the Commission, will it remain confidential?

In terms of considering the consequences of providing information to a public body the OIA also needs to be considered. The default position under the OIA is that 'information' as defined by that Act should be released unless one or more of the exclusions apply. Particular reference should be had to section 9 of the OIA but it is noted that this is not an absolute exclusion. Section 9(1) states:

Where this section applies, good reason for withholding official information exists, for the purpose of section 5, unless, in the circumstances of the particular case, the withholding of that information is outweighed by other considerations which render it desirable, in the public interest, to make that information available.

Section 9(2) provides a number of 'good reasons' for withholding information, the most pertinent of which is paragraph (b) which states:

Subject to sections 6, 7, 10, and 18, this section applies if, and only if, the withholding of the information is necessary to—
...
protect information where the making available of the information—

• (i) would disclose a trade secret; or
• (ii) would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information; or

It is submitted that, prima facie, commercially sensitive information provided to the Commission (and clearly identified as such to the Commission) and which may be later subject to an OIA request will not be released pursuant to an OIA request, for the reason that it would likely to unreasonably prejudice the respondents commercial position. However, in deciding whether to disclose the information pursuant to an OIA request, the Commission (and any body reviewing the Commission’s decision to release or withhold information) will balance whether withholding the information is outweighed by any public interest considerations in releasing the information.

We strongly recommend any commercially sensitive or confidential information is identified as such. We suggest the use of either a schedule of such information or a watermark on the copy paper stating ‘commercially sensitive’ or ‘confidential’. Alerting the Commission in a cover letter as to the supply of commercially sensitive information is also good practice.

Does the complainant receive a copy of the information or response provided?

We would advise that, subject to any information made available under an OIA request, the complainant does not receive a copy of the information or response supplied to the Commission. It is our understanding that the Commission will complete its investigation independently of the complainant unless it is necessary for the complainant to provide further information. Furthermore we understand that the identity of the complainant is strictly confidential to the Commission and will not be disclosed by it.

Publicity

Subject to the provisions of the OIA the information provided should not become public knowledge. However, the fact that an investigation into an allegation of a breach of the FTA is being carried out by the Commission could become public knowledge at any time. In addition, if the Commission takes enforcement action for such a breach, it is likely that the Commission will release a statement to the media to that effect. Although it is reasonable to expect that the Commission would be in communication with the offending body should they make this kind of decision.

What are the potential consequences if investigation reveals a breach?

A decision by the Commission to investigate a complaint into an alleged breach of the FTA, and any decision to take enforcement action for such a breach, will be influenced by the following criteria:

1. The extent of the detriment;
2. The seriousness of the conduct; and
3. The public interest

The Commission will also consider whether the particular breach falls within its ‘target areas’. For example, if the Commission for public policy reasons has decided to focus a particular industry practice, it will prioritise the investigation of complaints in this area and be more likely to take enforcement action than it would be if the complaint related to a matter that was not within a ‘target area’

If the Commission decides that (it its view) there may have been a breach of the FTA, the Commission could issue a compliance letter. This is the lowest possible level of enforcement action and would likely state that the Commission believed that there may have been a breach of the FTA but that they would not be taking the matter any further.

If the Commission decides that (it its view) there has been a breach of the FTA, there are several options open to it:

1. It could issue a warning letter; or
2. It could reach a settlement (the offending party would have to admit breach); or
3. It could prosecute.

It is noted that only a Court can ultimately decide whether a party has breached the FTA.

As a condition of any settlement with the Commission, or if a Court finds a breach of the FTA, the potential penalties include but are not limited to:

1. Negative publicity for the respondent;
2. Repayment of any commercial gains acquired as a result of the breach;
3. A fine of up to $200,000 for each offence;
4. Order requiring the respondent to disclose information or to publishing of advertisement acknowledging breach etc.