Australia: Court of Appeal says COMCOM can gag interviewees

NZ Competition and Market Regulation Update
Last Updated: 27 March 2011
Article by Jason Woolley and James Canny

The Court of Appeal has upheld the ability of the Commerce Commission to issue gagging orders. These orders prevent persons summoned to attend an interview before the Commission from disclosing either:

  • the questions the Commission asked them; or
  • the answers or other information they gave in response.

In the case before the Court of Appeal, Commerce Commission v Air New Zealand [2011] NZCA 64, the Commission had issued gagging orders to 13 Air New Zealand employees who had been required to attend interviews with the Commission in connection with the Commission's air cargo cartel investigation. The orders, issued under section 100 of the Commerce Act 1986, prevented the individual employees from discussing the interviews with Air New Zealand or anyone else (other than their own lawyers, who had been present at the interviews).

Section 100 relevantly reads as follows:

100 Powers of Commission to prohibit disclosure of information, documents, and evidence

(1) Subject to subsection (2), the Commission may, in relation to any application for, or any notice seeking, any clearance or authorisation under Part 5, or in the course of carrying out any other investigation or inquiry under this Act, make an order prohibiting—

(a) the publication or communication of any information or document or evidence which is furnished or given or tendered to, or obtained by, the Commission in connection with the operations of the Commission:

(b) the giving of any evidence involving any such information, document, or evidence.

(2) Any order made by the Commission under subsection(1) may be expressed to have effect for such period as is specified in the order, but no such order shall have effect,—

(b) where that order was made in connection with any other investigation or inquiry conducted by the Commission, after the conclusion of that investigation or inquiry.

(3) On the expiry of any order made under subsection (1), the provisions of the Official Information Act 1982 shall apply in respect of any information, document, or evidence that was the subject of that order.

(4) Every person who, contrary to any order made by the Commission under subsection (1), publishes or communicates any information or document or evidence commits an offence and is liable, on summary conviction, to a fine not exceeding $4,000 in the case of a person not being a body corporate, and $12,000 in the case of a body corporate.

Air New Zealand sought judicial review of the Commission's decision to make and maintain the gagging orders. It argued that section 100, properly interpreted, did not give the Commission the power to make the orders. Further, such a power would curtail the right to freedom of expression in section 14 of the New Zealand Bill of Rights Act 1990.

The Court of Appeal rejected Air New Zealand's arguments, and endorsed the Commission's approach. It held:

  • The ambit of section 100 is not limited to the protection of confidential information and can extend to the type of gagging order imposed in this case;
  • Making orders under section 100 is a serious step and the Commission must be satisfied that the orders are necessary and, once made, the Commission must keep such orders under review;
  • The scope of a section 100 order can extend to prevent an interviewee from discussing even the underlying facts of a case;
  • Protecting the integrity of the Commission's investigations was an important goal that justified a temporary impairment to the right to freedom of expression in section 14 of NZBORA;
  • Section 100 can be used to prevent disclosure of the questions posed by the Commission as well as the answers given to the Commission;
  • A section 100 gagging order can remain in place even after the Commission has issued proceedings although the issuing of proceedings represents a major change of circumstances requiring the Commission to reconsider whether it is appropriate for the order to remain in place.

The decision will be seen by the Commission as a significant win in its efforts to combat cartels. The Commission's practice of using issuing gagging orders has long been seen as controversial given their draconian nature. As pointed out by Air New Zealand in its submissions, no other investigating agency in this country has an equivalent power to make gagging orders, and this includes the police and Serious Fraud Office. Part of the Court of Appeal's response to this submission, that those agencies routinely ask potential witnesses not to discuss the content of interviews with other potential witnesses, seems to miss the point. A request not to do something is quite different to an order not to do it, particularly when breach of that order is a criminal offence.

Further, because the Court of Appeal was required to deal with the case before it at the level of principle, rather than delving into the facts, no real guidance was given by the Court on the issue of when the Commission could reasonably be satisfied that gagging orders were 'necessary'. The Commission's submissions on the issue suggest the Commission may be of the view that such orders are necessary whenever the Commission is conducting a cartel investigation. Reference was made to the "...prevention of collusion between witnesses..." and "...significant prejudice arising from the type of witness preparation that targets of an investigation could engage in if the Commission is required to conduct all investigation in an open way." But is it really the case that the risks of collusion between witnesses and improper preparation by and between witnesses are that much greater in a cartel case than in other types of cases - for example serious criminal matters investigated by the police?

The Court of Appeal did suggest one important possible limit on the Commission's use of gagging orders. It indicated that once all the interviews had been completed the Commission should have considered whether or not continuation of the orders was still required at that point.

It remains to be seen whether Air New Zealand will appeal the case further to the Supreme Court. It may not. The Commission indicated to the Court of Appeal that even if successful it did not intend to re-impose the gagging orders. Unless and until the Air New Zealand case is appealed, or the issue comes up for consideration by the Court of Appeal again, it is likely that the first opportunity that companies and individuals the subject of a Commerce Commission cartel investigation may get to speak to their employees about the allegations may be after the Commission has interviewed those employees and / or after the Commission has initiated proceedings. This underlines the importance of businesses having in place appropriate competition law / trade practices policies and a suitable compliance programme to educate their employees in this area.

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit www.dlaphillipsfox.com

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

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