Working with the Commerce Commission

Wellington barrister Peter Taylor spent 10 years as General Counsel at the Commerce Commission before joining Waterfront Chambers. He has a number of thoughts on working with the commission. In this article, Mr Taylor answers a series of questions.

What is the commission’s main role?

The Commerce Commission is sometimes viewed as the consumer advocate, serving to recover losses suffered by consumers. This is a misconception. The commission is primarily a market regulator charged with enforcing specific legislation. Its role is to promote the long-term interests of consumers but this is another way of ensuring economic efficiency.

Part of the commission’s role and consumer interests will often overlap. Examples include taking into account the extent to which consumers are compensated for the harm caused by wrongdoers as with the ANZ/ING case or when Telecom has refunded customers. The commission has also sought to ensure that companies do not profit from their wrongs, to deter further unlawful conduct.

What advice would you give to lawyers working with the commission?

First get acquainted with the commission.

It provides a great deal of information on its website. It explains its role, provides full guidelines and sets out its enforcement criteria. The commission states its leniency and cooperation policies and publishes its most significant reports and decisions. The commission’s statutory documents and its accountability material contain valuable information setting out its three-year focus.

Secondly, use specialists.

In areas other than, say, fair trading investigations and prosecutions, specialty is very important. This goes to technical expertise in areas such as competition law and regulation and also in understanding the commission and its processes. Much can be achieved by knowing how to work with the commission. The commission’s work is a unique mix of economics and law. As well as using lawyers experienced in the commission’s work it is important to work with economists and to do that as early as you can in any investigation or application before the commission.

I think it is helpful to try to work with the commission as much as possible. The commission is a market regulator. Although it has a prosecutorial function, lawyers can achieve significant gains for their clients by seeking to assist investigations and inquiries. This is particularly the case in dealing with cartel cases, that is price fixing and bid rigging.

It is often said that the commission is not willing to negotiate resolution of cases and will not use ADR. What is your view on that?

This view, held by some, is a myth. Most of the commission’s cases are resolved by negotiated outcomes. The commission is in a difficult position as regards initiating discussions but it is always open to entering into dialogue. The important point is that the parties facing proceedings initiate discussions. Many cases have been resolved this way. In fact the commission encourages early resolution as it is a much more effective use of its resources.

Sadly, as is often the case with prosecutions under the Fair Trading Act, parties will wait until the door of the court to resolve proceedings. This can cause significant difficulties for the commission as it has less time to be persuaded in favour of any proposal put to it. More can be achieved for a client by earlier dialogue.

What factors are likely to persuade the commission to adopt what might appear to be a lesser sanction?

The commission will take into account the usual factors of the seriousness of the offending, any compensation to affected parties or markets, the level of acceptance of wrongdoing, track record in the area and before the commission, extent of cooperation with the investigation and the timing of any approach to resolve the case. I think parties should try to make submissions to the commission about their case before the commission decides to take proceedings. This is an area where more can be achieved for clients. But this must be done well. The commission will look at a well-considered submission very seriously if the parties have made a realistic assessment of their case and addressed the commission’s concerns.

The commission’s use of document requests is often criticised. What is your view on how to react to the oppressive burden of providing information?

First, I think that the commission always tries to strike a balance between getting necessary information and the time and cost to businesses in providing it. It is natural for parties not to want to collate information for a third party and especially for an investigation. This is no different to the way many businesses react to discovery in litigation. It is part of the cost of having the laws we do.

Lawyers can assist their clients a lot. The commission is always open to reasonable requests for extensions of time. Sometimes extensions are sought because nothing has been done to respond and the attitude has been lackadaisical. It helps to understand how important to the commission the information request is, and a prompt and reasonable approach to the commission will often meet with a reasonable response. This applies to the nature of the information sought, how it is to be provided – that is, electronically or hard copy – as well as timing. Bear in mind that an obstructive response naturally risks raising the view that the party is hiding something.

You will have seen many applications for merger clearances. What lessons have you learned over your time at the commission?

Again using specialists really helps. I experienced applications that did not have to be made. Processes could have been better handled and more use could have been made of dialogue with the commission. The commission really understands the need for speed and quick decision-making. Better planning and preparation would really speed up applications. The commission is always willing to help parties. Time your application to try to avoid major bottlenecks. The commission has limited resources and cannot deal with 10 applications at once as quickly as it would like – it is simple logistics.

The bottom line is to understand the competition issues. This is the benefit of expertise. What are the principal competitive constraints affecting the relevant markets and how will they change following the merger? Really understand the client’s objectives and whether the merger can be restructured to avoid competition concerns yet still achieve the same objectives.

Any last points?

I think the major point is to engage with the commission and its staff. Often parties can be frustrated by the inability to meet with the commissioners. But most issues are dealt with by staff, who are very able and experienced. You would be surprised how much can be achieved through positive engagement with staff. The messages will carry through to the commissioners anyway. Commissioners have a major workload that, along with issues such as transparency and fairness, often make it problematic to have direct engagement.

This article was first published in LawTalk 770, 22 April 2011.