News
No confidence in confidentiality orders
First published in Competition Matters, NZLawyer, 19 September 2008.
In a recent investigation, a party provided commercially sensitive information to the Commerce Commission in response to a section 98 notice and requested a confidentiality order under section 100 of the Commerce Act 1986 (the Act). Section 100(1) provides:
Subject to subsection (2) of this section, the Commission may, in relation to any application for, or any notice seeking, any clearance or authorisation under Part 5 of this Act, or in the course of carrying out any other investigation or inquiry under this Act, make an order prohibiting–
- 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:
- The giving of any evidence involving any such information, document, or evidence.
In response, the Commission investigator stated that it no longer issues section 100 orders in such circumstances.
However, the Commission does issue section 100 orders prohibiting witnesses from disclosing details of any matters discussed at Commission interviews, including the questions asked and the answers given. While such orders may provide the Commission with an investigative advantage, they also give rise to serious prejudice to the parties under investigation. They prevent the witness from reporting to his/her employer (often the investigation's target). They may preclude joint representation of the company and its employees, even though there is a common interest and the company bears the cost of representation. They hinder the briefing processes that would enable a fully informed response to the investigation.
Despite the Commission's approach, there is very real doubt that section 100 authorises such orders. The Commission's approach appears contrary to the wording of section 100, the Courts' interpretation of that provision, the Commission's previous approach to it, and Parliament's intention.
It is clear from the wording of section 100 that the Commission may make orders in relation to "any information or document or evidence which is furnished or tendered to, or obtained by the Commission", not in relation to information disclosed by the Commission (the Commission could make an order prohibiting disclosure of third party confidential material which would then apply to such material disclosed by the Commission in an interview, but the orders made by the Commission for interviews are not intended to protect third party confidential information and go further, prohibiting witnesses from disclosing any matter discussed at interviews).
The Commission's submissions on the Official Information Amendment Act 1987 (which introduced the current wording of section 100) recognised this, stating that section 100 resulted from business sector lobbying for protection of confidential and commercially sensitive information provided to the Commission. Further, in a May 1988 discussion paper, "Commerce Commission's Powers to Make Confidentiality Orders", the Commission said:
Since its establishment under the Commerce Act 1975 the Commission has been given considerable powers to obtain a wide variety of information, some of which – by the very nature of the Commission's functions – was likely to be of high commercial sensitivity and, consequently, commercially valuable. Thus the Commission was empowered to make orders 'prohibiting the publication of the whole or part of any books or documents ...' which were provided to it in the course of its proceedings. Those powers of the Commission 'to prohibit publication or communication of information' have been retained in the Commerce Act 1986 (s 100).
The Courts have taken the same approach. In Lion Corporation Ltd v Commerce Commission (High Court, Wellington, 5 March 1987), Quilliam J stated:
The question of confidentiality arises because of the sensitive nature of some of the documents from a commercial point of view and from the advantage which competitors may be able to derive from being able to see the information contained in the documents .... It is not surprising, therefore, to find that in s 100 the Commission is given power to control the disclosure of the information supplied to it.
See also Brierley Investments Ltd v Lion CorporationLtd [1987] 1 NZLR 600, 602 (CA), per Cooke P.
To the extent there is any ambiguity in the wording of section 100, Parliament's intention is evident from the Parliamentary Debates regarding the introduction of a very similar power in section 31X of the Takeovers Act 1993. During the debate on 19 November 2002, Stephen Franks MP stated:
The panel's powers – which, as I say, parallel those of the Securities Commission – now include new section 31X .... The Securities Commission has interpreted that in the past as meaning it can effectively close down and gag the people who actually owned the information in the first place. The Minister should take advice on that, if necessary. She should be able to assure us that that is not the intention, so that at the very least there is a record that the Minister's intention is not to allow that.
The Minister of Commerce responded:
I believe that the amendment raised at the last point, on Part 2, was raised in good faith. I want to reassure him, and to put on the record my own view that I do not believe it is necessary. The panel's power to make confidentiality orders in new section 31X, inserted by clause 77, also applies only to material obtained by means of an inquiry. It is not intended to prevent use of the information by someone who holds it independently of the inquiry.
In light of the above, it is difficult to avoid the conclusion that the Commission's current approach to section 100 is an attempt to graft a gagging power onto the existing section 100 mechanism, rather than face the uncertainty and delay involved in seeking a legislative amendment. In doing so, the Commission is failing to use section 100 for its intended purpose – protecting confidential information provided to it – and using section 100 for the ultra vires purpose of gagging witnesses. While a gagging power, which not even the Police have, may be desirable (a matter for separate debate), that must be an issue for Parliament. In the face of the evidence above and the doubts of others (see David Goddard QC, "Section 98 of the Commerce Act 1986: Where do the limits lie?", Competition Law and Policy Institute of New Zealand, 6 August 2006 ), such a power should not simply be asserted by the Commission.
Finally, when challenged on these matters, the Commission has sought support from cases in which Australian Courts have implied a gagging power from a requirement that interviews take place in private – see Johns v ASC (1993) CLR 408, Constantine v TPC (1994) ATPR 41-291, and Gangemi v ASIC (2003) 45 ACSR 383. Of course, an implied power is not the basis on which the Commission purports to make such orders, which rely expressly on section 100. Moreover, in the Australian cases there was no equivalent power to make confidentiality orders. By contrast, in New Zealand, Parliament has expressly considered the issue of confidentiality and conferred a power of limited scope. There is no basis for seeking to imply a wider power. Secondly, the basis on which the Australian Courts have implied a power to "gag" is absent because the Act does not contain a provision requiring interviews to be held in private. Thirdly, implying such a power would be inconsistent with the NZBORA, which requires limits on the rights protected to be prescribed by law. Any limit on freedom of expression should be expressly enacted and not implied by the Courts.
Simon Ladd is a litigation senior associate at Bell Gully specialising in competition law.
